Cycle Trading

Hammerman asked,

“Likesmoney,
Given your methodology on cycles, where does gold need to close above on a monthly basis in order to confirm a new yearly cycle……the April -May or the Feb-April monthly upper trend line? …. and if gold went no higher than it’s current daily high and dropped to less than 1322 (previous low), would June be month 13 in the monthly cycle or month 2 ?
Thanks !”

So let’s start by defining a cycle low. I define a cycle low quite simply as the lowest point following the cycle peak.

So gold last had a yearly cycle low last May. The cycle peaked in October, month 5. So far, April is the lowest point since the October peak. Now some of you may point out that May actually closed lower, which is true, But still, April is the lowest point since the yearly cycle peak.

If April remains as the yearly low, then we will need to see gold break above the April high to form a monthly swing low. I will point out that last year it did take gold three months to from a monthly swing low. Then the final confirmation arrives with a break of the declining trend line. However, it seems that we will see a trend line break before the monthly swing low prints.

So my primary view on gold is that the yearly cycle low probably printed on April 16th. Following that low, gold printed a right translated daily cycle. If the yearly low is behind us then I would expect the current daily cycle to also form as a right translated cycle and it should print a higher daily cycle high. A break above 1487.80 forms a higher daily cycle high. Gold will need to break higher soon in order to accomplish this.

What happens if gold breaks lower here?

If gold breaks lower then that opens the possibility that gold needs to consolidate further following the dramatic panic sell off. Then I think that we could see a triangle consolidation unfold over the course of a shortened intermediate cycle. We could see a shortened cycle with possibly only three daily cycles. And gold not break higher until after the third daily cycle.

Did you notice the Buying on Weakness number for the SPY today?

The 166 million is a noticeable number. Still, I would not be surprised to see stocks not form a swing low until the job’s numbers is reported on Friday.

Wednesday was day 33 for the daily equity cycle. Stocks are in the timing band for a daily cycle low and stocks also had a Bollinger Band crash today. Any swing low could mark the daily cycle low. We still need to see a break of the declining trend line to confirm a new daily cycle.

I still expect to see the next daily cycle break above 1700 before putting in a final intermediate cycle peak.

Then I think the party will be over …