Stocks have broken above the previous all all time highs.
Stocks are delivering bullish follow through on the breakout of the 4545.85 level which could trigger a melt-up phase. However, I suspect that a daily cycle decline will backtest the breakout level before the we see the melt-up phase.
Stocks are currently getting stretched above the 10 day MA. At 25 days, stocks are 5 days shy of their timing band for a DCL. A daily cycle decline would allow stocks to backtest the breakout level and allow sentiment to cool off. This would also allow stocks to emerge from a DCL heading into the most bullish time of the year.
Stocks broke below the daily cycle trend line on Tuesday.
To recap – stocks peaked on day 39. They formed a swing high and closed below the 10 day MA on day 42, which placed stocks in their timing band for a daily cycle low. Stocks went on to form a swing low on Thursday and closed at new all time highs on Friday. And in this environment of massive global liquidity it looked, in real time, as if that was all the daily cycle decline we would see.
Then stocks formed a swing high and closed back below the 10 day MA on Monday. They delivered bearish follow through by breaking below the daily cycle trend line on Tuesday. Since there is no way that the daily cycle topped on day 3, that makes Tuesday day 47 for the daily equity cycle.
Stocks are even deeper in their timing band for a daily cycle low. A swing low and close back above the 10 day MA will signal a new daily cycle. Stocks continue to be in a daily uptrend. Therefore if stocks form their swing low above the lower daily cycle band then they will remain in their daily uptrend and trigger a cycle band buy signal.
The Russell broke out to new highs as well on Thursday.
Both the Transports …
… and the Dow are delivering bullish follow through to their respective breakouts.
I believe that March 4th was not just a daily cycle low, but an intermediate cycle low as well. (Which is something that I plan to cover in the Weekend Report.) If I am correct that stocks are now in week 1 of a new intermediate cycle, and if this weekly cycle right translates then stocks could be rallying for 15 – 20 weeks before the next intermediate cycle decline.
Monday was day 17 for the daily equity cycle. The new high on day 17 begins to shift the odds towards a right translated daily cycle formation. Notice that there are bearish divergences beginning to appear on the oscillators as stocks are starting to get a bit stretched above the 10 day MA. With stocks at all time highs we need to be alert that Wednesday’s FOCMC meeting could trigger some profit taking. Stocks are currently in a daily uptrend. They will remaining their daily uptrend unless they close below the lower daily cycle band.