Stocks printed their lowest point on 6/29, tagging the 50 day MA. That was day 29, placing stocks 1 day shy of its timing band for a daily cycle low. If day 29 remains as the DCL then stocks will need to break above the day 29 high of 2442.73 in order to form a swing low to signal a new daily cycle.
I was hoping to see a narrow range lower low that breaks below the day 29 low of 2405.70 in order to ease the parameters for forming a swing low. While stocks have not printed a narrow range lower low, bullish signals are beginning to develop.
After closing below the 50 day MA on Thursday stocks recovered on Friday closing above Thursday’ high and also regaining the 50 day MA. Then stocks delivered some more bullish follow through on Monday by closing above the 10 day MA. Still we need to see a daily swing low form which at this point would have good odds of marking the daily cycle low.
The Nasdaq has already formed a daily swing low.
The Nasdaq printed a lower low last Thursday, which was day 34. That placed it in its timing band for a DCL. The Nasdaq did form a swing low on Friday but was contained by both the 50 day MA and the declining 10 day MA. The Nasdaq delivered more bullish follow through on Monday. The Nasdaq closed above both the 50 day MA and the 10 day MA on Monday which is a good signal that Thursday hosted the DCL for the Nasdaq.
But like the SPX, the Nasdaq still needs to break above the declining trend line to confirm the new daily cycle. With the declining trend line break being about 14% away a strategy could be to enter a long position here with a stop below Thursday’s low. Then the position can be added to with a bullish break of the declining trend line.