Cycle Trading

Euro Zone officials have agreed to lend bailout funds directly to struggling banks.

The can gets kicked further down the road.

Look at what happened to the dollar.

The dollar dropped immediately upon the news and formed a swing high.

The dollar bounced off the rising trend line and then midmorning crashed right through it.

Our framework was calling for a left translated cycle to rollover by day 12 and likely by day 8.

Friday was day 8.

The aforementioned break of the rising trend line confirms the daily cycle in decline.

Also note how the Schaff Trend Cycle was also quick to confirm a move into the daily cycle low.

The timing band for a daily low begins around day 18 – meaning another 10 to 17 days of further weakness for the dollar.

This daily cycle decline will lead to the final intermediate cycle decline.

The dollar’s weekly cycle peaked on week 13.

This week the dollar formed a swing low, but the price action today indicates that the swing low set the declining weekly cycle trend line.

This week is week 17. The daily cycle should decline for 2 – 3 more weeks bringing the intermediate cycle to week 19 or 20, which is smack dab in the timing band for an intermediate cycle low.

Since this weekly cycle peaked on week 13, it is likely to form as right translated and hold above the previous weekly low printed on 2/29

The yearly cycle has the dollar on month 4 and the three year cycle shows the dollar on month 13.

As stated, I do not anticipate this intermediate cycle decline to violate the 2/29 low.

But seeing evidence that commodities have printed their three year low – which we will discuss later in the report, then there is a good likelihood that the dollar’s three year cycle is topping and maybe even the yearly cycle as well.

We need to have a failed weekly cycle to confirm a yearly cycle in decline.

I do not believe that the current intermediate cycle decline will yield a failed weekly cycle unless the next two to three weeks are filled with days like Friday 🙂

Stocks

On Monday, 6/25, equities printed a half cycle low

Friday was day 19 and formed a swing low off the 6/25 half cycle low.
This set the equity daily cycle trend line.

With the dollar’s daily cycle in decline, I believe that equities will break through the 1360 resistance level and make a run to test the previous highs.

Equities are on the verge of breaking past the current cycle peak set on day 11.
Should equities rally for at least another 3 – 4 days it will virtually lock in this cycle being right translated.

And as the first daily cycle of a new intermediate cycle the expectation is for this daily cycle to be right translated.

The stocks printed week 3 for the equity intermediate cycle.

Equities regained the 1350 level by closing at 1362 for the week.

It would appear that this week set the intermediate cycle trend line.

The yearly cycle certainly looks like an early yearly cycle low has been printed.
June was month 8 for the yearly cycle.

Because stocks ended the day on strength, a break above 1364 forms a monthly swing low.

Now equities are “due” for a four year low in 2013.

We will begin to watch for a monthly swing high to signal the decline into the 4 year low has begun.

— Gold

Based on how things have unfolded I am relabeling Thursday day 30 as a stretched daily cycle low.

Friday had a clear and convincing break off the declining trend line draw off the retest of the daily cycle high.
This formed a swing low that forcefully declared day 1 to a new daily cycle.

The weekly chart shows that gold has been coiling

I expect that now that the dollar has rolled over, gold will spring forcefully out of the weekly coil.

Gold has been consolidating the move to the September peak for 10 months.

I think that June was month 1 of the new yearly cycle. July should cause gold to form a monthly swing low confirming a new yearly cycle.

While gold seems like it has printed month 1, the Miners actually did.

The Miners

May was month 43 of the three year cycle and month 11 of the yearly cycle.

June witnessed a swing low form on the HUI that makes June very likely the first month of the yearly and the three year cycle.

This first daily cycle out of the three year low was tricky.

After the day 14 peak, a case could be made that day 17 began a new daily cycle.

But after taking in consideration gold’s and the dollar’s daily cycle, I concluded that this first daily cycle for the Miners became stretched and now has bottomed and formed a swing low and trend line break on Friday declaring a new daily cycle for the Miners.

And it seems that the daily cycle low helped to set the weekly cycle trend line for the Miners

The CRB Index

We discussed on Thursday night that despite the monster day the dollar printed on Thursday, the CRB daily cycle held up well.

Well that was obviously a signal that it was ready to rally.

The CRB printed a 16 day – daily cycle on Monday.
It formed a swing low on Tuesday and ran up against resistance on Wednesday.
With the dollar rolling over, the CRB smashed through the resistance level.

The CRB Weekly cycle is on week 3.

The CRB easily sliced through the declining cycle trend line eliminating any doubt if a new intermediate cycle has begun.
The CRB should trend higher for the next 10 – 15 weeks before seeking out a weekly cycle low.

It has been 42 months since the last 3 year cycle low for the CRB.

A break above 340 in July will form a monthly swing low and likely mark the CRB Index three year low.

On to Bonds

TLT broke out of consolidation on Friday, day 7

It appears that TLT has begun its decline into a daily cycle low.

TLT has been consolidating the 20 point move out of the March low.

With the daily cycle breaking lower, we are likely to see the weekly cycle follow suite.