Volatility

Monosnap 2015 06 15 16 04 56

Stocks dropped at the open and were down over 1% today before recovering into the close. The volatility today is characteristic of the volatility stocks have demonstrated over the previous couple of weeks. This volatility may have obscured our daily cycle count.

0 spx

A 28 day daily cycle low printed in early May. Stocks then peaked on day 10. A swing high formed and then stocks broke below the upper cycle band on day 13 to confirm the daily cycle decline. Stocks then went on to print its lowest point on day 23, since the day 10 peak.

A peak on day 10 indicates a left translated cycle formation which should lead to a failed daily cycle. If today was day 27 of the daily equity cycle, then the gravitational pull from the impending daily cycle low should have seen stocks break below the previous daily cycle low of 2067.93, forming a failed daily cycle.

Instead, stocks recovered into the close. This unexpected recovery into the close could be telling us that a daily cycle low may have already printed on last Tuesday, day 23. A break of the declining trend line would confirm a new daily cycle. But since 23 days is too early for a daily cycle low we need to be open to what the tape is telling us.

spx 51

If last Tuesday was a daily cycle low, that would make day 28 a half cycle low, making last Tuesday day 51. Looking at it this way we see that the daily cycle trend line runs through the day 28 low. And stocks break that trend line as they decline into the day 51 low.

This also explains the large amount of BOW prior to day 51. A total of 1909 BOW printed prior going into last Tuesday’s low. Which is closer to what we would expect at an intermediate low but can occur prior to a daily cycle low. Today stocks back tested last Tuesday’s low printing an eye popping 1273 BOW Today. The shaded area totaled 3434 for Buy on Weakness, which further supports day 51 as a cycle low.

A break below 2067.93 would force us to table this scenario and revisit day 28 as the daily cycle low, making today day 27.

However, a break above the declining trend line would align with a day 51 low. That would make today day 4 of a new daily cycle.

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3 thoughts on “Volatility

  1. Pingback: Bullish Follow Through | Cycle Trading

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