Cycle Trading: Equity Cycle Timing Band
|Stocks printed their lowest point last Thursday, day 40. That placed stocks in their timing band for a daily cycle low. Tuesday's swing low signaled a new daily cycle. Stocks need to close above the declining trend line in order to confirm a new daily cycle.
Instead of breaking above the declining 10 day MA -- stocks broke lower on Thursday.
I still think that last Thursday hosted the DCL and we are witnessing the volatility associated with stocks trying to establish their daily cycle low. However, there is the possibility that stocks could still break below the day 40 low to print a lower low. Even if stocks were to print a lower low we need to keep in mind that the average length of the the daily equity cycle over the previous 15 daily cycles was 35 days. So if last Thursday was not the DCL and stocks go on to print a lower low, that would make today day 45. That scenario would likely be short lived before stocks reverse and rally into a new daily cycle.
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