Cycle Trading: Change of Character - Revisited
|We discussed back on 10/01/17 that stocks were beginning to exhibit a change of character. I thought that tonight we would a revisit that discussion.
That last time that stocks printed a failed daily cycle was during the decline into the October, 2016 intermediate cycle low. Following the 10/2016 intermediate low the intermediate cycle timing bands still worked, but two times in a row stocks did not deliver a failed daily cycle during their intermediate cycle decline. I said then that "I believe that this weekly uptrend is becoming so strong that we may not see a failed daily cycle until the weekly uptrend ends." And that continues to be the case.
But I will point out that both the RUT & the transports delivered failed daily cycles. So I thought that it would be interesting to look at the current daily cycle for all three.
Both the RUT & the transports are in their timing bands for seeking out a daily cycle low. Both have formed swing highs and delivered trend line breaks to confirm their daily cycle declines. But stocks keep drifting higher. Since stocks have already exhibited a change of behavior by not forming a failed daily cycle we need to be prepared for another change of character, a mild daily cycle decline.
I would like to see stocks form a swing high and deliver a break of the daily cycle trend line to confirm the daily cycle decline. However, if both the RUT & the transports form a swing low and close back above their 10 day MA that would signal a new daily cycle. And if stocks only continue to drift sideways we may be forced to recognize any mild dip at that point as the daily cycle low.
So going forward there may be a question if our timing band tool will be effective as stocks continue in their weekly uptrend. But what has been effective is our cycle band tool. Our cycle band tool has been able to identify both the daily and weekly uptrends. As long as any dip forms a swing low above the lower cycle band, then the correct strategy is that the dip should be bought because stocks will continue in their uptrend until they close below the lower daily cycle band.
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