Change Of Character

The advancing phase of the intermediate cycle is characterized by RSI 05 embedding in overbought and delivering quick bullish reversals once oversold. Stocks on Tuesday are beginning to show a change of character.

Instead of a quick bullish reversal, RSI 05 once again became oversold and is beginning to embed there. The previous 2 times that stocks tested the 50 day MA, dip buyers were rewarded with a continued rally. Stocks are still in a daily uptrend. If stocks form a swing low above the lower daily cycle band then they will remain in their daily uptrend and trigger a cycle band buy signal. However, a close below the 50 day MA would be another change in character that would signal the daily and intermediate cycle decline.

Oil Forms A Lower High

Oil lost the 10 day MA on Monday and then the 50 day MA on Tuesday.

Oil forming a lower high along with a peak on day 8 sets oil up for a left translated daily cycle formation which signals that the intermediate cycle decline has begun. RSI embedded in oversold during the day 39 DCL. RSI then reversed quickly once it became overbought. This change in behavior in RSI aligns with oil rolling over into an intermediate cycle decline. If RSI embeds once again in oversold that will signal the intermediate cycle decline. And with Tuesday was only day 10, oil can trend lower for another 3 – 4 weeks before printing its DCL.

Miner Change Of Character

A change of character in the Miners is unfolding.

Prior to the March day 67 DCL the Miners were in a daily downtrend characterized by forming lower highs and lower lows. The day 19 DCL was the first higher low and now on Tuesday the Miners printed a higher high –> which ends the pattern of lower highs and lower lows. The Miners also closed above the upper daily cycle band. Closing above the upper daily cycle band indicates that the Miners are now in a daily uptrend. That aligns with the emerging bullish RSI pattern. Prior to the day 67 DCL, RSI 5 would embed in oversold and reverse quickly once overbought. That patterns is changing. RSI became embedded in overbought at the peak of the March daily cycle. RSI did not embed in oversold as the Miners printed the day 19 DCL. Instead, RSi reversed quickly and is now oversold.

If RSI becomes embedded in overbought that would be characteristic of the advancing phase of a new intermediate cycle.

Being in the advancing phase of a new intermediate cycle would signal a major change in trend. Which will be a game changer

Bullish Reversal

After Wednesday’s big drop, the RSI index for stocks formed a bullish reversal on Thursday.

Stocks have not delivered anything that we could recognize as a daily cycle decline –until Wednesday.  Wednesday’s drop caused the RSI Index to become oversold. On Thursday, the RSI index formed a bullish reversal. The bullish RSI reversal is characteristic of stocks being in the advancing phase of its intermediate cycle.

Wednesday was day 59, placing stocks deep in its timing band for a daily cycle low. Stocks have been in a strong daily uptrend that has been characterized by highs forming above the 10 day MA and swing lows forming above the upper daily cycle band. If stocks form a swing low here that would signal a new daily cycle. If the swing low forms above the upper daily cycle band then stocks will remain in its daily uptrend and trigger a cycle band buy signal.

Stocks had a successful breakout of the megaphone pattern. But stocks got stretched above the 50 day MA. Wednesday’s drop has allowed the 50 day MA to catch up to price. A swing low off of support of the 50 day MA should resume the breakout.

Stocks Drop

Stocks dropped on Thursday.

Stocks have been very bullish as they are in the advancing phase of their intermediate cycle. During the advancing phase of the intermediate cycle RSI does not stay oversold for long. So if RSI reverses quickly then it is likely that stocks are declining into a half cycle low.

However, closing below the 200 day MA has me thinking something more sinister is afoot. Stocks gapped below the 10 day MA to close 5.89% lower on Thursday. This has started to turn the 10 day MA lower – which signals the daily cycle decline. A peak on day 16 has the possibility of resulting in a left translated daily cycle formation, which would signal the start of the intermediate cycle decline. Which is something that I plan to discuss in the Weekend Report.

Is Gold Ready To Cross The Line?

We discussed the Miners on Tuesday.

We observed that they had just broken above a multi year resistance level after slingshotting out of an historic oversold position. Once the Miners new daily cycle gains traction, that should deliver a powerful trending move. But the Miners seem to be waiting for gold to cross the line.

Day 25 remains as the lowest point following the day 20 peak. The decline into the day 25 low did not cause the 10 day MA to turn lower. But since forming the declining cycle trend line on day 27, gold has been contained by the declining 10 day MA — until Thursday. A break above the declining trend line will have us label day 25 and the daily cycle low.