On Tuesday we discussed that there is a major opportunity for the Miners. Tonight we will look at the Miner progress.
The Miners formed a swing low and closed above the 10 day MA on Wednesday. The Miners delivered bullish follow through on Thursday by closing a full candle body above the 10 day MA so we will label day 50 as the daily cycle low.
In the Weekend Report I plan to breakdown how the Miners are overdue for the intermediate and yearly cycle lows, as well. And forming a swing low could indicate not only the DCL, but the ICL and YCL as well.
The Miners were rejected by the 10 day MA on Friday. They went on to undercut the day 43 low on Monday to extend its daily cycle decline.
Monday was day 50 for the daily Miner cycle, making it severely overdue for a daily cycle low. After undercutting the low, the Miners could have easily went on to a 5 to 7 day bloodbath phase. But instead, they printed a bullish inside candle. That eases the parameters for forming a daily swing low. A break above 25.42 will form a swing low, Then a close above the declining 10 day MA will have us label day 50 as the DCL.
In the Weekend Report I plan to breakdown how the Miners are also overdue for the intermediate and yearly cycle lows, as well. There is a minor risk that the Miners will break below the day 50 low of 24.66 to extend its daily cycle decline. But if the Miners form a swing low, that could indicate not only the DCL, but the ICL and YCL as well.
The Miners broke below the previous daily cycle low on Tuesday.
Breaking below the previous daily cycle low forms a failed daily cycle and extends the intermediate cycle decline. There are bullish divergences developing on the oscillators that often herald the cycle low. And with the Miners being in their timing band for an intermediate cycle low, the odds are good that once the DCL forms it will mark the ICL as well.
Friday was day 60, placing stocks deep in their timing band for a DCL.
We have seen this before with stocks deep in their timing band for a DCL. The undercut low has good odds of marking both the DCL and ICL. A break above Friday’s high of 3943.42 will form a swing low. Then a close above the 10 day MA will signal the new daily cycle. Stocks are currently in a daily downtrend. Stocks will remain in their daily downtrend unless they close back above the upper daily cycle band.
Gold broke below the previous DCL on Monday to form a failed daily cycle and signal that gold is also seeking out its ICL.
Gold delivered bearish follow through on Wednesday, closing below the 1900 support level. However in the Thursday morning premarket — gold is in the process of forming a bullish reversal. If gold can form a bullish reversal on Thursday then a swing low and recover the 1900 level — that would signal the daily cycle low and possibly the intermediate cycle low as well. Which I plan to discuss further this weekend in the Weekend Report.
Stocks delivered a bullish change in behavior on Monday.
RSI 05 would embed in oversold and quickly reverse from overbought as stocks were seeking out their ICL. That behavior has changed since the day 22 DCL. Since then RSI 05 has quickly reversed once oversold and is now starting to embed in overbought – which is characteristic of an intermediate cycle advance. Stocks will need to close above the 200 day MA for a trending move to develop.
Reason #1– The 50 day MA. Since the March ICL the 50 day MA has been acting as support.
Reason # 2– RSI 05. Stocks are in an intermediate cycle advance that has been characterized by RSI embedding in overbought and having quick reversals once oversold. A quick bullish RSI reversal would indicate that stocks are resuming their intermediate cycle advance.
Reason # 3 – Cycle Band Buy Signal. Stocks are currently in a daily uptrend. If stocks form a swing low above the lower daily cycle band then stocks will remain in their daily uptrend and trigger a cycle band buy signal.
The Miners printed their ICL in early March. The first daily cycle peaked just below the 200 day MA. The resulting daily cycle decline saw the Miners backtest the declining multi month trend line. The Miners rallied off of the declining trend line and now are testing the 200 day MA. A close back above the 200 day MA will signal a major change of trend.
Stocks printed and another higher high on Tuesday.
The decline into the week 23 low did not come as a result of a failed daily cycle. The decline only caused stocks to close below the 10 week MA for 1 week and did not even turn the 10 week MA lower. So there are several criteria for an ICL that has not been satisfied.
But I am not going to over-think this one. The week 23 low was the timing band for an ICL. In this environment of a new president just passing a truly massive stimulus package on top of the record amount of money printing that has been ongoing – this is probably all we will see for an intermediate cycle decline so we will label week 23 as the ICL.
On Saturday we observed that stocks were breaking out to new highs.
On Tuesday we can see that the breakout continues. Unless stocks close back below the ‘Line in the Sand’, I will continue with the assumption that stocks are now advancing into a new intermediate cycle.
Stocks printed their lowest point on Monday, day 68, placing them very late in their timing band for a DCL. Tuesday’s swing low signals a new daily cycle. A break above the declining trend line will confirm the new daily cycle.
Stocks are on week 26, placing them in their timing band for an intermediate cycle low. While most ICL’s have a failed daily cycle en route to printing the ICL, on a rare occasion some don’t. And this may be one of those times that they don’t. If stocks can close back above the upper daily cycle band that would end the daily downtrend and begin a new daily uptrend. It will also indicate that the intermediate cycle low has been left behind.
Which brings us back to the megaphone topping pattern we discussed on September 14th.
Stocks appear to have delivered a classic false breakout from this megaphone topping pattern. With stocks in their timing band for an intermediate cycle decline – this could trigger the intermediate cycle decline and a revision to the mean. But with the historic amount of liquidity the Fed has been providing to the market — this could be all the daily cycle decline we get.
So if day 68 is the DCL and stocks manage to break above the previous daily cycle high that would mean that a bubble scenario is still on the table.