Cycle Trading: Bearish Follow Through
|Stocks printed their lowest point on day 45, following the day 37 peak. That placed stocks well within their timing band for a daily cycle low. Stocks formed a swing low last Tuesday and then closed above the 50 day MA on Thursday to signal a new daily cycle.
However stocks lost the 50 day MA on Friday. They delivered bearish follow through on Monday by closing lower. If stocks can recover and break above the declining trend line that would confirm day 45 as the daily cycle low. But since stocks are in their timing band for an intermediate (weekly) cycle low there is certainly the possibility that the gravitational pull of the pending intermediate cycle low will cause this daily cycle to extend. A break below the day 45 low of 2801.43 will extend the daily cycle decline. A break below the previous daily cycle low of 2722.27 would form a failed daily cycle. Stocks have begun a daily downtrend. They will remain in their daily downtrend until they can close above the upper daily cycle band.
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