Waiting For Stocks To Cross The Line

The Dow Jones Industrial is seeking out its DCL.

The Dow broke below the daily cycle trend line, turned the 10 day MA lower, and is in its timing band for a daily cycle low. And Thursday’s bullish reversal eases the parameters for forming a daily swing low. A swing low and break above the declining trend line will signal a new daily cycle.

It’s questionable if day 27 represents a DCL for the Nasdaq. However, the tech heavy Nasdaq is breaking out to new highs. The Nasdaq is currently in a daily uptrend. Breaking out to a new high signals a continuation of the daily uptrend and triggers a cycle band buy signal.

The broader S & P has been consolidating for almost the past 2 weeks. A break below the day 27 low of 4630.66 should see stocks complete their daily cycle decline. But with the Nasdaq breaking out to new highs, it is possible for the S & P to follow. A break above the day 27 high of 4718.50 will shift the odds of stocks entering a melt-up phase and stops should then be raised to the new breakout level.

Miner Confirmation

The Miners formed a bullish engulfing candle on Wednesday.  

The Miners printed their lowest point on Wednesday, day 25, placing them in their timing band for a DCL. Wednesday’s bullish engulfing candle closed back above the 50 day MA which may have marked the DCL. While the Miners formed a swing low on Thursday, we really need to see a close above the declining trend line to signal the new daily cycle.

Then the Miners will need to close above the 200 day MA in order for a trending move to develop.

Stocks Deliver Bullish Follow Through

We discussed last week that stocks needed to close above the declining trend line to confirm the new daily cycle.

Stocks closed convincingly above the declining trend line on Thursday then deliverered bullish follow through on Friday and Monday to close above both the 50 day MA and the upper daily cycle band. Closing above the upper daily cycle band ends the daily downtrend and begins a new daily uptrend. Closing above the upper daily cycle band also indicates that the intermediate cycle low has been set.

The decline into the ICL has stretched the ‘elastic band’ lower. A quick recovery of the all time highs could trigger a final melt-up phase.

Stocks Need To Cross The Line

While stocks closed above the 10 day MA last week to signal a new daily cycle …

…stocks still need to close above the declining trend line for confirmation that day 31 was the DCL. Instead, stocks formed a lower swing high on Monday. Stocks are currrenrlty in a daily downtrend. Forming a swing high below the upper daily cycle band signals a continuation of the daily downtrend and triggers a cycle band sell signal.

The 10/09/21 Weekend Report Preview

The Dollar

The dollar peaked on day 18 and has since consolidated above the breakout from the previous daily cycle high.

Friday was day 24, placing the dollar in its timing band for a DCL. The weekly chart shows us that the dollar is running into resistance at the 200 week MA. A close below the 10 day MA will signal the daily cycle decline. The dollar currently is in a daily uptrend. The dollar will remain in its daily uptrend unless it closes below the lower daily cycle band.

Stocks

Stocks printed their lowest point on Monday, day 31, placing them in their timing band for a DCL. 

Stocks formed a swing low on Tuesday then closed above the 10 day MA on Thursday to signal the new daily cycle. Stocks should go on to break above the declining trend line as they rally out of the DCL. Stocks are in a daily downtrend. They will remain in their daily downtrend unless they can close back above the upper daily cycle band. 

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Gold Signals New Daily Cycle

Gold printed its lowest point on day 36 to place it deep in its timing band for a DCL.

Gold formed a swing low and closed above the 10 day MA on Thursday. On Monday closed above the declining trend line to signal a new daily cycle. Gold is still contained by both the 50 day MA and the 200 day MA. Gold needs to close above both these MA’s in order for any rally to be sustained.

Stocks Lose The 10 Day MA

We discussed on Monday that one of the confirmations of a DCL is turning the 10 day MA higher. On Tuesday, stocks lost the 10 day MA and turned it lower.

Stocks needed to turn the 10 day MA higher and break above the declining trend line in order to confirm that day 21 was the DCL. Instead, losing the 10 da y MA in a clear and convincing manner signals a continuation of the daily cycle decline — making Tuesday day 27. Stocks should go on to break below the day 21 low of 4305.91 in order to complete their daily cycle decline. Stocks are in a daily downtrend. Forming a swing high below the upper daily cycle band signals a continuation of the daily downtrend and triggers a cycle band sell signal.

Stocks Need To Turn The 10 Day MA Higher

Stocks are beginning to consolidate along the 50 day MA.

One of the confirmations of a DCL is turning the 10 day MA higher. The decline into the day 21 DCL caused the 10 day MA to turn steeply lower. Stocks may need to consolidate for a few days in order to allow the 10 day MA to flatten before it can turn higher. Then stocks should go on to break above the declining trend line as they rally out of the DCL. Stocks are currently in a daily downtrend. But a close above the upper daily cycle band will end the daily downtrend and begin a new daily uptrend.

Stocks Confirm New Daily Cycle

Stocks formed a swing low on Wednesday.

Stocks delivered bullish follow through on Thursday by closing above the converging 10 day MA and 50 day MA to confirm the new daily cycle. Stocks should go on to break above the declining trend line as they rally out of their DCL.

It is quite likely that Monday was not only the DCL but the intermediate cycle low (ICL) as well. And if stocks can quickly break out to new highs then that may trigger a final melt up.

Half Cycle Low

Stocks are in a daily uptrend that is characterized by highs forming above the upper daily cycle band and lows forming above the lower daily cycle band.

Stocks rallied on Monday. 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. And we would label day 16 as a half cycle low.

Then a close back above the 10 day MA will indicate that the trend line remains intact and that the rally continues.