Cycle Trading: SOS Signal
|Stocks closed below the upper daily cycle band on Wednesday to confirm that it was day 60 of an extended daily cycle.
Stocks formed a swing low on Thursday. Stocks also broke clearly above the declining trend line to close above the declining 10 day MA. With stocks being so late in their timing band this indicates that Thursday should be day 1 of the new daily cycle.
We can also see that both the Russell and the Transports also managed to close above their respective declining 10 day MA's to signal new daily cycles.
And with this type of agreement normally I would feel pretty confident that Thursday was day 1 of a new daily cycle. But there was a bearish signal that was delivered on Thursday.
Stocks printed a large SOS number on Thursday. The 701 million selling on strength is the type of number that will be printed prior to an intermediate cycle decline. It is certainly not the type of number the we typically see as stocks emerge from a daily cycle low.
So whether or not stocks still have more to correct or if stocks are preparing to form a left translated daily cycle remains unknown.
But the 701 million SOS clearly indicates risk ahead ..
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