Cycle trading: Still on the table
|Stocks formed a swing low on Tuesday.
Stocks printed their lowest point on Monday, day 68, placing them very late in their timing band for a DCL. Tuesday's swing low signals a new daily cycle. A break above the declining trend line will confirm the new daily cycle.
Stocks are on week 26, placing them in their timing band for an intermediate cycle low. While most ICL's have a failed daily cycle en route to printing the ICL, on a rare occasion some don't. And this may be one of those times that they don't. If stocks can close back above the upper daily cycle band that would end the daily downtrend and begin a new daily uptrend. It will also indicate that the intermediate cycle low has been left behind.
Which brings us back to the megaphone topping pattern we discussed on September 14th.
Stocks appear to have delivered a classic false breakout from this megaphone topping pattern. With stocks in their timing band for an intermediate cycle decline – this could trigger the intermediate cycle decline and a revision to the mean. But with the historic amount of liquidity the Fed has been providing to the market -- this could be all the daily cycle decline we get.
So if day 68 is the DCL and stocks manage to break above the previous daily cycle high that would mean that a bubble scenario is still on the table.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.