Cycle Trading

Summary

•  Day 57 confirmed as the DCL (57 RT) after a swing low and close above the 10 day moving average and 50 day moving average; new daily cycle underway but trend remains down until price reclaims the upper daily cycle band. Repeated rejection at 7000 signals persistent overhead supply.

Stocks were rejected at the 7000 level and broke below the prior day 50 low early last week, pushing the daily cycle deep into its timing band. However, the breakdown failed to produce bearish follow-through.

Instead, buyers defended the 6800 level, producing a bullish reversal. That reversal was followed by a swing low and a close back above the converging 10 day moving average and 50 day moving average, which also turned the 10 day moving average higher to confirm Tuesday as the Daily Cycle Low — 57 RT, signaling the start of a new daily cycle.

While a new cycle is underway, stocks remain in a daily downtrend and will need to close above the upper daily cycle band to shift the daily trend back to bullish. The immediate focus now shifts back to the well-defined 7000 resistance level, which has capped price action since early January.

As discussed in recent posts, the Dollar remains a key driver. Continued Dollar weakness would support this new cycle and increase the odds of a breakout above 7000. Renewed Dollar strength, however, would reinforce downside risk and increase the probability of a failed daily cycle.