Cycle Trading: The Bearish Case for Stocks

The status of the daily equity cycle has been unclear.   But what is clear is that either scenario has a bearish outcome.

Monday was either day 50 or day 17 for the daily equity cycle.

Under the scenario that Monday was day 50, that would place stocks deep into its timing band for a daily cycle low.  Stocks have closed below the 10 day MA for the third straight day.  At this late stage of the daily equity cycle, losing the 10 day MA should send stocks into their final decline into their daily cycle low.  Stocks would need to break below the (solid blue) daily cycle trend line in order to complete its daily cycle decline.

I am in the camp that a daily cycle low formed back in August on day 33 making Monday day 17 for the daily equity cycle.   Under this scenario that makes this the 5th daily cycle for the current intermediate cycle.  Intermediate cycles usually consist of 3 or 4 daily cycles.  Having an intermediate cycle with over 4 daily cycles is rare.  That makes it likely that with this being the 5th daily cycle that it will be the terminal daily cycle to the intermediate cycle.  The final daily cycle typically left translates and fails in order to print the intermediate cycle low.  Therefore stocks should break below the day 33 low of 2802.49 in order to form a failed daily cycle and complete its intermediate cycle decline.

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