Cycle Trading

PRE-SUMMARY

Stocks continue to consolidate between the 10 day and 50 day moving averages as competing daily cycle scenarios develop.

Stocks broke below the day 34 low on Tuesday and closed below the lower daily cycle band on Wednesday. This signals that the prior daily uptrend has ended and shifts the odds toward a failed daily cycle scenario. However, sellers were unable to deliver meaningful bearish follow-through. Instead, stocks have begun to consolidate between the 10 day moving average and the 50 day moving average.

This consolidation is obscuring the daily cycle count and setting up competing scenarios. The bearish scenario remains straightforward. A bearish break out of consolidation with a close below the 50 day moving average would favor the view that day 34 hosted the DCL, making Friday day 17 of a failed daily cycle. The bullish scenario remains viable as well. A break above Tuesday’s high at 7483.15 would form a swing low. A subsequent close above the 10 day moving average would signal a continuation of the larger uptrend and have us label Tuesday as the DCL.

What is clear is that stocks remain caught between support and resistance. Confirmation will be needed before the next directional move can be identified.  Until then, the market remains in consolidation while traders wait for the next cycle signal.

CYCLE ALIGNMENT

Mixed