Acknowledging where we are as the stock market cycles, from peak to trough, will increase your swing trading accuracy. These peaks and troughs can be correlated to breadth, price action, and volatility.
Current Market Cycles
We’ve made much of the current cycles, as we sold into strength in late July and buying into the lows in August. If you keep this simple cycle in breadth and price action in mind when you enter and exit positions, your anxiety level will decrease.
The cycle is up for the NYSE. Anticipate a move back to the top of the cycle.
Understanding how these cycles work, and how they can affect your trading is discussed in my book, “Trade and Think Like a Professional Trader”. Understanding the four phases a stock or industry group goes through will also help you tremendously with your trading.
Market Cycles – Industry Groups
If we apply the same concept to individual industry groups, we see a bullish picture unfolding for transports. We have a bit more room to the upside at this point in time, so focusing on airlines, rails and trucking make sense.
Market Cycles – Financials
The current cycle is down for financials, though we are near an extreme. Had you paid attention to the current cycle, you’d likely be positioned in other sectors for the past several weeks. That said, anticipate that this current cycle will turn up shortly as we near support.
This exercise, if used on a regular basis will elevate your workflow to a higher plateau. Consider using this approach, like we do every day LIVE during market hours when you take that next trade.
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