Cycle Trading

The dollar delivered a convincing breakout of the declining cycle trend line today.

The dollar formed a swing low off the reversal on Friday
The breakout makes Monday day 1 of a new daily cycle.

This most recent daily cycle broke below the previous daily cycle low last Wednesday making this a failed daily cycle.

I received a few emails asking me if Friday also marks an intermediate cycle low.

My thinking is not likely.

Lets look at the dollar since the September intermediate cycle low.

(The above chart was part of the weekend report and therefore does not include Monday’s print)

The September intermediate cycle low is easily identified.

That intermediate cycle is characterized by three daily cycles, the last of which failed. It is the failed daily cycle that signals an intermediate cycle decline

The new intermediate cycle is now has printed two daily cycles, the second being a failed daily cycle.

The dollar should continue to print failed daily cycles until it prints a yearly cycle low.

Now let’s look at the at weekly chart.

Point (a) represents week 14 of the previous weekly cycle. Last week the dollar broke below that week 14 low, signaling a failed weekly cycle.

A failed weekly cycle heralds a yearly cycle decline.

Because this is a failed weekly cycle, the dollar should not be able to break above the declining (black) trend line on a counter trend rally.

Should this new daily cycle break above the declining (black) intermediate cycle trend line then we would have to consider either an early weekly low has printed or that a stretched cycle is in play.

If the dollar is rejected by the declining (black) intermediate cycle trend line then very likely we will witness the dollar’s yearly cycle decline accelerate.