On Thursday we discussed that stocks were ready to cross the line. Well, stocks closed above the previous daily cycle high on Monday.
Stocks are only on week 3 for their new intermediate cycle. Monday was only day 15 for the new daily cycle. Right translated cycles often peak on or after day 30. So stocks are breaking out to new all time highs early in the intermediate cycle with still plenty of time in the current daily cycle. And the holiday season is right around the corner which is typically one of the most bullish times of the year. Stops can be raised to a close below the previous daily cycle high of 4545.85.
Stocks formed a swing high on Tuesday, triggering our stops. Here are 2 scenarios to consider.
Tuesday was day 26, which is 4 days shy of the timing band for a DCL. Scenario # 1 would be for stocks to deliver bearish follow through and close below the 10 day MA to signal the daily cycle decline.
Scenario 2 would be for stocks to form a swing low. Stocks have been in a daily uptrend that has been characterized by highs forming above the upper daily cycle band and lows forming above the lower daily cycle band. If stocks form a swing low above the lower daily cycle band, that would signal that stocks will remain in their daily uptrend and trigger a cycle band buy signal. A break above 4416.38 forms a daily swing low.
And if stocks form a swing low and deliver bullish follow through, that could kick off a melt-up phase.
Stocks have been in a consolidation box for the past 4 weeks — until Monday.
Stocks are in a daily uptrend that has been characterized by highs forming above the upper daily cycle band and lows forming above the lower daily cycle band — and more recently lows forming above the upper daily cycle band. Which indicate that stocks are beginning a runaway move. So, if stocks close back in the upper consolidation box that could lead to a daily cycle decline. Therefore raise stops to the top of the recent consolidation box.