Reversal Patterns That Happen Just Ahead of Intermediate Lows During Bull Market Declines
- Nov 21, 2025
- 9 min read
Updated: Nov 26, 2025
Some of the biggest down days in a bull market happen just ahead of intermediate lows. Yesterday was a perfect example. We saw one of the sharpest sentiment flips in months despite Nvidia delivering another standout quarter and the long-delayed jobs report finally arriving. The Nasdaq jumped more than two percent at the open, the S&P pushed nearly two percent higher, and the Dow ripped more than 700 points before the entire move reversed leaving traders confused about why strength couldn't hold.
The reversal wasn't driven by a single headline or bad news. It came from selling into strength and stop-loss triggers that broke the will of early buyers once markets stalled on the upside. Nvidia reversed from a five-percent gain to finish in the red, semiconductors sold off across the board, and the pattern fit exactly what happens when intermediate cycles are still declining. Even the best headlines struggle to help markets gain real footing when the intermediate trend hasn't resolved yet.
This is the risk of trying to catch bounces before intermediate cycles flatten and turn. The market treats these moves as counter-trend rallies rather than the start of new advances. Short-term and momentum cycles are back in their lower zones after the failed rally, and while the long-term cycle remains bullish, it's beginning to weaken on the Nasdaq as an early warning. The intermediate cycle is very close to turning, and once it stabilizes, the backdrop will finally shift allowing strength to hold instead of reversing sharply.
Why Biggest Down Days Happen Just Before Intermediate Lows Form
The biggest down days happen just before intermediate lows form because sentiment reaches maximum optimism right when cycles are closest to turning but haven't confirmed yet. Traders see positive catalysts like strong earnings or economic data and assume the decline is over, piling into positions expecting immediate continuation. But when intermediate cycles are still in their decline phase, even powerful news can't sustain buying pressure as the underlying trend hasn't actually shifted despite bullish headlines appearing.
Yesterday demonstrated this perfectly. The day opened with strong AI-driven surge after Nvidia delivered standout results. For a brief stretch it looked like markets would catch bullish traction. Traders were anxious to break out of the recent cyclical slump after weeks of waiting for data. But similar to the one-day drop on October 10, selling into strength caused markets to slip then make one more thrust lower. That's always the risk when intermediate cycles are still declining, where momentum rallies become subject to failure and sharp reversals shake out early buyers right before actual lows finally develop.
Understanding Selling Into Strength When Intermediate Cycles Declining
Selling into strength happens when professional money uses rallies as exit opportunities rather than participating in continuation, creating the reversal pattern where initial gains evaporate quickly. Once markets stalled on the upside yesterday, traders began selling strength. The reversal came from this selling pressure combined with initial stop-loss triggers breaking the will of early buyers who expected Nvidia's five-percent gain to hold. Without intermediate cycle support, momentum rallies lack the structural foundation for continuation regardless of how positive the catalysts appear.
This pattern explains why even the best headlines struggle during declining intermediate trends. Markets working through these phases treat any bounce as counter-trend rather than the start of new advances. The intermediate cycle hasn't resolved its decline phase yet, so short-term rallies get squeezed as selling into strength overwhelms buying enthusiasm. Until the intermediate cycle flattens and begins turning, this dynamic continues where initial gains reverse sharply and traders attempting to catch early bounces get stopped out right before actual lows form when cycle resolution finally arrives, applying principles detailed in TQQQ Trading Strategy With Cycle Context: Smarter Entries Better Outcomes.
Reading Early Warning Signs in Long Term Cycle Weakness
Long-term cycle weakness on the Nasdaq provides early warning of potential trend reversal even while the cycle remains bullish overall. While the long-term cycle stays in bullish territory confirming the bull market remains intact, it's beginning to weaken on the Nasdaq. That's an early warning signal worth noting. But until it falls below 80, it's only a warning not confirmation of actual trend change. This distinction matters because premature defensive positioning based on warnings rather than confirmations creates opportunity cost missing continuation when warnings don't develop into actual reversals.
The weakening appears as the cycle reading drops from extreme bullish levels toward the threshold where bearish territory begins. This gradual decline warns that the bullish trend may be aging and losing momentum even though it hasn't actually reversed yet. Traders need watching for whether this weakness continues progressing toward confirmation levels or if it stabilizes and bounces back up confirming the bull market retains strength. The current intermediate cycle decline creates additional pressure on the long-term reading, but once intermediate cycles resolve and turn up, the long-term weakness may stabilize rather than continuing to deteriorate, using frameworks detailed in QQQ Strategy That Works: Trade the Decline With Crossovers Price Channels and Cycle Timing.
How Counter Trend Rallies Fail Until Intermediate Cycle Turns
Counter-trend rallies fail because they represent bounces within declining intermediate trends rather than genuine reversals supported by cycle resolution. The market treating bounces as counter-trend means professional money views strength as selling opportunity rather than buy signal. Yesterday's action demonstrated this outcome perfectly as the market still works through a declining intermediate trend. Short-term rallies are being squeezed because the intermediate cycle hasn't provided the structural support required for sustained advances.
Short-term and momentum cycles are back in their lower zones after their failed rally attempt. This positioning confirms the bounce lacked the cycle support needed for continuation. Until the intermediate cycle flattens and begins to turn, failed rally attempts continue as the pattern where initial strength reverses sharply. The key insight involves recognizing that the intermediate cycle is getting very close to turning. Once it stabilizes and the turn confirms, the backdrop finally shifts from treating rallies as counter-trend to recognizing them as continuation of resumed uptrends, applying systematic timing detailed in Swing Trading ETFs With Cycle Timing: How to Avoid Late Entries Near Market Tops.
People Also Ask About Reversal Patterns
What are reversal patterns in trading?
Reversal patterns in trading are price movements that signal potential trend changes from bullish to bearish or bearish to bullish. These patterns can happen at any timeframe but the most significant occur when intermediate cycles are transitioning between phases. Yesterday's sharp sentiment flip from a two-percent open higher to finishing negative despite strong Nvidia earnings demonstrates a classic reversal pattern where initial strength completely evaporates.
The key to understanding reversal patterns involves recognizing the cycle context behind them. Not every reversal signals a major trend change. Some represent counter-trend bounces within ongoing declines where strength gets sold into rather than validated through continuation. The patterns become predictable when you know intermediate cycles are still declining, as markets treat positive catalysts as exit opportunities rather than reasons to chase. True reversal patterns that mark major lows only confirm once intermediate cycles actually flatten and turn.
Why do markets reverse on good news?
Markets reverse on good news when intermediate cycles are still declining because professional money uses positive catalysts as exit opportunities rather than reasons to add positions. Yesterday perfectly demonstrated this. Nvidia delivered another standout quarter and the long-delayed jobs report arrived, yet the Nasdaq's two-percent open reversed completely. The good news created initial enthusiasm but the underlying intermediate trend hadn't resolved yet.
This pattern explains why even the best headlines struggle to help markets gain real footing during intermediate cycle declines. Traders pile in expecting continuation when positive catalysts emerge, but selling into strength from professional money overwhelms that enthusiasm. The reversal comes from this dynamic where early buyers get stopped out as momentum fails. It's not that the news wasn't genuinely positive. It's that timing matters more than catalysts when intermediate cycles haven't turned yet.
What is selling into strength?
Selling into strength means using rallies as opportunities to exit positions rather than participating in continuation. Professional money employs this strategy when they believe bounces represent counter-trend moves within ongoing declines rather than genuine reversals. Once markets stalled on the upside yesterday, traders began selling into the strength that developed from Nvidia's initial surge. That selling pressure combined with stop-loss triggers broke the will of early buyers.
This creates the reversal pattern where initial gains evaporate quickly. The strength that seemed so promising at the open gets sold into systematically. Nvidia reversed from five-percent gain to finish in the red. Semiconductors sold off across the board. The pattern continues until intermediate cycles actually resolve and turn, at which point professional money stops selling strength and starts validating it through continued buying instead.
How do you identify counter-trend rallies?
Counter-trend rallies get identified through intermediate cycle positioning showing the larger trend remains in decline phase despite short-term bounces. When intermediate cycles are still declining, any rally gets treated as counter-trend rather than the start of new advances. Yesterday's failed attempt demonstrated this perfectly. The strong open looked promising but the market working through a declining intermediate trend meant that bounce was counter-trend.
The identification comes from recognizing that short-term and momentum cycles can bounce while intermediate cycles remain in decline. Those bounces lack structural support for continuation. Until the intermediate cycle flattens and begins turning, the rallies fail as selling into strength overwhelms buying enthusiasm. Once intermediate cycles actually turn, the dynamic shifts and rallies become trend continuation rather than counter-trend. The key involves patience waiting for cycle confirmation rather than trying to catch bounces that may reverse sharply.
What are early warning signs of trend reversal?
Early warning signs of trend reversal appear when long-term cycles begin weakening even while remaining in bullish territory. The Nasdaq's long-term cycle is beginning to weaken. That's an early warning worth noting. But it's only a warning, not confirmation of actual trend change. Until it falls below 80, the bull market remains intact despite the weakness. This distinction prevents premature defensive positioning based on warnings that may not develop into actual reversals.
The warning appears as gradual decline from extreme bullish readings toward the threshold where bearish territory begins. Traders watch whether this weakness continues progressing or stabilizes. Current intermediate cycle decline creates additional pressure on long-term readings. But once intermediate cycles resolve and turn up, the long-term weakness may stabilize rather than continuing. The early warning matters for awareness but requires confirmation before acting defensively and missing continuation if the warning doesn't develop into actual reversal.
Resolution to the Problem
The problem with reversal patterns during intermediate cycle declines involves traders attempting to catch bounces based on positive catalysts without recognizing the underlying trend hasn't resolved yet. Yesterday's sharp sentiment flip trapped traders who saw Nvidia's standout quarter and the jobs report as signals the decline ended. They piled in expecting continuation only to watch the two-percent open reverse completely as selling into strength overwhelmed early buying enthusiasm.
The systematic approach recognizes that some of the biggest down days happen just ahead of intermediate lows when sentiment reaches maximum optimism but cycles haven't confirmed turns yet. Rather than chasing strength during intermediate cycle declines, the framework waits for the intermediate cycle to flatten and turn before positioning aggressively. The intermediate cycle is very close to turning, and once it stabilizes, the backdrop shifts from treating rallies as counter-trend to recognizing them as genuine continuation where strength finally holds instead of reversing sharply.
Join Market Turning Point
Most traders struggle with reversal patterns because they chase positive catalysts without understanding intermediate cycle context determines whether strength holds or reverses. They see strong earnings or economic data and assume declines ended, piling into positions expecting immediate continuation only to get stopped out when markets reverse sharply. The pattern repeats where the biggest down days happen right before actual lows form as failed bounces shake out early buyers who positioned before cycle confirmation developed.
Master Market Turning Point's systematic approach to reversal patterns through understanding intermediate cycle positioning. You'll learn why some of the biggest down days occur just ahead of intermediate lows when sentiment reaches extremes but cycles haven't turned yet. You'll understand selling into strength patterns where professional money uses rallies as exit opportunities during intermediate cycle declines. You'll see how to identify counter-trend rallies that fail versus genuine reversals supported by cycle resolution, and recognize early warning signs in long-term cycle weakness that require confirmation before defensive positioning.
Conclusion
Reversal patterns that happen just ahead of intermediate lows create some of the biggest down days during bull markets as yesterday's sharp sentiment flip demonstrated perfectly. The Nasdaq's two-percent open reversed completely despite Nvidia's standout quarter and the jobs report arrival because intermediate cycles are still declining, causing markets to treat strength as selling opportunity rather than continuation signal. Nvidia's reversal from five-percent gain to finishing negative showed how selling into strength combined with stop-loss triggers breaks the will of early buyers attempting to catch bounces before cycle confirmation develops.
The intermediate cycle is very close to turning but hasn't resolved its decline phase yet, explaining why short-term rallies continue getting squeezed as counter-trend moves. The long-term cycle remains bullish confirming the bull market stays intact, though it's beginning to weaken on the Nasdaq as early warning worth noting but not confirming until it falls below 80. Once the intermediate cycle flattens and turns, the backdrop finally shifts from failed rallies to sustained advances where strength holds instead of reversing, making patience for cycle confirmation more important than chasing positive catalysts during the final stages before intermediate lows actually form.
Author, Steve Swanson