Cycle Trading

In Thursday’s report, Possibilities, we discussed what would happen if the dollar’s daily cycle peaked on day four and rolled over.

That possibility looked to be in play early on Friday.
The dollar began by printing an early morning lower low.
Then the dollar found support at the 79 level and rallied into the close.

Friday was day 5.

We should know soon enough the nature of this daily cycle.
Most left translated daily cycles peak by day 8.
A swing high before day 8 would have us on alert that the current daily cycle is a continuation of the failed intermediate cycle.

Should this daily cycle continue to make higher highs after day 8 then the odds increase that this is a new intermediate cycle as well.
A right translated daily cycle would confirm that this is a new intermediate cycle as well.

I neglected to point out last week that the dollar broke below the previous weekly cycle low (by 2 whole cents) producing a failed weekly cycle. A Failed weekly cycle signals a yearly cycle decline.

So Monday began a new daily cycle. New intermediate dollar cycles tend to explode out of the gates, which does not describe the current new daily cycle.

At 20 weeks, there is still the possibility of this cycle stretching a bit to accommodate one more daily cycle.

So the dollar has printed a couple of failed daily cycles, which signals an intermediate cycle decline.

The dollar has also printed a failed intermediate cycle, which signals a yearly cycle decline.

Well the yearly cycle came with in 51 cents of printing a failed yearly cycle.
If (when) that happens, it will signal a three year cycle in decline.

So at Month 7, the yearly cycle is in decline.
A break below 78.09 would herald the three year cycle is in decline.

Stocks

Stocks were flat this week as they were waiting to see if the dollar rally would get some legs.

Friday was day 13 for the daily equity cycle.

Should the dollar rally continue, stocks will likely seek out their half cycle low.

However, the dollar rolling over could send stocks to 1500.

The weekly equity cycle stands at week 15.
Until the weekly cycle trend line is breached, the trend is up.
Equities are not likely to breach that rising trend line unless the dollar launches into a new intermediate cycle.

September is month 3 for the new yearly equity cycle.
With a tailwind provide by QE to Infinity has stocks breaking out to a new recovery high.

This chart also demonstrates the each new QE program is buying less and less rally time.

Gold

There are two possible scenarios for gold’s daily cycle.

Scenario 1

Gold formed a daily cycle low 8/15 making Friday day 27.
Gold’s daily cycle normally runs 18 – 28 days.
Since gold still needs to travel down into a daily cycle low, this becomes a lower probability scenario with each passing day.

Scenario 2

Gold formed an abnormal daily cycle low on 8/31.
It is abnormal because I have never seen a daily cycle low break above the daily cycle peak.
Setting that aside, this does have a trend line break, but comes up a tad short on the daily cycle count.

Still, recognizing 8/31 as a daily cycle low brings the daily cycle count to day 15, with a possible reversal candle printed.

Should this mark the top, a low printed over the next 3 – 10 days would fit in the normal timing band for a low.

There are two different scenarios for the weekly cycle as well.

Scenario 1

Gold printed a weekly cycle low in July and this is week 8

Scenario 2

Do not to label the swing low in July as a weekly cycle low.
That makes the May swing low as the last weekly cycle low, meaning this week was week 18.
A break below 1752.60 would print a swing high and possible mark the daily cycle peak.

Both daily cycle scenarios are calling for an imminent daily cycle correction.
I suspect the nature of that correction will clarify the weekly cycle count.

The yearly cycle stands at month 4.

Gold is presently working through resistance at the 1700 level.
Once through that level, there is not much left until 1900 🙂

The Miners

The Miners had a clear trend line break and printed a daily cycle low August 30.
That brings the current daily cycle count for the Miners to 15 which is in line with gold’s second scenario.

The Miners will be entering their timing band for a low on Monday.

The weekly scenario is very similar to gold’s.

Scenario 1

The Miners printed a weekly cycle low in July and this is week 8

Scenario 2

Do not to label the swing low in July as a weekly cycle low.
That makes the May swing low as the last weekly cycle low, meaning this week was week 18.

A break below 511.59 forms a weekly swing high and brings the second scenario to the forefront.

As previously stated, the daily cycle will enter the timing band for a daily cycle correction on Monday. I suspect the nature of that correction will clarify the weekly cycle count.

The Miners are also on month 4 for the yearly cycle.

Unlike gold, the Miners have plenty of resistance to work through to test their previous highs

The CRB Index

I may have mislabeled 9/05 swing low as a daily cycle low last week.

A DCL on 9/5 would Make Thursday day 10 and have a failed daily cycle in progress.

I think that the CRB printed a 34 day DCL and Friday’s swing was day 1.

However, we will need to keep an open mind to the possibility that if the CRB breaks below Thursday’s low that the 9/5 DCL was valid and the CRB does have a failed daily cycle in progress.

It is undeniable that the CRB formed a swing high this week.

If the CRB breaks above 321.36 it will form a weekly sing low.
Is it possible that the CRB is in the process of printing an intermediate cycle low?

That would make this week a 13 week Intermediate Cycle Low.
Although on the short end of the timing band, it would not be unprecedented.

A 13 week intermediate cycle low is not out of the question, especially if we see the daily dollar cycle rolling over here.

And the CRB probably needs a fresh set of weeks that a new intermediate cycle brings to give it the energy needed to break through the declining weekly trend line.

Again, we will need to see the CRB break above 321.36 to from a weekly swing low.

Once the CRB breaks above the declining trend line that will let the genie, which is inflation, out of the bottle.

Bonds

Last Friday, bonds printed a daily cycle low, which makes 9/21 day 5.

Thursday saw bonds smack into the declining trend line and reverse.
Friday formed a swing high off of that reversal.

Bonds breaking above the declining trend line signals that this is a new intermediate cycle.
More follow through to the downside would have us on watch for another failed daily cycle.

A failed daily cycle would certainly help the CRB to slice the declining monthly trend line.

Since the daily cycle that was left behind was a failed daily cycle, that extended the intermediate cycle to week 25.
If TLT breaks through the declining trend line on the daily chart, then that would make this week one.

Otherwise, Bonds are still in the grips of an intermediate cycle decline.

The yearly cycle peaked on month four and formed a swing high.
Should bonds break below the 120 support level, that will signal a yearly cycle decline.