Mid-Cycle Peak Ahead: Why the Next Dip Is Likely a Setup, Not a Breakdown

Mid-Cycle Peak Ahead: Why the Next Dip Is Likely a Setup, Not a Breakdown

With the U.S. and China agreeing to pause most of their tariffs for the next 90 days, and long-term cycle projections continuing to rise, the mood across financial markets has noticeably shifted. Suddenly, fears of a full-scale breakdown have been replaced by speculation about whether the recent rally can continue. But for disciplined traders focused on structure and cycle timing, the better question isn’t whether this move continues—it’s what comes next when the current leg runs out of steam.

At Market Turning Points, we don’t chase headlines. We focus on price structure, crossover alignment, and the slope of projected cycles. Right now, those cycles are pointing to a mid-cycle peak—not a market top. And the difference is critical. While late-stage rallies often lure in emotional traders with strong price action, they usually precede temporary pullbacks—not breakdowns.

In this article, we’ll walk through why the upcoming weakness is more likely a setup than a signal to panic, and how to prepare for what comes after the mid-cycle peak.

Understanding the Mid-Cycle Peak

A mid-cycle peak occurs when a shorter-term uptrend within a longer bullish phase runs out of energy. It’s the point where short-term cycles top, even as long-term cycles continue pushing higher. It’s not the end of the trend—just the end of the leg.

Here’s how you can usually spot a mid-cycle peak forming:

• Price is pushing into the upper bounds of the 5- or 10-day price channels

• The short-term cycle slope begins to roll over, flattening or turning down

• Momentum diverges from price

• Breadth narrows (fewer stocks or sectors are participating in the move)

• Crossover averages begin to tighten

These are the signals we’re seeing now on SPY, QQQ, and many sector ETFs inside our Visualizer. Intermediate cycles are approaching projected peaks between May 13 and May 19, with projected weakness stretching into a potential low by May 30. That timing aligns with past mid-cycle peaks—not major tops.

What the Cycle Structure Shows Now

Let’s look at the current environment:

• The intermediate cycle is rising but projected to peak soon

• The long-term cycle has turned up since early April, providing underlying support

• Short-term cycles have already topped, indicating slowing momentum

This alignment creates a high-probability window for a tactical pullback—not a trend change.

On our Visualizer charts:

• SPY is near the top of its 5-day price channel

• QQQ’s crossover averages (2/3 and 3/5) are still holding but beginning to narrow

• Sector leadership is getting thinner, with tech still leading but energy and industrials stalling

This tells us we’re moving into a tactical topping window, with elevated risk for late entries but a strong setup likely forming once the pullback matures.

Why This Is a Setup, Not a Breakdown

There are several reasons we view the projected pullback as a buying opportunity, not a warning to exit the market altogether:

1. Long-Term Cycle Support

Long-term cycles remain bullish. That changes the game. When long-term pressure is upward, short-term weakness often resolves with higher lows and leads to new uptrends. It’s the exact pattern we saw coming off the March lows.

2. Reduced Macro Pressure

The recent U.S.–China tariff pause, combined with the U.S.–U.K. trade agreement, has significantly lowered macro tension. With fewer policy disruptions on deck, institutions are more likely to buy the dip, not sell it.

3. No Structural Breakdown Signals (Yet)

We have not seen:

• A break below the 3/5 crossover average

• A confirmed violation of the 10-day price channel

• A breadth collapse in leading sectors

Until those signals trigger, the trend is intact. And that’s what matters most.

This environment offers an edge for traders who can stay patient and read the structure clearly. The market may be losing momentum at the short-term level, but it hasn’t reversed. The difference is key.

If you’re actively swing trading this setup, knowing where we are in the cycle helps you avoid the common trap of buying too high or bailing too early.

Check our post on Swing Trading ETFs with Cycle Timing: How to Avoid Late Entries Near Market Tops for more info.

What People Ask About Mid-Cycle Peak Trading

What is the biggest danger of trading during a mid-cycle peak?

The biggest mistake traders make during a mid-cycle peak is assuming that strength equals sustainability. Just because price is climbing doesn’t mean the trend will continue. A mid-cycle peak is when price reaches the upper reversal zone while short-term cycles flatten. If you confuse that with a breakout, you risk entering too late—right before momentum rolls over. This phase requires caution, not conviction. Recognize the signs of exhaustion and avoid being lured in by surface-level strength.

Should I stay fully invested during this type of pullback?

Not necessarily. While the long-term trend may still be intact, mid-cycle peaks are tactical zones, not trend continuation setups. That means partial profit-taking, raising stops, or reducing position sizes can all make sense. The goal is to reduce risk exposure as conditions become less favorable—not to exit blindly, but to stay nimble. If structure holds and the next low confirms, you can always add back in with more confidence.

Can I short during a mid-cycle rollover?

Shorting is only viable when structure breaks down. That means a clean violation of the 3/5 crossover, a strong downside move through the lower price channel, and a falling short-term cycle slope. Without those, shorting becomes guessing—and that’s not what we teach. Until you have those signals, the focus should remain on preserving capital and waiting for reentry after the pullback stabilizes.

How do I know when it’s safe to reenter after the dip?

Reentry after a mid-cycle pullback depends on confirmation. That means:

• The short-term cycle must bottom out and start to rise

• Price should find support near the lower 10-day channel or bounce from it

• The 2/3 crossover average should begin to widen again

• Breadth and volume should begin expanding again, especially in leading sectors When those signals line up, the risk/reward shifts in your favor—and that’s when we look to step back in.

Why is this a setup and not a breakdown?

Because the structure hasn’t broken. The long-term cycle is still pushing upward. There’s no violation of key crossover levels, and no confirmation of price failing to hold major support zones. Macro stress is easing—not rising—which also supports the idea that this is a temporary pause within a larger uptrend. These are exactly the types of pullbacks we look for to reload and position into the next cycle leg higher.

Resolution to the Problem

The temptation during a mid-cycle peak is to overreact. But that’s not what Steve teaches. You don’t chase late strength, and you don’t run from healthy pullbacks.

This is when we tighten up, get more tactical, and prepare—not when we assume collapse.

Join Market Turning Points

We help traders:

• Identify mid-cycle peaks before they trigger drawdowns

• Manage trades with cycle projections and crossover tools

• Avoid news-driven decisions and focus on confirmation

If you’re serious about trading the structure—not the noise—start your cycle timing journey here.

Conclusion

Not every pullback signals danger—and this one doesn’t either. What we’re seeing now is a typical mid-cycle peak: a pause in momentum, not a reversal of trend.

The big picture still leans bullish. Long-term cycles are supportive, trade tensions have eased, and structure hasn’t broken. That tells us the next dip is likely an opportunity—not something to fear.

So tighten your stops, avoid emotional trades, and let the cycle run its course. When confirmation returns, so does our edge.

Stay patient. Stay tactical.

That’s the Market Turning Points edge.

Author, Steve Swanson