TIMING BAND FOR A DAILY CYCLE LOW IN STOCKS

Timing Band

Stocks are entering the timing band for a daily cycle low.

I’m not completely convinced stocks have begun the drop into the daily cycle low, but if it has, everyone should be an old pro at these by now. If stocks have begun to drop into a daily cycle low they usually last 5-7 days. During the advancing phase of the larger intermediate cycle, price reverses quickly once the 5 day RSI reaches oversold. If the market continues lower this week be prepared to buy aggressively once the cycle bottoms. Remember, the time to buy is when you are scared, not when you are comfortable.

If stocks have begun to drop down into the daily cycle low, the correction usually lasts 5-7 trading days. During the advancing phase of the larger intermediate cycle price reverses quickly once the 5 day RSI reaches oversold.

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39 thoughts on “TIMING BAND FOR A DAILY CYCLE LOW IN STOCKS

  1. jacob 2

    The market is headfaking the bulls! Its a common pattern at a bottom, the reverse happens at tops. It was weird that the utilities were up when the talks was more about higher rates. I think computer driven trading programs are making things look weaker than they really are. We can always blame artificial intelligence.

  2. Alexandru Popovici

    Gary, there is growing evidence that this jump in stocks is empty on the inside – a typical character of dead cat bounces.

    There is one clear fact though: STOCKS HAVE PRINTED MONTHLY SWING LOWS – WE ARE IN A NEW YEARLY CYCLE!

    As to the new multy-year cycle, I doubt we are in a new one and I am growing more resolute of this conclusion by each week.

    In the meantime, I’m growing my portfolio with my short gold and long treasuries positions.

    1. Gary Post author

      Stocks have to print a monthly swing in order to qualify for a move down into a 7 YCL. As a matter of fact they have to print a quarterly swing.

      However this has been the 5th strongest rally out of an intermediate bottom in 60 years. That isn’t the sign of a bear market rally.

      Also I’ve noted that retail traders are way too bearish. That also isn’t the sign of a bear market. It should take much bigger losses before retail gets bearish on the market. They jumped on the bear market idea almost immediately, and that is not how bear markets act. Bear markets slide down the slope of hope, and retail traders gave up hope almost immediately.

      1. Gary Post author

        Sentiment trader also noted that half the worlds markets are above their 200 DMA. When this has happened in the past after more than half were below the 200 it has been a sign of exceptional returns in the medium and long term, without exception.

    1. Gary Post author

      It is a triple leveraged fund you know. The swings are going to be big. Wait for the end of the week and see if the weekly swing low remains intact. I’m waiting for a weekly swing before adding to my positions.

      1. David

        XBI or IBB look like to looking for a lower low right now, it is possible a H&S pattern are in progress.

      1. Gary Post author

        Absolutely. The only reason I’m willing to trade LABU right now is because I’m convinced this is the initial rally out of the 7 YCL. Once this is over I will go back to IBB or XBI.

  3. Frank

    As the exact opposite of yours, I state my Elliott Wave interpretation of where we are for the stock market: on top of a cliff about to go down like a stone to a new low in a wave 3. One thing that has given me faith is the huge elliptical dome that has contained all upward movement for the last few years – now that’s a top. We have just touched it again – for the last time.

    1. Gary Post author

      I don’t understand EW at all. Other EW analysts are calling for a move to 2500. How can there be that much subjectivity to a tool and it have any value?

  4. Marco

    deutsche bank downgrades miners saying that the gold and commodities uptrend is unlikely to continue.
    Is our baby bull already dead?????? πŸ™

  5. eyecit

    Why isn’t anyone talking about the elephant and the 800lb gorilla! Europe and the middle east crap show going full retard this year….how does that fit your YCL’s and fibbonaci’s??

    1. Gary Post author

      I tend to ignore the news. At cycle turning points the news is always bleak. Then as the cycle turns the news improves and always looks brightest at the top.

  6. Bill

    Long and strong Gary let the sheep get sheared again like they always do I’m buying and sitting tight.

      1. Gary Post author

        You are too worried about the short term. I don’t care if it breaks 4 as long as it breaks 20 later in the year.

        This is the same mentality that caused traders to miss the rally in gold and the rally in oil.

        You don’t have to time the exact bottom, you just need to get “close enough”.

  7. Dan

    You’re on the slope of hope getting biowrecked, because your gold call got to your head.

    Timestamped low risk entry into UVXY calls today, now sit back and watch everything implode. China devaluation is just the start.

    1. Gary Post author

      I’ll be willing to bet a burrito that during the second daily cycle stocks test the all-time highs.

      1. Gary Post author

        LOL The problem with end of the world predictions is that it can only happen once…

  8. Irwin

    Now I remember why I haven’t listened to kwn for a long time; Eric always sounds like he’s straining to pass a huge turd. ha!

    1. Vortex

      Gary oh my goodness. The peanut gallery hot-head belligerent over at you know where comes to this site and reads all of the comments and he is going to write a ten page smear synopsis on how you don’t like E-Wave theory but are quoting it and using to make a point.

      You just watch.

      V

  9. Jay

    Tomorrow is the last trading day of this week, and I doubt we see heavy selling tomorrow, so likely the more scary selling will have to wait until next week. #Timestamp πŸ™‚

      1. Jay

        I think I’ll skip dinner…after all…I already ate a lot of gold bugs for breakfast today! πŸ™‚

        1. Ralph Wiederzane

          Oh yeah Jay, you’ve been all over the move these last few months. If anyone deserves a victory lap it’s you!

  10. Joseph

    Biotech seasonal strength on AVG starts usually in April/May and again in Sept-Dec.. I Read a report that showed last 25yrs on BioTech. .Makes sense to nibble but seasonality needs to work with other factors as well for a wining trade. Have not got in Biotech yet as its coming down with TSX/SnP…. As well, I always close out 2x/3x Lev ETFs every FRI or a portion depending on a few factors. Not sure why you would hold LABU when it was clear market was gonna corect at least to 2020 and then 1990 approx. I wd have booked orofits or a portion….
    To each his own : )
    Anyhow, that’s what I do as I have been heavily burned with HGU many many years ago and learned my Lesson!! Book profits in portions when dealing with these Leveraged products as in a bad day or 2, TOU can loose 20-30%…..

  11. Alexandru Popovici

    Gary, I understand your sentiment-based argument and I do think that retailers will have the chance to get very bullish.
    Phases as I see them:
    – a higher DCH will be printed (as I pointed out in your prior post),
    – retailers will get extatic and start jumping on board,
    – FED needs space to raise its rates and FOMC will see this strength as an opportunity to allign rates at 0.5%
    – smart money will resume selling,
    – a new low will ensue,
    – we will have the new bull market in the end of summer or September.

  12. Alexandru Popovici

    USX –> an unthinkable scenario deserves credence: MAR18 HOSTED AN YEARLY CYCLE LOW.
    If USX rises above 98.59, a monthly swing low will be charted.

    Last YCL was on AUG24 so that we would have a shortened YC of only seven months.
    This is OK since the prior YC had lasted as long as 15 months.

    So, let’s wait for 98.60 to be reached in April and then the odds will weigh considerably for this scenario.

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