Look Test

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Stocks broke above the declining daily cycle trend line on Monday and then delivered more bullish follow through on Tuesday.

spx daily

Tuesday was day 20 for the daily equity cycle. The new high on Tuesday shifts the odds towards a right translated daily cycle formation. Stocks are also beginning to close back again above the upper daily cycle band to reestablish its daily uptrend. All of this suggests that stocks are not just in a new daily cycle, but a new intermediate cycle as well.

However, many will be skeptical of such a labeling due to the fact that stocks did not form a failed daily cycle during the recent sell-off.

It is possible for an intermediate low to form absent of a failed daily cycle. While this is rare, one did occur back in 2013.

spx daily 2013

Back in 2013 stocks had a daily cycle decline that ran 23 days before printing its daily cycle low. Usually a daily cycle decline lasts 7 – 15 days.

spx weekly 2013

And the weekly chart back in 2013 passed the ‘look test’ for an intermediate decline. Stocks clearly broke below the weekly trend line and formed a weekly swing low to indicate a new intermediate cycle.

spx weeekly

And the current weekly chart also passes the look test. Stocks clearly broke below the weekly trend line as it declined into its week 21 low. Now stocks have delivered a clear and convincing break above the declining weekly trend line to signal that this is week 4 of the new intermediate cycle. And if I am correct that this is a new intermediate cycle then that should push the yearly cycle low out to late summer.

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