Cycle Trading: Closer To A Top Than A Bottom

Stocks broke out a new daily cycle high on Monday.

Monday was day 16 for the daily equity cycle. While stocks broke out to a new daily cycle high there are signs that signal caution.  One of the signs that emerge as a cycle nears its peak is the bearish divergence developing on the oscillators.   

Another signal is the clustering of Sell on Strength days.

6 of the past 11 trading days stocks have printed a large Selling on Strength numbers.  The clustering SOS days often precede a cycle decline.

In the Weekend date we discussed how the previous intermediate cycle was really stretched.  And since cycles often balance out, we suspect that this intermediate cycle may be short. Which raises the possibility of that this daily cycle may left translate to begin its intermediate cycle decline. 

Big money tends to sell into a breakout to a new high.   If stocks print a reversal and break below the daily cycle trend line that would lock in a left translated daily cycle formation and indicate that stocks are beginning their intermediate cycle decline.