The 2/20/13 Morning Update

February 20, 2013

The dollar has formed a swing high accompanied by a daily cycle trend line break.

With a day 11 peak, the odds are pretty good that this will form as a right translated daily cycle.

Following a failed daily cycle, this cycle is the first daily cycle of a new intermediate cycle.

The question is: has the dollar printed a yearly cycle low?

The dollar’s last yearly cycle occurred in February, 2012.
The yearly cycle peaked at month 5 in July and has printed a low in September.
Since then it has not broken above or below September’s candle.

A break below September’s low of 78.601 means that the yearly cycle decline is still unfolding.

A more likely scenario is that the dollar will break above September’s high of 81.667 signaling that a yearly cycle low was left behind in September.

The yearly cycle already has a declining trend line break that supports this view.

Gold’s behavior since September also supports this view.

Above is a 10 year monthly look at gold and the dollar.
The dollar’s yearly cycle lows are marked by the green lines, the three year lows are marked by the red lines and the 15 year super sycle low is marked by the blue line.

There is a fairly high correlation of gold correcting as the dollar emerges from a yearly, three year, or 15 year low.

So while the dollar has yet to form a monthly swing low off of the September print, gold is certainly behaving has if a yearly low has printed.

Getting back to the dollar, this daily cycle will likely form as right translated.
That means printing a higher daily cycle low.
And then it also means that the task ahead for the following daily cycle will be to print a higher daily cycle high, which could take out the September high and (finally) form a monthly swing low.

If, in fact, the dollar has begun its daily cycle decline then that should help equities continue higher.

The daily equity cycle did form a swing high off the day 30 candle.
Tuesday’s breakout to a new daily cycle high has negated that swing high and (grey) trend line.

While there was a little (41 million) Selling on Strength on Tuesday, it is likely that equities will continue higher until the dollar finds its daily cycle low.

5 responses to “The 2/20/13 Morning Update”

likesmoneystudies

February 20, 2013

The dollar has broken out to a new daily cycle high.
That will negate the swing high and we will now need to re-draw the daily cycle trend line

Reply
chris

February 20, 2013

As I have said before, the US Dollar certainly looks like it has been basing for the past 4-5 years – this is how secular lows are put in. Studying longer term charts show this pattern time and time again. If one needs a fundamental rational – then I believe the thesis that “Ben is printing therefore the dollar is doomed” is flawed imho as it ignores global capital flows at this time.

Reply
1. likesmoneystudies
  
  February 20, 2013
  
  Chris ,
  
  I would be interested in hearing about global capital flows.
  
  I do agree with you about secular lows. I believe that the dollar printed a secular (super cycle) low in March of 2008.
  
  I believe that the dollar has a 15 year super cycle.
  
  The 15 year super cycle is embedded with three-year cycles.
  
  The last super cycle low occurred in March, 2008.
  
  The current super cycle is not behaving as the previous 2 super cycles.
  
  The first 3 three-year cycles should be a wildly bullish time for the dollar, printing higher three-year cycle highs.
  
  That has not happened since emerging from the 2008 super cycle low.
  
  In fact, the dollar has continued to print lower three-year highs, which i attribute to three reasons:
  
  QE1, QE2, QE infinity.
  
  Reply
chris

February 21, 2013

I flipped back to your chart and lost my lengthy response – damn. Thank you for your response and sharing your methodology. Your certainly seem to apply it more objectively than other sites I have seen using the same. It has always intrigued me and I think it may possibly help me become a better trader – so I keep checking in.

In regard to your 3 yr cycle – for my simpleton thought process – does it really matter where the high is within that 3 year window (because we are talking about a 3 yr window)? Sure 2008-2011 peaked early relatively to another rise during that window (setting a left translation expectation), but the final low was higher than the initial low. If you were short based on that expectation – you are still holding the proverbial bag

Take your chart just a little further back – I think the current basing pattern is very similar. So similar I am trading it.

I think many people tend to focus on whats going on in our neck of the woods and fail to factor in (or fully factor in) what’s happening in the rest of the world and/or put in the context of “what would I do if I had a shit-pot-full of dinero right now”. To put it succinctly, I think Japan and Europe are screwed first in terms of government debt; we will be last, Dollar will look good relative to Euro/Yen/Pound. Money fleeing govt debt will either be hoarded or invested in other (non government) assets, much of it outside of their respective currencies.

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