Cycle Trading

The way the dollar has been rallying, it seems that it can pass the “look test” of a new intermediate cycle.

The classic doji weekly candle for a weekly cycle low, forming a weekly swing low and a then a follow through week helps this to look like an intermediate cycle low has been left behind.

The reason why we are hesitant to label this as an intermediate cycle low is because of the weekly count.

The timing band for the intermediate dollar cycle runs from 18 -25 weeks. And over 76% of weekly cycles run 14 weeks or longer. The weekly doji printed during the third week in August. That was week 10 for the intermediate cycle. So as you can see, this is very early for a weekly cycle low and we look to see what else helps to confirm this.

Usually we also look for a declining trend line break to help to confirm a new weekly cycle. However, due to the nature of the decline, the declining weekly cycle trend line is not as well defined as I would prefer.

So we look to the daily cycle for more evidence.

One such piece of evidence is forming a higher daily cycle high. And we can see clearly that the dollar has exceeded the previous daily cycle high. While that, in of itself, does not guarantee a new intermediate cycle, printing a higher high is the hallmark of a new intermediate cycle.

Finally, if the currant daily cycle forms as a right translated daily cycle, then we will have to label this as a new intermediate cycle. Today was day 12 of of the daily cycle. With each passing day, the likelihood of this forming as a right translated daily cycle increases.

And we see the effects of this dollar rally on gold.

Gold peaked on day 15 and has been in decline since then. Thursday was day 20 for the daily gold cycle. Gold is in the timing band for a daily cycle low. A swing low accompanied by a declining trend line break will mark the daily cycle low. Currently, a break above 1399.50 forms a swing low.

Then we expect gold to print a higher high.