Cycle Trading

Today’s mail hits upon something worth looking at…

“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.”

And one more Comment to include …

“Thanks for the report, as always.
The DXY fell to 82.23 overnight, but then jetted higher.”

So let’s look at the buck.

To start out, the previous daily cycle low was 82.05. The daily cycle peaked on day 8 and started a downtrend on day 9. Yes I know day 13 breached the (black) declining cycle trend line, but then closed back in the down trend. Wednesday had a clear breach of the (red) daily cycle trend line. Wednesday’s intra day low was 82.50.

The daily cycle can form a low any day now right through day 28. A break above the declining cycle trend line will likely signal a new daily cycle. However, if the dollar continues lower, then there is a failed daily cycle. A failed daily cycle signals an intermediate cycle decline.

So the dollar not only breached the daily cycle trend line, it also formed a weekly swing high.
A weekly swing high is a prerequisite for a weekly cycle decline. So should the daily cycle continue for a few more days, the dollar will have produced a failed daily cycle. With a weekly swing high already in hand, then that greatly increases the odds of a weekly cycle decline.

Ideally, the dollar will print a failed weekly cycle which will signal a yearly cycle decline. However if the three year is still in ascent, then we may not see a failed weekly cycle. That was the case in 2011.

In 2011 the three year dollar cycle was still in ascent and did not produce a failed weekly cycle at the 2/2011 yearly cycle low. In September of 2012, there was a failed weekly cycle leading into that yearly cycle low.

By the way, notice how the yearly cycles are normally comprised of two intermediate cycles. We are currently in the second intermediate cycle for the year.

Bonds are also in a daily cycle decline.

The daily bond cycle peaked last Friday and has been in decline since. Bonds are in a new yearly cycle and this is the first daily cycle of that new yearly cycle. Therefore we can expect a right translated daily cycle to form. Bonds are already at day 22. Once the daily cycle trend line is breached, a swing low will very likely begin a new daily cycle with the expectation to print a higher daily cycle high.

Stocks closed at all time highs today.
Last Wednesday stocks breached the daily cycle trend line.
A low printed on Friday followed by a swing low on Monday.
Closing to new highs confirms that this is day 3 of a new daily cycle.

With the possible tail wind of an intermediate and potentially yearly cycle decline of the dollar propelling stocks, that should take equities to where no one has gone before …