Cycle Trading: Confirmation of the Daily Cycle Decline
|Stocks closed below the daily cycle trend line on Monday to confirm that stocks are declining into their daily cycle low.
Monday was day 31 for the daily equity cycle, placing stocks in their timing band for a DCL. Stocks now need to turn the 10 day MA lower in order to complete its daily cycle decline. We have discussed previously that despite the right translated formation to this daily cycle that stocks could still roll over and fail in order to usher in the intermediate cycle low. That concern is based on 2 factors.
1st, stocks are in their 4th daily cycle for the current intermediate cycle. Intermediate cycles are normally embedded with either 3 or 4 daily cycles. So despite the right translated cycle formation there is still a possibility to see this daily cycle fail.
The other factor that makes it possible to see a failed daily cycle here s due to the amount of Selling on Strength days that already have occurred. The current daily cycle already has 7 SOS days the totaled over 3.6 billion in selling on strength. That is a huge number, the type of number associated with an intermediate cycle decline. However a new concern is beginning to emerge which suggests to me that stocks will need a 5th daily cycle in order to complete its intermediate cycle decline.
Since stocks have formed their daily cycle swing high, there has been over 1 billion in Bowing on Weakness. That is a big number already and it suggests to me that traders are ready to "buy the dip". A likely spot for that to occur would be around the 50 day MA. If that were to happen then stocks would not be able to form a failed daily cycle at this point therefore necessitating the need for one more daily cycle to allow stocks to complete an intermediate cycle decline.
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