Last Line of Defense


Last night we discussed how stocks were forming a triangle consolidation sending price ricocheting along both the upper and lower stems. And since stocks are nearing their timing band week out a daily cycle low our expectation was to see a bearish resolution to the consolidation.

1 spx

(Above is yesterday’s chart)

The daily cycle sports a day 9 peak making this a left translated cycle. Left translated cycles typically fail. So a break below 2044.02 forms a failed daily cycle, leading to an intermediate cycle decline.

Well stocks opened today by breaking below the lower stem and dropping close to 30 points.

2 spx

Wednesday was day 26 for the daily equity cycle. While stocks dropped close to 30 points early on, they did find support at the 2052 level, a last line of defense.
Usually at day 26 stocks could go lower for another 2 to 4 weeks before printing a daily cycle low. However I have to think that the Fed intervened to prevent stocks from printing a failed daily cycle. I think that we will see that stocks are going to print a shortened 26 day, daily cycle low here.


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