Cycle Trading

Pre-Summary

Expansion → new highs + growing stretch

Stocks broke out to a new all-time high on Thursday, but were unable to hold those gains and closed lower on the day. From a cycle perspective, stocks have become somewhat stretched above the 10 day moving average following the recent advance. Thursday was day 26 for the daily cycle, placing stocks in the early part of their timing band for a daily cycle decline.

Structurally, the trend remains higher, but the market may need to consolidate in order to allow the 10 day moving average time to catch up to price. This type of pause would be normal following an extended move higher.

Confirmation will be needed. A swing high with a close below the 10 day moving average would signal the daily cycle decline. A break below 7321.66 would form the swing high.

Stocks are currently in a daily uptrend while holding above key support levels.  However, the combination of cycle timing and short-term stretch suggests that upside momentum may begin to slow as the cycle matures.  If stocks continue to hold above the lower daily cycle band, then the daily uptrend remains intact. If price forms a swing high and closes below the 10 day moving average, then the daily cycle decline would be underway.

Cycle Alignment

Bullish