Cycle Trading

Yesterday we discussed the apparent break of the declining cycle trend line on the dollar.

The dollar followed through today with a convincing swing low and trend line break.

The swing low was formed off the of Wednesday’s candle, which was day 21.
A swing low that happens in the timing band which is accompanied with a trend line break stands pretty good odds of marking a daily cycle low.

Some of you may be thinking
“Now wait a minute, you were just saying that the dollar printed a failed daily cycle signaling an intermediate cycle decline. What gives ??”

What I saying was that we are in the timing band for a daily cycle low. Because of the timing of the weekly cycle, we are expecting at least one more failed daily cycle to this intermediate cycle. Therefore should see the dollar rally for no more than day 8 before rolling over into a 3 – 4 week sell off.

Here is what this looks like on the weekly chart.

The weekly dollar peaked on week 9 and the dollar is currently in week 11. A new daily cycle beginning today can last 4 – 6 weeks bringing the current intermediate cycle out to week 15 – 17, which is on the early end of the timing band for an intermediate cycle low.

Stocks were down again today and 3 out of the last 4 days since Thursday.

I am beginning to think that day 27 did not mark a daily cycle low, but set the daily cycle trend line. I think this primarily for 3 reasons:

1) A day 27 low while not unheard of, it is still early for the normal timing band.
2) The dollar’s daily cycle.

The expectation of a short rally on the dollar syncs up with the daily equity cycle decline. Then as the dollar rolls over, stocks form a daily cycle low and begins a new daily cycle.

3) Selling on Strength

There has been no significant Selling on Strength prior to last Thursday. Usually we see some large S.O.S. numbers prior to the intermediate cycle topping.

But for now it looks like the dollar will rally for a few days as equities take it on the chin …

I have opened up the one month trail subscription link for the week.

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