Friday was day 13 for the dollar’s daily cycle.
And for the thirteenth straight day, the dollar printed another higher high.
Then the dollar reversed hard and erased all of Friday’s gains and of the two previous day’s gains.
Since Friday the dollar printed a higher high, the earliest it can form a swing high is on Monday.
The dollar’s timing band for a low runs from day 18 – day 25.
So it is still conceivable for the dollar to put in one more leg higher.
Should the dollar break below the rising cycle trend line, then the odds are that the dollar has begun its primary descent into its daily cycle low.
After seeing the dollar rally for close to three weeks, it looks pretty convincing that this is week 2 of a new intermediate cycle.
Then after the dramatic selloff on Friday, I think that it is prudent to entertain the possibility that the original labeling was correct and that this is week 11.
I think how the current daily cycle concludes will help to determine which interpretation is correct.
If the dollar follows through and continues to sell off and prints a failed daily cycle, then I would be inclined to the original view.
The dollar’s yearly cycle peaked in January and then formed a monthly swing low off the dip in February.
Was that the yearly low at month 9?
8 of the previous 12 yearly lows printed a low between months 9 & 12.
Because May has exceeded the January high it raises the question that could May be the yearly high with the yearly low still to come.
The ten year declining trend line has turned the dollar away.
Also please note how the monthly dollar has been coiling for the past 5 months.
Monthly coils occurring at yearly lows is a fairly common occurrence.
Back in 2002 the dollar formed a monthly coil have the sharp sell off.
At the time the dollar was caught in the grips of a bear market and peaked (barely)
at month 3 and then continued the dramatic sell off.
The 2002 coil suggests that we have seen the new yearly peak.
Continued follow through of the reversal printed on Friday will strengthen this view.
Stocks
Equities have sold off for 11 of the past 13 sessions.
Equities are now deep in the timing band to print a daily cycle low.
If Friday’s low stands then a break above 1312.24 forms a swing low.
The weekly equity cycle stands at week 32.
The average weekly cycle duration is 20 – 25 weeks, so clearly we are due of a weekly cycle low.
Now, over the past 13 trading days, the SPY printed 8 Buying on Weakness days totaling an impressive 1082.87 in Buying on Weakness.
The Big Boys have been consistently positioning themselves for the next leg up.
I think that this week makes it pretty clear that equities are in the process of seeking out their yearly cycle low.
As we discussed last week, it is very rare for equities to print back to back red monthly candles without it leading into a yearly low.
It is interesting to see the effects of QE 1, QE2 and Operation Twist.
There appears to be diminishing returns with each new program.
The correction following QE 2 was more severe than QE1.
We will see if the current sell off will be worse, or will there be some sort of intervention announced soon …
Cycle Trading 
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