Friday was day 8 for the dollar’s daily cycle.
This is the third daily cycle in the current intermediate cycle.
The second daily cycle low was lower than the first daily cycle low.
The lower low means that the second daily cycle was a failed daily cycle.
A failed daily cycle is a clear signal that the intermediate cycle has entered its primary decline into an intermediate cycle low.
By definition, a weekly cycle declining into an intermediate cycle low will print lower highs and lower lows. That means any subsequent daily cycles in the intermediate cycle should be failed daily cycles.
So under this view, the current dollar daily cycle is destined fail and should form a swing high soon.
A majority of failed daily cycles peak on or before day 8.
If the dollar does not form a swing high on Monday, the odds begin shifting away from that this will be a left translated failed daily cycle.
On to the current weekly chart.
The weekly cycle has a week 2 peak and a break of the intermediate cycle trend line on week 8.
Week 9 printed the current weekly cycle low and week 10 reversed off that low.
The intermediate cycle is considered to be in decline unless the week 2 peak is surpassed.
I believe this fairly captures the salient points to the current daily and intermediate dollar cycles.
The three daily cycles does a fairly nice job describing the dollar’s price action under this scenario.
There are two things that bother me with this.
1) The current daily cycle has not formed a swing high yet.
2) The current weekly chart does not have an easily distinguishable declining cycle trend line.
So I am going to review a second possible scenario that I introduced last weekend.
First off, the daily cycle stills stands at day 8.
It is the interpretation of where the weekly cycle is that changes the rest of the expectations.
There is precedent of weekly dollar cycles lasting 24, 25 and 26 weeks.
I even know of an example that stretched to 30 weeks.
Therefore, a 27week intermediate cycle is not out of the question.
Since this intermediate cycle is part of a larger triangle consolidation, the weekly cycle low is not the low point following the intermediate cycle high. The intermediate cycle low is the lowest point near the apex of the triangle consolidation.
This second scenario explains why the current daily cycle has not failed.
It is because the first daily cycle of a new intermediate should be right translated, peaking after 12 days, and printing a higher daily cycle high.
This second scenario also has a clearly defined declining cycle trend line.
This second scenario is also congruent with what I am witnessing on the yearly cycle.
The Yearly cycle has a January 2012 peak at 8 months and a February low at 9 months.
The monthly chart shows that the dollar has been coiling for the 4 months.
This is characteristic of what we see the dollar do at about half of its yearly cycle lows.
My observation of these monthly coils is that they tend to appear if there is a change in trend.
There is the distinct possibility that February is not the yearly cycle low and that the coil will mark a change in trend.
Getting back to the second scenario weekly chart.
There is a break out and this past week would be week 1 of the new intermediate cycle.
The 10 year declining trend line suggest that the dollar will run into resistance very soon.
We could possibility see an intermediate dollar cycle peak on week 2, leaving the possibility of trending lower for the next 18 or so weeks.
Part 2 will be posted tomorrow
So …
Cycle Trading 
Leave a comment