Part 1
Due to some commitments this weekend, I will not have my complete report out until later.
So I am releasing my dollar observations early.
I want to start off with looking at the intermediate (weekly) dollar cycle.
There are 4 criteria that need to be satisfied to confirm a weekly cycle decline.
1) Weekly Swing High
2) Weekly Trend Line Break
3) Failed Daily Cycle
4) Follow Through
The Current weekly chart shows a swing high off the week 2 peak – check.
There is a weekly trend line break during week 8 – check.
Next we look for a failed daily cycle.
The Current daily cycle is on day 4.
The last two daily cycles were characterized by being left translated cycles.
The previous daily cycle low broke below the daily low before that, the definition of a failed daily cycle.
This Satisfies criteria #3 – Check.
So we have three out of four.
To complete this picture, all that is lacking is some follow through to the down side.
It is this lack of follow through that I find unsettling.
However, if we back things out a bit, a different interpretation presents itself.
It appears that the current intermediate dollar cycle is embedded within a larger Symmetrical Triangle Pattern.
In a triangle consolidation pattern, the cycle low is not the lowest point following the cycle peak.
It is the lowest point near the apex.
Now the dollar has clearly embarked on a new daily cycle.
Under the first scenario, the expectation is for a brief dollar rally, followed by a cycle peak, swing high and then a decline that breaches the previous daily cycle low.
The first scenario’s weekly cycle count stands at week 9, leaving another 5 – 13 more weeks to find a weekly cycle low.
Under the second scenario — again there is clearly a new daily cycle at day 4.
Interpreting the intermediate cycle as part of a larger consolidation places the weekly count at week 27. The new daily cycle that just began therefore has good odds of beginning a new intermediate cycle under this scenario.
If this scenario is the correct interpretation, then dollar would be expected to break to the upside out of the consolidation.
This second scenario also sheds a different light on the yearly cycle.
We have previously discussed the possibility of February being the yearly cycle low.
Lately, I have been considering that the yearly low is still out in front of us.
Two things are causing me to reconsider this labeling.
1) The Symmetrical Weekly Consolidation
2) Monthly Coils
The monthly dollar chart shows that the dollar is in its fourth month of a coil.
About half of the yearly cycle lows are characterized by a three to five month coil.
This coil would be congruent with a symmetrical triangle consolidation with the expectation of an upside break out.
This current set up is similar to the 2005 set up.
Both coiled at the yearly low following the three year low.
This second scenario for the dollar does offer a different framework to view the market in.
However, that’s all I have time for right now, so …
Cycle Trading 
Leave a comment