Cycle Trading

The dollar printed a monthly swing high this week. This is significant.

While a monthly swing high does not guarantee that the yearly cycle is in decline, A yearly cycle decline cannot occur without a monthly swing high. With all of the damage perpetrated on the dollar via Q.E., I am not at all surprised to see the yearly cycle peak at month 1.

The dollar printed a left translated 14 day daily cycle low on Wednesday, July 31st. A swing low formed on Thursday and the new daily cycle peaked on Friday after being rejected by the 50 MA. This week the dollar continued lower. The dollar broke below the 200 MA and broke below the previous cycle low on Wednesday, signaling a failed daily cycle. With Friday being day 7, we could see the dollar trend lower for the next 2 to three weeks. A break below 80.49 delivers a failed yearly cycle.

Stocks

Stocks form a daily cycle low every 30 to 45 days. The current daily cycle peaked on day 28. The lowest point since the cycle peak was day 31 and now the daily cycle sits at day 33.

Day 31 does qualify as a daily cycle low. There is a daily cycle trend line break and stocks have lost the 20 MA (not shown). Day 31 is in the timing band and its the lowest point following the cycle peak.

Typically we see a panic sell off and a lower Bollinger band breach at the daily cycle low, which has not occurred. Therefore I would expect a few panic days down into a daily cycle low.

But with dollar at day 7 of a failed daily cycle, that may be all of the sell off we see. If stocks recover and break above the declining cycle trend line then we will need to consider that a daily cycle low printed on day 31.

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