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Independent Analyst
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.
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