Cycle Trading

Summary

• Stocks broke below the 200 day moving average last week
• Day 42 marked a potential daily cycle low
• Price consolidated below the 200 day and 10 day moving averages
• Stocks broke below the day 42 low to extend the decline
• Day 47 places stocks deep in the timing band for a cycle low
• Focus shifts to the 50 week moving average

Stocks broke below the 200 day moving average the previous week and continued lower into day 42, marked a potential daily cycle low. Since then, stocks had been consolidating below the converging 10 day and 200 day moving averages while holding above the 6500 level. That low did not hold. However, that structure broke on Thursday, with bearish follow-through into Friday.

What is clear is that the break below the day 42 low extends the daily cycle decline and signals a cycle band sell signal. From a cycle perspective, breaking below a prior DCL confirms a failed daily cycle and keeps downside pressure intact. Stocks are now in day 47, which places them deep in their timing band for a daily cycle low. While that suggests a low could form at any time, confirmation will be needed. A swing low with a close above the 10 day moving average will be needed to confirm that a new daily cycle has begun.

The focus now shifts toward higher timeframe support, including the 50 week moving average (covered in the Weekend Report), which may act as the next area of interest.

Cycle Alignment

Daily, weekly, and monthly cycles are aligned to the downside, signaling increased risk.