Cycle Trading

Pre-Summary

Stocks delivered bearish follow-through on Tuesday. The weakness is causing us to reconsider whether Week 17 actually marked the intermediate cycle low.

When stocks formed a weekly swing low during Week 17, they were in a weekly uptrend and subsequently broke bullishly out of consolidation.

That provided enough evidence for us to label Week 17 as the intermediate cycle low.

There was one piece of evidence that kept us cautious.

The 10-week MA never turned lower into the Week 17 low.

That did not prevent us from labeling the ICL. Stocks were in a weekly uptrend and the bullish breakout from consolidation supported the Week 17 interpretation.

But cycle labels remain subject to the evidence that follows.

Emerging Evidence

Stocks peaked during Week 19 and have now begun to sell off.

Tuesday’s bearish follow-through is causing us to reconsider whether Week 17 actually marked the ICL.

Stocks remain in a daily uptrend. The rising 50-day MA is converging with prior resistance, providing a potential support area for the current decline.

That leaves us with two possibilities.

Stocks could find support and form their DCL, which would support the Week 17 ICL interpretation.

Or the decline could continue.

A close below the 50-day MA will shift the odds toward Week 17 not being the ICL. We would then consider the possibility that stocks are currently in Week 22 and still seeking their intermediate cycle low.

For now, we will allow the market to provide the evidence.