A Note On The Cycle Low

Since earlier this year, I have been projecting the low of the 10 month cycle to fall on or around 11/26 to 12/5. ( I had said 12/6, but today is not a trading day.) Yesterday marked the exact date for the 10 month cycle low from the 1/23 low. However, we saw the markets close near the highs of the week after last week's rally. One interesting phenomenon that often occurs with cycle lows and highs is that they can form a double bottom or double top with the intervening high or low occuring at the cycle low or high.

This occurred in July when the market bottomed near the mid-point of the 10 month cycle. It may be happening now on a smaller scale as we may be seeing a minor high occurring between the two lows of a double bottom. If this is the case, then we should see another low in 4 to 6 days. From the 11/21 low, we have 4 days up, 3 days down, 3 days up and by symmetry we may expect 4 days down to a new low around December 11 to 12, or if we make a minor new high on Monday, then we could expect 12 days down to a new low around December 24. The latter projection is exceptionally late, but the usual year-end rally may not occur this year.

Based on this possible outcome, I will remain short the indexes unless the markets rally on exception volume above the 11/26 high. I usually wait for the first hour of trading and multiply the first hour's volume by 5. This usually gives the end of day volume for the day within 10%. Compare this to the previous days volume and the average volume to determine if it supports the breakout. A projected end of day volume more than 10% less than the prior day's volume on a breakout makes the breakout suspect.