The daily equity cycle peaked on day 8
Formed a swing high on day 9
Lost the 50 day MA on day 12.
Regained the 50 day MA on day 15.
Re-lost the 50 day MA again today, day 17.
These are bearish signals.
Stocks losing the 50 day MA has been a reliable indicator of a daily cycle decline. Only once since 2009 has losing the 50 day MA not led directly to a daily cycle decline. The weekly charts are becoming more bearish as well.
The daily cycle decline in December set the intermediate cycle trend line. The weekly cycle went on to peak in week 11. Last week stocks formed a weekly swing high that broke below the intermediate trend line, which signals an intermediate cycle decline. Already this week stocks are delivering more bearish follow through. A break below the December low produces a failed daily cycle and confirms the intermediate cycle decline.
However, in the midst of all these bearish signals, stocks delivered a bullish signal that is hard to ignore.
Today stocks printed a whopping 2.229 billion Buying on Weakness. This is a big Buying on Weakness number easily ten times the type of number that I would expect to see. Minus this BOW signal, I would say that things were adding up to potentially 8 to 12 weeks of downside for stocks.
Only one other time have I seen a billion plus in Buying on Strength get printed. It was not prior to the 2009 Financial Crisis Low, which is where I would have assumed it would have occurred. It did not print then, I checked. However, It was just prior to the recent yearly cycle low printed in October.
Stocks printed 1.114 billion for Buying on Weakness in September just as they began their decline into the yearly cycle low. That printed on the first day of the decline that lasted 20 days.
Right now our cycle analysis is pointing to an intermediate cycle decline that will be confirmed with a break below the October low of 1820.66. The record breaking BOW print does signal that the bulls have not given up the fight. So we need to be open to the possibility of an upside surprise. But as we can see the BOW (and SOS numbers) are not precise timing tools. And unless stocks print a higher high, we will assume that they are headed toward an intermediate cycle decline.