Cycle Trading

We were expecting a bounce in the dollar and reasoned that there was more upside to equities and precious metals, it was a pretty neat trick to see them all up in the same day.

Starting with the dollar

Wednesday was day 11 for the daily dollar cycle. That was the second Bollinger Band crash in a row for the dollar and expected an oversold bounce.

I drew the red trend line last night speculating that any bounce should be contained by it and likely simply set the declining cycle trend line.

Then the dollar broke above that line. Either I was premature in drawing that line, or there is a possibility that a daily cycle low printed on day 11.

While I think that a daily cycle low is a low probability event for day 11, because of the strength of the rally we need to keep an open mind.

The odds are that Thursday was an oversold bounce. We will need to see if this bounce last 4 days or less. Over the past 3 years no counter trend rally after a cycle peak lasted more than 4 days without resulting in a daily cycle low.

Besides the dollar, stocks were up as well.

Thursday was day 10 for daily equity cycle. Stocks rallied back and actually had an all time closing high.

We also saw gold bounce back.

Thursday was day 12 for gold’s daily cycle. Currently gold daily cycle has a day 8 peak. Gold will need to break above the day 8 peak to lock in a right translated nature to this daily cycle. That is necessary if gold indeed left behind a yearly cycle low.

The big news today was oil.

After two big days down, Oil recovered today. Oil broke above yesterday’s high forming a swing low. Oil also appears to have set a daily cycle trend line.

As we mentioned earlier, we were expecting an oversold bounce on the dollar, we knew that stocks were likely to go higher and reasoned that precious metals needed to go higher to form right translated daily cycles.

I am not sure if I expected to see all of that accomplished in the same day.

Perhaps gold and oil in particular do not respect the dollar’s strength today and are sniffing out further dollar weakness.

I wonder if Ben has any more rabbits he can pull out of his hat …