Stock Market Cycle Signal Market Participation

Ed Stein Roller Coaster

Stock Market Cycle

We look at the larger composite indices, like the NYSE and Wilshire 5000, at turning points to measure investor sentiment. This simple methodology considers the flow of stock market participation. When momentum shifts we watch as fewer stocks are sold compared to those that are being bought. And, by monitoring these cycles we can begin the process of entering new positions in a measured way.

NYSE Cycle – Buy Low Sell High

While the expression is meant as tongue in cheek sarcasm, cycles are important. In the case of a broad stock market index, like the NYSE composite, a change in sentiment is an alert of sorts. When we are at extremes, we begin shifting our exposure. January became an extreme or peak in the cycle, so we were scaling out of positions. At lows, we began the process of scaling into positions.

NYSE Composite Stock Market Cycle

While this isn’t a scientific process, it is logical. Buy low, sell high.

Wilshire 5000 Cycle 

As a broad measure of market participation, 5000 stocks definitely give us a measure of investor sentiment. Once again, buy low, sell high.

WLSH Wilshire 5000 Stock Market Cycle

While the above is no guarantee that the market will continue higher, it does remain one of many items in our workflow that we consider on a daily basis. If the cycle continues its present pace, many more traders and investors will recognize what started over a week ago. The cycle is turning.

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Buy low, sell high,

Vinny



Navigating the Volatility Present in the Stock Market

 

Vinny Gambini

Trade Fundamentals w/ Technical Analysis - CANSLIM method using high probability setups and Ichimoku Trend Analysis. Architect, Family Man and Father of three.