Cycle Trading

The dollar had a failed daily cycle at the end of April that resulted in an intermediate cycle low.

The subsequent rally that began on May 1 st peaked on day 16, setting a higher high. That confirmed a new intermediate cycle. The following three plus week plunge broke below the previous daily cycle low confirming this young intermediate cycle as a failed cycle.

Wednesday was the lowest point since the cycle peak, marking the daily cycle low. Wednesday also delivered a trend line break. Thursday formed a swing low, confirming a new daily cycle making Friday day 2. (My chart shows a swing low off of Tuesday, I will be able to correct on Sunday night).

Since this first daily cycle failed, that signals that the intermediate cycle decline has begun. All subsequent daily cycles should form as left translated daily, failed daily cycles. Left translated dollar cycles usually peak on or before day 8.

Stocks

The fourth daily cycle peaked on day 24 and looks to have printed a right translated daily cycle low on day 34. However, stocks continued to crawl up the intermediate cycle trend line before slicing through it on Thursday and then printing a reversal on Friday. The reversal on Friday signals that day 34 was not the daily cycle low, but it extended out to potentially Friday, which would be day 45.

Last week saw stocks break below the intermediate cycle trend line. Friday could be day 11 meaning that stocks can trend lower for the next four to six weeks into the daily and intermediate cycle low.

But Friday’s reversal could mean that Friday was day 45 and stocks are about to print a daily cycle low. The buying on weakness that I observed this week supports this view.

Thursday the SPY topped the Buying on Weakness with a 321 million print. Friday saw 380 B.O.W. print. These are not the type of numbers that should be printing if equities still had another 4-6 weeks to sell off. In fact the 700 million B.O.W. over two days is more suggestive of an intermediate cycle low.

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