Game Changer …

September 18, 2013

The Fed signaling that it will continue its bond purchases was a game changer.

That change was immediately apparent on the dollar. Prior to today, the dollar was flirting with forming a right translated cycle. In fact we discussed last night how a swing low formed, but not a trend line break to confirm a new daily cycle.

With the news of continuing the bond purchases the dollar crashed below the previous daily cycle low printing a failed daily cycle. This is the third failed daily cycle in a row. So instead of a this daily cycle potentially being a new intermediate cycle, this continues the intermediate cycle decline now at week 13.

This was a game changer for the dollar in another way as well.

The move by the dollar today delivered a clear and convincing break of the three year cycle trend line. The dollar has confirmed its decline into a three year cycle low. With the dollar on month 3 of its yearly cycle, we can easily see the dollar decline over the next 7 – 10 months into its yearly and three year cycle low. And keep in mind that a plunge into three year cycle low can be a rather nasty affair.

Stocks soared today.

Stocks were up 1.22% today and broke out to new all time highs. But as people were piling into stocks, the Big Boys were selling into strength.

The 328 million SOS print is a pretty big number. It is the type of number I expect to see that signals an intermediate cycle top. If the Big Boys are selling into strength guess where I think some of will land.

Gold

I had some concerns when gold broke below the intermediate cycle trend line last week. However, I believe that today signals the bull is alive and well. A break above the previous daily cycle high will negate the intermediate cycle breach and then today will set the intermediate trend line.

Gold was up big today rallying a whopping 4.22% gain. Gold printed a right translated daily cycle with a higher high and a higher low. That is the definition of a bull trend.

Gold has not even formed a swing low and a declining trend line break to confirm a new daily cycle. When it does, that sound you here will be the sound of gold leaving the station…

4 responses to “Game Changer …”

He Wei

September 19, 2013

Great analysis, gold is still at a juncture, hard resistance below 1380-85 and silver is a bit lagging. Let’s see how it plays out.

Reply
CEDRIC

September 19, 2013

Hi LM,

According to cycle definition it can’t be possible that the dollar cycle has a higher high (above the previous cycle) and also at the same time make a failed cycle…something must be wrong…

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1. likesmoneystudies
  
  September 19, 2013
  
  Cedric,
  
  Many times the cycle peak of an asset class is embedded in a left translated cycle.
  
  For example, an asset, like the dollar begins a new intermediate cycle. The first daily cycle is is right translated and sets a higher low. The second daily cycle, following the right translated cycle, prints a higher daily cycle high and then goes on to print a higher low. (Higher highs and higher lows are the definition of a bullish cycle) Since the second daily cycle is right translated, our expectation would be for the third daily cycle to go on to print a higher daily cycle high. Now the third daily cycle can still go on to print a higher daily cycle high, but since it peaked before the cycle mid point, it becomes left translated and fails (breaks below the previous daily cycle low)
  
  No time to draw up a chart, but will try to get to it later.
  
  Reply
2. likesmoneystudies
  
  September 19, 2013
  
  Here is an example of an intermediate cycle that is comprised of 3 daily cycles.
  
  The third daily cycle prints a higher daily cycle high. But because it peaks left of center (left translated) it goes on to break below the previous daily cycle low producing a failed daily cycle and an intermediate cycle low.
  
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  Reply