Cycle Trading

Friday’s reversal off the panic sell off of the dollar on what was day 31 of the daily cycle likely printed a daily cycle low.

What is needed to confirm a new daily cycle is a swing low and break of the declining trend line. A swing low will be formed if the dollar rises above 81.72.

The dollar did two things on Tuesday. It did not trade lower and it did not form a swing low.

I almost wish for the dollar to print a narrow range lower low to ease the parameters of printing a swing low.

Unless the dollar prints a lower low, I am leaning to Tuesday being day 1 of the new daily cycle.

The dollar may need a few days to change the trend.

You may recall that back in November 2011 the dollar printed a low and it took 8 additional days to form a swing low.

We could see the dollar wait until Draghi speaks on Thursday or the jobs numbers coming out on Friday before the dollar prints a swing low.

Equities may be sniffing out the impending dollar rally

Tuesday was day 29 for the equity daily cycle.
Stocks have been declining since peaking on day 20.
I do not foresee stocks making a new daily cycle high this late in the daily cycle.
Especially considering that the dollar is due to rally.

Bulls have been defending the 1400 level over the past 19 trading days.
I suspect that once the dollar forms a swing low, stocks will break below that support to seek out a daily cycle low.

As I pointed out in the weekend report, the parameters for confirming a new dollar daily cycle are ( this time) identical to the parameters needed to confirm a new intermediate cycle.

The expectation for this new dollar daily cycle is to be a right translated daily cycle peaking after 11 to 12 days — which will take stocks to around day 41.

41 days would be right in the heart of the timing band for an equity daily cycle low.

And if the dollar is rallying out of an intermediate cycle low,
I expect a rough going for stocks…