Cycle Trading

Stocks delivered a bearish reversal on Wednesday.

Wednesday was day 24 for the daily equity cycle. Stocks breached the 1680 level before reversing. The low of the day managed to tag the (blue) daily cycle trend line. A break below 1648 forms a swing high and also breaks below the daily cycle trend line signaling a daily cycle decline.

If today holds as the daily cycle peak, at 24 days the odds are good that this cycle will form as a right translated daily cycle. The timing band for a low is normally between days 30 and 45. Then the next cycle will likely be the terminal cycle to this intermediate cycle. The next cycle should then peak before day 20 before rolling over into a left translated, failed cycle.

The dollar also rallied to a new daily cycle high today.

Wednesday was day 15 for the daily dollar cycle. We see that since the dollar breached the Bollinger Band on day 12, the dollar has traded sideways. Also notice that the Bollinger Bands have opened up. It looks like the dollar is getting set for one more leg higher. Since the dollar’s daily cycle runs through day 28, there is plenty of time for one more push higher before rolling over in to a daily cycle decline.

Back to the Mail Bag

pk34145 asked,
“LM, Could you please give us your long term view of $GOLD for the current Intermediate cycle?

Is it likely, or at least “possible” that we are on track to test all time highs in $GOLD for this Intermediate Cycle?

I just looked at the 2008 bottom and this is what I found.
2008 bottom
25% below 200dma – (recovered 200dma in about 1 1/2 months)
45% rally to A-wave high (700 to 1000 in about 3 1/2 months)

2013 bottom (Assuming we have already seen ICL and YCL)
20% below 200dma – (still possible to recover this during 2nd Daily Cycle)
40% below 1900 – (should be able to do this during current Intermediate cycle)

The slow beginning off of this bottom does not look all that different than the 2008 bottom.

http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&st=2008-05-22&en=2009-04-01&id=p91950315237

Your thoughts on this would be appreciated. (turn on your “crystal ball”)”

Nice work. I also think that this reminds me of 2008 yearly cycle low.

Above is the big picture.

The pattern does seem similar to the 2008 yearly cycle low. Of course this was a bigger rally and the correction was more severe stretching over two yearly cycle lows. I expect that once this new yearly cycle is confirmed, this intermediate cycle will peak between the 1800 – 1900 level. An intermediate decline into a to around the 1600 level before a launch to new all time highs.

So we are waiting patiently for gold to get it in gear …