Cycle Trading: its about time ...
|Stocks formed a daily swing low on Monday.
Typically the daily equity cycle runs about 30 - 45 days from trough to trough. However, the previous daily cycle was stretched at 58 days. Since cycles tend to balance a stretched cycle with a shortened cycle, we could see a shortened daily cycle here.
Even though we are expecting a shortened daily cycle, 13 days would be really short. I would have more confidence of the possibility that Friday hosted an early DCL if stocks broke below the previous daily cycle low of 2333.25 on Friday. The reason is that stocks have been declining into an intermediate cycle low for the past 6 plus weeks. A failed daily cycle normally forms during the intermediate cycle decline. A break below 2322.25 will form a failed daily cycle. However, with stocks being in their timing band for an intermediate cycle low, if stocks deliver a clear and convincing break of the declining trend line then we would be forced to recognize that a new intermediate cycle has begun. Bonds have entered their timing band to seek out a DCL
The daily bond cycle peaked on Friday, day 23. A swing high formed on Monday. There is a bearish TSI divergence developing that we often see at cycle tops. A break below the daily cycle trend line will confirm the daily cycle decline. Bonds have been closing above the upper daily cycle band, establishing a daily uptrend. We will watch for a DCL to form above the lower daily cycle band. If that happens then that will confirm that bonds are in a daily uptrend. They will continue in their daily uptrend until they close below the lower daily cycle band.
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