Overview; TLDR

If you haven’t already checked it out, I recommend you read the Cycles 101 Overview which will give you some important background to understand the details below.

This first week of August was just consolidation after the big green weekly candle from the previous week. We did manage to make a new high on the weekly chart but then pulled back on Friday after the Jobs Report. This consolidation makes sense since the next CPI report is due Wednesday (8/10) morning. The market is likely to chop around until we get that number.

The Daily Cycle

Friday was day 33 of the current daily cycle with a high so far on day 31. With the move lower today that day 31 high is now a bearish swing high as well and a candidate for the DCH of this Daily Cycle. As mentioned above, the CPI print on 8/10 is likely to be the next major catalyst so I would expect trappy action between now and then similar to how Jobs Report Friday played out. We had a huge downside move 1 minute after the release and then didn’t have much follow thru at all. When I say downside 1 minute after the number release, I mean quite literally as we had a huge red 1 minute candle which dropped price 34 points. After that price consolidated for an hour before trying to rally higher only to be met with no follow through. All that to say, we just were not seeing much follow through in either direction which is exactly what “trappy” action looks like. Right when you think we’re getting a trending move, we get pulled back to within the range. I’m going to be patient to let the congestion resolve itself and see if we can a typical daily cycle decline that gives us a buyable swing low.

• Current Count: Day 33

• Previous Daily Cycle Low: Day 54 (5/12/22)

• Current DCH: Possibly Day 31 (8/3/22)

The Weekly Cycle

This was mostly a consolidation week as you can see by the sheer size of the tiny candle. We did make a new high here on week 7 so a bearish scenario for next week would be a weekly swing high by breaking below 4080 which is the low from this week. Given we would be expecting a DCL soon you would expect we will at least get an initial rebound from any CPI related weakness but we will need to play the price action as it happens.

In general, at week 7 we are not early in the weekly cycle but it’s also not late so we’re in a weird middle place. Since last weekly cycle was only 16 weeks we might expect this one to be at least 20 weeks which gives us quite a bit of time to go. Given that we need to be vigilant of an ICH and be mindful even if we have formed a major long term bottom, this weekly cycle will still have a declining phase. This means we have to assess the character of this weekly cycle decline whenever it comes as it will give us the best clue as to if we have formed a major low in June.

• Current Week: 7

• Previous Intermediate/Weekly Cycle Low: Week 16 (6/17/22)

• Current ICH: Not Printed Yet (NPY)

The Long Term (3 Year) Cycle

The biggest development here since the last update is we did manage to make a high above the July high which we wanted to see but have since pulled back. Also important to note we really need to get through the June highs around 4178 to start seeing upside on the monthly time frame which would be a very bullish signal. What we are looking for is the resumption of the uptrend on the monthly chart. We have a very clear uptrend on the daily chart since the last DCL. We also have a clear uptrend on the weekly chart since that same DCL which was also an ICL. The last step is establishing an uptrend on the monthly chart. This is how a bottom forms. The lower time frames reverse the downtrend and if they see follow through, they cause higher time frame downtrends to reverse.

The tough part is these signals take a long time to play out since you need confirmation from the monthly candle which is why we focus on multi-time frame analysis and use cues from one time frame while keeping other time frames in mind for additional context. In this case the monthly signal will be added evidence but we will use weekly and daily signals to trade.

Conclusion

Last week’s update I said, “We either have a multi-month bottom here or we have a short-term (next 3-4 weeks at most) rally that ends with a lower high…” This week really didn’t tell us too much about which of those two scenarios is more likely to play out but with the CPI number next week we’re likely to get more clues. We are in an uptrend on the daily and weekly time frame so now we watch to see if that can turn into a monthly uptrend or a bearish reversal to start the next leg down to new lows.

Overview; TLDR

If you haven’t already checked it out, I recommend you read the Cycles 101 Overview which will give you some important background to understand the details below.

This first week of August was just consolidation after the big green weekly candle from the previous week. We did manage to make a new high on the weekly chart but then pulled back on Friday after the Jobs Report. This consolidation makes sense since the next CPI report is due Wednesday (8/10) morning. The market is likely to chop around until we get that number.

The Daily Cycle

Friday was day 33 of the current daily cycle with a high so far on day 31. With the move lower today that day 31 high is now a bearish swing high as well and a candidate for the DCH of this Daily Cycle. As mentioned above, the CPI print on 8/10 is likely to be the next major catalyst so I would expect trappy action between now and then similar to how Jobs Report Friday played out. We had a huge downside move 1 minute after the release and then didn’t have much follow thru at all. When I say downside 1 minute after the number release, I mean quite literally as we had a huge red 1 minute candle which dropped price 34 points. After that price consolidated for an hour before trying to rally higher only to be met with no follow through. All that to say, we just were not seeing much follow through in either direction which is exactly what “trappy” action looks like. Right when you think we’re getting a trending move, we get pulled back to within the range. I’m going to be patient to let the congestion resolve itself and see if we can a typical daily cycle decline that gives us a buyable swing low.

• Current Count: Day 33

• Previous Daily Cycle Low: Day 54 (5/12/22)

• Current DCH: Possibly Day 31 (8/3/22)

The Weekly Cycle

This was mostly a consolidation week as you can see by the sheer size of the tiny candle. We did make a new high here on week 7 so a bearish scenario for next week would be a weekly swing high by breaking below 4080 which is the low from this week. Given we would be expecting a DCL soon you would expect we will at least get an initial rebound from any CPI related weakness but we will need to play the price action as it happens.

In general, at week 7 we are not early in the weekly cycle but it’s also not late so we’re in a weird middle place. Since last weekly cycle was only 16 weeks we might expect this one to be at least 20 weeks which gives us quite a bit of time to go. Given that we need to be vigilant of an ICH and be mindful even if we have formed a major long term bottom, this weekly cycle will still have a declining phase. This means we have to assess the character of this weekly cycle decline whenever it comes as it will give us the best clue as to if we have formed a major low in June.

• Current Week: 7

• Previous Intermediate/Weekly Cycle Low: Week 16 (6/17/22)

• Current ICH: Not Printed Yet (NPY)

The Long Term (3 Year) Cycle

The biggest development here since the last update is we did manage to make a high above the July high which we wanted to see but have since pulled back. Also important to note we really need to get through the June highs around 4178 to start seeing upside on the monthly time frame which would be a very bullish signal. What we are looking for is the resumption of the uptrend on the monthly chart. We have a very clear uptrend on the daily chart since the last DCL. We also have a clear uptrend on the weekly chart since that same DCL which was also an ICL. The last step is establishing an uptrend on the monthly chart. This is how a bottom forms. The lower time frames reverse the downtrend and if they see follow through, they cause higher time frame downtrends to reverse.

The tough part is these signals take a long time to play out since you need confirmation from the monthly candle which is why we focus on multi-time frame analysis and use cues from one time frame while keeping other time frames in mind for additional context. In this case the monthly signal will be added evidence but we will use weekly and daily signals to trade.

Conclusion

Last week’s update I said, “We either have a multi-month bottom here or we have a short-term (next 3-4 weeks at most) rally that ends with a lower high…” This week really didn’t tell us too much about which of those two scenarios is more likely to play out but with the CPI number next week we’re likely to get more clues. We are in an uptrend on the daily and weekly time frame so now we watch to see if that can turn into a monthly uptrend or a bearish reversal to start the next leg down to new lows.