Cycle Trading

We have discussing since July the possibility that yearly dollar cycle has topped. Today’s action with the dollar has confirmed this.

The current dollar cycle peaked on day 2 and formed a swing high on day 3. Wednesday we see the dollar break below the previous daily cycle low forming a failed daily cycle. The dollar has now printed 2 failed daily cycles in a row, as well as losing the 200 MA. A failed daily cycle signals that the intermediate cycle is in decline.

The dollar printed a yearly cycle low in June. This is the first intermediate cycle of the new yearly cycle. We see that the dollar peaked on week 3 and formed a weekly swing high on week 4. The failed daily cycle confirms that the intermediate cycle is in decline. Since the weekly dollar cycle averages about twenty weeks, that leaves approximately 3 more months before the intermediate cycle low is due. That will take the dollar into November. So it is very likely to see the dollar break below the previous yearly cycle low of 80.49 in the coming weeks. Once that happens, that confirms a failed yearly cycle.

The dollar printed a yearly cycle low in June. August is month 2. As mentioned, the failed daily cycle signals the intermediate cycle decline, which should take us out to November. That takes the yearly cycle to month 5. So the yearly cycle will need at least one more failed intermediate cycle to take it to the yearly cycle low. Allowing for about 20 weeks takes the dollar to late February or early March, 2014. March, 2014 brings the current yearly cycle to month 9, which is in the timing band for a yearly cycle low.

For over the past 30 years the three year dollar cycle has averaged 35 months. March, 2014 takes the three year cycle count to month 34, which is right in the timing band for a three year cycle low. Should the dollar break below the previous three year cycle low, then that produces a failed three year cycle. Let’s look at the implications of a failed three year cycle.

The dollar cycles through a 15 year super cycle that is comprised of five 3 year cycles. The 15 year super cycle forms higher 3 year cycle highs until the cycle peaks and then prints lower highs into the 15 year super cycle low. The alarming thing with this new 15 year super cycle is that the dollar has failed to print a higher 3 year cycle high. Should the dollar break below the previous three year cycle low then that would signal that the 15 year super cycle is in decline. Which would be a disaster for the world’s reserve currency.

I am not surprised to see gold print (again) a bullish reversal now that the daily dollar cycle has failed.

Wednesday was 27 for the daily gold cycle. Gold’s daily cycle is getting long in the tooth. With gold printing a narrow range day along with the failed dollar cycle gives a high likelihood that today marked a daily cycle low. A break above 1289.30 forms a swing low. A break above the declining cycle trend line confirms a new daily cycle.

Above I broke down both the weekly gold and weekly dollar. You will notice as the dollar rallies, gold tanks. But as the dollar tanks gold rallies. So the dollar beginning its journey into its three year cycle low signal that gold should be entering a very bullish period.