Stocks Need To Cross The Line

Stocks formed a swing high and closed below the 10 day MA on Monday to signal the daily cycle decline.

Stocks closed lower on Tuesday, stopping at the daily cycle trend line. Stocks will need to break below the daily cycle trend line and turn the 10 day MA lower in order to complete its daily cycle decline. Stocks are currently in a daily uptrend. If they form a swing low above the lower daily cycle band that will indicate a continuation of their daily uptrend and signal a cycle band buy signal.

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Stocks Take Bearish Turn

Stocks formed a daily swing high on Monday.

Monday was day 31 for the daily equity cycle, placing stocks in their timing band for a DCL. Stocks closed below the 10 day MA, turning it lower, to signal the daily cycle decline. A break below the daily cycle trend line will confirm the daily cycle decline. Stocks are currently in a daily uptrend. They will remain in their daily uptrend unless they close below the lower daily cycle band.

Squeeze Play

Stocks are being squeezed by the rising 10 day MA and the declining 200 day MA. 

Friday is day 30 for the daily cycle, placing stocks in the early part of their timing band for a DCL. There is a chance that stocks will again be rejected by the 200 day MA – which would then send stocks into a daily cycle decline.

However, stocks could deliver a bullish surprise and breakout above the 200 day MA. Typically breakouts that occur later in the timing band for a DCL are rarely sustained. If stocks break above the 200 day MA here, a daily cycle decline that backtests the 200 day MA would likely be needed before a trending move to be sustained. 

Dollar Downtrend

The dollar formed a swing high on Wednesday.

The status of the dollar’s daily cycle is not clear. The dollar printed its lowest point on day 30, placing it squarely in its timing band for a DCL. The dollar formed a swing low last Thursday. Then went on to close above both the declining trend line and the 10 day MA on Monday to signal a new daily cycle. The dollar should go on to turn the 10 day MA higher as it rallies out of its DCL. But instead the dollar formed a swing high on Wednesday. What is clear is that the dollar is currently in a daily downtrend. Forming a swing high below the lower daily cycle band indicates a continuation of the daily downtrend and signals a cycle band sell signal.

Consolidation – Update

Stocks have been consolidating for the past 9 trading days just below the 200 day MA.

Stocks were clearly rejected by the 200 day MA back in August which sent stocks into a failed daily cycle to extend their intermediate cycle decline.

Tuesday is day 28 for the daily cycle, placing stocks in the early part of their timing band for a DCL. There is a chance that stocks will again be rejected by the 200 day MA – which would then send stocks into a daily cycle decline. With a peak on day 23 – that assures us of a right translated daily cycle which indicates a higher low.

However, stocks could deliver a bullish surprise and breakout above the 200 day MA. Typically breakouts that occur later in the timing band for a DCL is rarely sustained. If stocks break above the 200 day MA here, a daily cycle decline that backtests the 200 day MA would likely be needed before a trending move to be sustained.

Oil Possible Daily Cycle Low

Oil broke below the October DCL on Monday to form a failed daily cycle and extend its intermediate cycle decline.

Monday was day 40, placing oil deep in its timing band for a DCL. Oil formed a huge bullish reversal, easing the parameters for forming a swing low. A break above 80.50 will form a swing low. Then a break above the declining trend line will signal the new daily cycle.

In the Weekend Report I will discuss how oil may not only forming a daily cycle low, but an intermediate cycle low as well.

Dollar Support – Update

We noted on Tuesday that the dollar formed a bullish reversal on a multi decade support/resistance level.

Tuesday was day 30, placing the dollar in its timing band for a DCL.

The dollar went on to form a daily swing low on Thursday to signal the new daily cycle. A close above the 10 day MA will have us label day 30 as the DCL. The dollar rallying into a new daily cycle will likely put pressure on stocks and precious metals. In the Weekend Report we will look at the long term picture for the dollar and discuss what the dollar would need to do if Tuesday is not only the DCL, but the ICL as well.

Consolidation

Stocks printed a new daily cycle high on Tuesday.  

A new on day 23 shifts the odds towards a right translated daily cycle formation. That aligns with stocks currently being in a daily uptrend. However, stocks are now stretched above the 10 day MA. Stocks have been consolidating the past 4 days, which is allowing the 10 day MA to catch up to price.  Stocks are currently in a daily uptrend.  A bullish break out of consolidation will indicate a continuation of the daily uptrend and signal a cycle band buy signal.  But a bearish break out of consolidation could send stocks to seek out its DCL.

Dollar Support

The dollar printed a bullish reversal on Tuesday. Tuesday was day 30, placing the dollar in its timing band for a DCL.

The longer term chart show that the dollar has retraced back to a multi decade support/resistance level. Which indicates that if the dollar forms a daily swing low here, it will likely mark the DCL and quite possibly the ICL — which I plan to discuss in the Weekend Report.