Trading Prospects The Next 2 Months

When I speak of cycles, I am talking about the period from bottom to bottom of stock price movements.  Take a few minutes to study the chart below so that you will understand.  The daily stock cycles the past year have ranged from 35 to 42 days.   Friday was day 30.  Unless the Fed can abort this stock cycle (which they have done) we should expect a daily cycle low in the next 2 weeks.  The current intermediate cycle just completed week 13.

What happens over the next couple of weeks will have a large bearing on how well we do the next two months.  Intermediate cycles last 20 to 25 weeks.  The previous intermediate cycle was 33 weeks long which is a very long IC.  Long cycles are generally followed by short cycles.  That would mean we should anticipate the next IC could be short.  Does not mean it has to but it increases the odds greatly.

So if there is a short cycle and if falls in line with a 14-15 week intermediate cycle, here is what needs to happen:

1.  We need the daily cycle to left translate.  This has happened.  The current daily cycle has peaked on day 16.  To have a right translated daily cycle, stocks needed to top at least on day 18 which is beyond the half way point of a 35 day cycle.  This cycle looks to have topped already, signaling that an IC decline is underway

2.  The declining phase of an intermediate cycle usually, not always has at least one failed daily cycle.  

3.  Given we are on day 30 of the daily cycle, these events would need to occur over the next 8-12 trading days which would be around July 8-13.  That will be a scary drop but would be my preferred way for this to play out.  It would end this miserable sideways market quickly and would give us an ICL to buy.

That was the scenario where a shortened intermediate cycle occurs with only two daily cycles.  There is still a second option where we get 3 daily cycles in the intermediate cycle.  This would mean that the intermediate cycle should bottom in about 105 to 120 days from the previous intermediate cycle low which would be late August or early September.

Under a longer intermediate cycle, we would still attempt a long trade at the DCL, but would use tighter stops and have our expectations greatly reduced than we did at the previous two DCL's.  We would get an ICL in late August or early September that we would certainly buy, but who knows how well the stock market will respond into the election.