Cycle Trading: Growing Bearish Divergence
|Stocks have been closing above the upper daily cycle band, which indicates that they are in a daily uptrend. Despite being in a daily uptrend, some bearish concerns are beginning to develop.
This is month 11 for the yearly equity cycle. Stocks are due to begin their decline into a yearly cycle low. We can see that the momentum indicators are beginning to develop bearish divergences. A failed daily cycle is required to begin the yearly cycle decline. So we are watching of signals that the daily cycle will develop as a left translated cycle. A close below the upper daily cycle band usually signals the start of the daily cycle decline. Then a close below the lower daily cycle band results in an end to the daily uptrend and possibly the beginning of the daily downtrend.
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