Cycle Trading

I had a few questions over the past couple of days from “PT” that I wanted to address.

The first question was: “So essentially, metals and miners are aligned now. Day two, Daily Cycle one, beginning a new intermediary cycle, and a new yearly cycle . . . if the stars have finally come together for this truly beaten-down sector. That’s a mouthful, I know, but do I have it right?”

That was a spot on summary. Let’s look at a chart.

The Miners printed the lowest point on Thursday following the previous cycle peak. Friday formed a swing low and very likely day 1 of a new daily cycle for the Miners. The Miners gave back a little on Monday but then rallied for 4.36% on Tuesday. So Tuesday is quite likely day 3 of a new daily cycle. We need to see the Miners break above the declining cycle trend line to confirm the new daily cycle.

PT posed another question:
“One follow up, LM: So we need the DXY to pass under 82.03 to confirm a failed DC, right? That’d mean the IC is in a confirmed decline. You have mentioned a YCL in the dollar. If the above confirm, when can the dollar’s YCL be expected? TIA.”

Breaking below the previous daily cycle low produces a failed daily cycle.
A failed daily cycle does signal an intermediate cycle decline.

To illustrate this,let’s look at the dollar back in 10/2012

The dollar began a new intermediate cycle in late October, 2011.
The first two daily cycles were right translated daily cycles.
Notice that the third daily cycle peaked on day 7
Day 15 saw the dollar brake below the previous daily cycle low — signaling a failed daily cycle and an intermediate cycle decline.
The the dollar printed a shortened failed daily cycle for a fourth daily cycle.

And here is what this looked like on a weekly basis.

So getting back to the current daily dollar cycle:

Tuesday was day 16 for the daily dollar cycle. The dollar has yet to break below the daily cycle trend line (blue) to confirm a daily cycle decline. Should the dollar break below the daily cycle trend line, then the previous daily cycle low is just about 20 cents away at 82.05. A break below 82.05 produces a failed daily cycle and signals an intermediate cycle decline.

So the dollar is currently on week 10 of the current intermediate cycle.
The dollar appears to have peaked on week 9 and is close to forming a swing high.
A break below 80.27 forms a weekly swing low.
The dollar will enter its timing band for a weekly cycle low at week 16.
At week 10, the dollar could easily see 1 to 2 more failed daily cycles before printing an intermediate cycle low.
That would bring us to late May into June.

Left translated intermediate cycles typically peak on or before week 8. In order for the current weekly cycle to form as a left translated weekly cycle, then the dollar needs to trend lower until at least week 19.

The last yearly cycle low for the dollar occurred in September. Should the current intermediate cycle last until June, that would be 9 months. The timing band for a yearly cycle low is 9 – 13 months …

One more thing to consider, lets look at the gold cycle as the dollar heads into a yearly cycle low.

Notice at point 1 the dollar is forming a yearly cycle low in May, 2011 and the gold cycle peaks.
Point 2 has the dollar forming a yearly cycle low in February of 2012 and the gold cycle peaks again.
The dollar prints a yearly low at point 3 in September of 2012 and the gold cycle peaks yet again.

We see that when the dollar heads into a yearly cycle low that the gold cycle tends to peak.

One other observation is the gold did not set its all time high at the three year cycle low.
Gold set is all time high during the 4 month consolidation that followed …