Cycle Trading

 
 
 
The dollar printed day 21 of the daily cycle on Friday.
 
 

 
 
The current daily cycle shows a cycle low on day 13.
The lowest point following the cycle peak is how I define a daily cycle low.
Confirmation comes with a swing low and descending trend line break.
So I am looking for the dollar to break below the rising trend line for one more final push lower over the next 5 days to mark the daily cycle low.
 
Another possible scenario can develop from this framework.
 
As you can see appears the dollar appears to be forming a triangle.
We could see the dollar tag the lower stem of the triangle on more time and then break above the declining cycle trend line.
 
In this second scenario, the daily cycle low would not be the lowest point following the cycle peak, but the last tag of the lower stem of the triangle.
 
 
The weekly cycle printed a slightly higher high this week, which is by definition a swing low.  The question is if this is significant?
 
 

 
If the dollar breaks lower, then this sets the declining cycle trend line and the earliest this weekly cycle could print a low would be week 16.
If the dollar breaks above the declining daily cycle trend line declaring a new daily cycle, then we will be faced with acknowledging a week 14 intermediate cycle low.
Only 3 intermediate cycles out of the 21 right translated daily cycles between 1992 and 2008 printed a low under 15 weeks.  So there does exist the possibility that week 14 could harbor the intermediate cycle low.
 
Before we look at the yearly cycle, I want to look at the bigger picture.
 
 

 
The two points I want to focus on are the 23 year resistance line and the 10 year support turn resistance line.
 
The 10 year support turn resistance line has currently been holding the monthly dollar in check.
 Above that is the 23 year resistance line.
The 23 year resistance line has been a major line of resistance, except during the rally to the 15 year super cycle peak in 2002.

Now for a closer look.
 
 

 
The last two times the dollar tagged the 23 year resistance line, Ben initiated either QE1 or QE2.
 
Should the current daily cycle resolve itself as a triangle with an upside breakout forcing us to recognize a 14 week intermediate cycle, then I think we will see the dollar break above the 10 year support turned resistance line with the next stop being the 23 year resistance line.
 
The dollar tagging the 23 year resistance line would be my guess of when Ben would drop the hammer with QE3 (or to infinity and beyond).
 
 
Stocks

 
Stocks are likely to rally until the dollar prints its daily cycle low.
 
 

 
Considering that the dollar’s daily cycle stands at day 21 and is due to print a daily cycle low, any break above the previous high of 1422.38 will likely be short lived.
 
 

 
 
The intermediate equity cycle printed week 10 this week. 
The weekly cycle normally runs between 18 – 25 weeks. 
So far the weekly cycle looks very bullish.  If the current intermediate cycle is going to print as left translated then two things would need to happen:
1)    A new intermediate cycle for the dollar would need to begin soon.
2)    An equity weekly swing high would need to print in the next two weeks.
The dollar could make one more push lower, which should send equities above the 1422.38 mark.
As previously stated, with a 21 daily count on the dollar any equity break out should be short lived.
 
Something else to factor are the Selling on Strength Days.
Out of the 18 days of the current daily cycle, 8 of those days printed some S.O.S:
7/25 – 187.02            8/03 – 66.24                8/07 – 200.56                8/10 – 101.70
7/26 – 13.89               8/06 – 98.56               8/09 – 65.89                   8/15 – 28.93
 
 
For a total of 762.79 million.
It looks as though the Big Boys have been consistently leaving the party by the back door.
 
 
The yearly cycle is a bit unclear.
 

 
Equities formed a swing low off the June pivot which was month 8.
The question here is was June a yearly cycle low?
Equities have, on occasion, printed an 8 month yearly low so it is a possibility.
An 8 month cycle following two stretched cycles of 17 and 15 months does balance things out.
 
The other possibility is that June set the yearly cycle trend line and the yearly low is still out in front.
This second possibility fits should the current intermediate equity cycle form as left translated. 
A left translated cycle weekly cycle could see stocks slide for the next 2 – 3  months  which would take the yearly cycle to month 12 or 13.
 
 
Gold

 
Gold’s daily cycle offers a couple interpretations.
 
 

 
 
Gold printed a trend line break on day 17.
Gold has formed a swing low off the day 17 trend line break making Friday possibly day 2 of a new daily cycle.
I am not ready to embrace this labeling since there has not been a declining cycle trend line break.
 
The other interpretation would be Friday marking day 19 of gold’s daily cycle.
A break above the day 4 peak would clear up gold’s cycle count.
 
Gold’s weekly count also needs clarification.
 
 

 
 
On week 10 gold broke up through the 11 month declining trend line.
It looked very much like a new intermediate cycle had begun, yet there has not been a weekly swing low to confirm.
 
Gold needs to break above 1629.20 in order to form a weekly swing low.
It seems that with gold’s daily cycle count at day 19, the odds are shifting towards a week 13 label for the intermediate cycle count.
Should gold break above 1630 next week then a week 3 count would be in order.
 

 
Gold needs to break above the declining trend line to confirm May as the yearly low.
 
 
Miners

 
Friday was day 18 for the Miners daily cycle.
 

 
The Miners have entered into the timing band to seek out their daily cycle low.
The Miners did print a reversal candle on Friday. 
A break below 432.72 would form a daily swing high.
A break below the (red) accelerated trend line would signal the cycle is in decline.
 
Where the weekly gold chart needs clarification, the weekly Miners chart appears to be leading gold.
 

 
 
The Miners printed week 3 of the intermediate cycle.
They show a clear trend line break and appear to be headed towards testing the three year cycle declining trend line.
 
A back test of the break out may be in the cards considering that the Miners daily cycle is on the verge of a daily cycle decline.
 
 

 
The yearly cycle stands at month 3.  A break above the declining trend line would confirm a new yearly and three year cycle.
Currently the Miners are caught in a monthly coil.
Coiling after a decline into a three year low is helping to consolidate the recent move down and is likely setting a base to launch the next yearly and three year cycle from.
 
The CRB

 
Friday was day 11 for the CRB
 
 

 
The current CRB daily cycle has a peak on day 5.
The CRB is in danger of printing a left translated daily cycle unless it can break above 306.54 this week.
 
The daily cycle runs on average 18 – 25 days so there is still time for one more push higher.
A left or right translation of the daily cycle will likely be dependant on how the dollar resolves its triangle consolidation.
 
 

 
The weekly chart for the CRB is looking very bullish.
It features an explosive launch from its weekly cycle low.
It is currently consolidating the 14.34% gain above the 295 resistance level and now appears to have found support at the 300 level.
 
 

 
The yearly cycle shows the CRB has a break of the declining trend line.
Barring a sharp reversal, this trend line break declares a new yearly and three year cycle.
 
 
Bonds

 
It is worth noting that both the dollar and bonds last daily cycle low was on 7/19.
Bonds printed a possible daily cycle low on Thursday which was day 20 for TLT’s daily cycle.
 

 
 
The normal timing band for a low is 15 to 20 days so Friday may have been day 1 of the new daily cycle.
A break above 122.50 forms a swing low and then we would need to see a break above the (red) accelerated declining trend line to confirm a new daily cycle.
 
With Bonds on the verge of declaring a new daily cycle, it strengthens the case for the dollar to also be on the verge of a new daily cycle.
 
 

 
At 21 weeks, TLT is primed to print a weekly cycle low.
A break below 119.60 fills a gap and would help to ease the parameters to form a weekly swing low.
 

 
TLT  is on month 5 of the yearly cycle.
The yearly cycle appears to be consolidating above the 120 pivot.