Cycle Trading

The SPX printed 138 million Selling on Strength today which reverses the Buying on Weakness that we saw from Monday.

http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html

Tuesday’s SOS is not a panic level but a warning. It seems that as equities approach the all time highs, it looks like Big Boys are quietly slipping out the back door.

Tuesday was day 24 of the daily equity cycle. Stock have another 11 days before entering the timing band to print a daily cycle low. We need to keep a watch for a swing high accompanied by a break of the daily cycle trend line.

It seems that the dollar is adding pressure to stocks. The dollar peaked on day 8 and has formed a swing high. We discussed this morning that we needed to see a break of the daily cycle trend line to confirm the daily cycle was in decline.

Today, the dollar tagged the 82.50 level and reversed higher. If the dollar breaks above the 83 level it will have had a bullish breakout to a mini bear flag that has been forming off the day 8 peak.

Should that occur then we could see the dollar lock in another right translated daily cycle. This is the type of scenario that could send stocks into a daily cycle decline.

Gold decisively broke lower today closing below the 1580 level. Tuesday was day 28 for the daily gold cycle.

It is very late in the timing band for gold to print a daily cycle low so this sell off should be reversed soon. In fact the next swing low will very likely mark the daily cycle low.

Either the 2/21/13 low will hold or not.

If the 2/21 low fails, then that will extend the yearly cycle decline.

If 2/21 low stands then this was very likely the first daily cycle of a new yearly cycle.

Editor’s note:
I expect to return to the office late mañana