Stocks Choose a Direction

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In the Weekend Report Preview we looked at the daily equity cycle and discussed how the breakout to new highs was not clear and convincing. And because of that we discussed that this was probably a false break out. Well today stocks took a turn lower.

$ RUT Sharp Charts Workbench Stock Charts com 2

$ COMPQ Sharp Charts Workbench Stock Charts com

Both the Russell and the Nas were down big today dropping 1.92% & 1.43% respectively leading the decline into a daily cycle low. And it looks like the S&P is ready to follow.

$ SPX Sharp Charts Workbench Stock Charts com 2

Since closing above the 1875 level on day 21 the S&P has failed to regain that level after numerous attempts. With stocks closing at the lows of the day, I believe that today was a “kiss goodbye”. This is supported by the True Strength Indicator breaking below the zero line today. A bearish zero line crossover is a signal of a daily cycle decline.

Since the daily cycle peaked on day 31, stocks have locked in a right translated nature to this daily cycle. Which means what we are expecting a brief decline and then expect to see the new daily cycle break above the day 31 high. Stocks are in their timing band for a daily cycle low. So we begin looking for a swing low accompanied by a declining cycle trend line break to mark the daily cycle low.

Gold printed a lower low today.

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We have been watching gold approach the convergence of the 50 MA & and the 200 MA. Today gold breached the 50 MA and reversed off the 200 MA. Wednesday was day 18 for gold’s daily cycle. Gold has entered its timing band for a daily cycle low. A break above 1317.10 forms a swing low. And if a swing low forms on Thursday it should also deliver break of the declining trend line confirming a new daily cycle.

The CRB confirmed a new daily cycle today.

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The CRB’s daily cycle peaked on Friday, March 7th and then proceeded to decline into its daily cycle low. The CRB printed its lowest point last Thursday following the March 7th high. A swing low formed today along with a convincing trend line break making Wednesday day 4 of a new daily cycle.

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2 thoughts on “Stocks Choose a Direction

  1. SPX is the only index that made a higher high on March 21 and that high was only by pennies. Every other index, the DOW, RUT, NDX, COMP, and even Vanguard’s Total Market Index, made their highs during the period of March 4 – 7, except for the DOW which made its all time high on December 31.

    As a result, I think we’d have to go with the early March date for the cycle high which means that the cycle could easily end up being left translated.

    • Pima,

      You make a valid observation that is tough to dispute. Perhaps these other indexes will be leading the SPX lower and we will need to be open to the possibility. For now I am not ready to embrace that as my primary scenario. I am looking to the current daily cycle to resolve by printing a higher daily cycle low and then see the next daily cycle print a higher daily cycle high.

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