Cycle Trading

The daily equity cycle peaked on day 28 and has been in decline since. We discussed on Monday that usually we see a lower Bollinger band breach at daily cycle lows. Equities delivered a lower Bollinger Band breach today on a big 1.43% down day for stocks.

Thursday was day 37 for the daily equity cycle. Stocks are in their timing band for a daily cycle low. The timing band stretches to day 45. A swing low accompanied with a declining trend line break will signal a daily cycle low.

Despite the big,down day for stocks — precious metals demonstrated tremendous relative strength.

Gold printed a 27 day right translated daily cycle low on August 7th. It can easily be seen as equities declined into their daily cycle low, gold rallied out if its low. And today with stocks down big, gold was up big, gaining 2.25%. Gold also broke above the previous daily cycle high, printing a higher high. Today provides clear evidence that the trend in gold and precious metals has changed.

The Miners continued their party …

Like gold, the Miners printed their daily cycle low on August 7th and have not looked back. So while stocks were working their way lower, the Miners were rallying. Prior to the Miners printing their yearly cycle low, if stocks had a big day down then the Miners were taken out to the shed. Now today the Miners printed a whopping 6% gain in the face of the equity smack down. Again, terrific relative strength indicating that the trend has changed.

I want to look at how the Miners reacted to equity sell offs prior to the Miner yearly cycle low.

The Miners were in an extended yearly cycle decline since October. That decline was exasperated when stocks declined into cycle lows.

Now on the biggest sell off for stocks since precious metals printed their yearly cycle low saw the Miners print one of their biggest days yet.

I think that it is no small coincidence that this big day for precious metals came on the day the dollar lost the 200 MA.

Wednesday was day 11 for the daily dollar cycle. The dollar was rejected by the 82 level and the declining trend line. The dollar failed in its attempt hold the 200 MA and the trend for the dollar is down.

And as the dollar continues to drop, precious metals and the Miners will continue to exhibit relative strength.