Cycle Trading

Stocks formed a swing high off the bearish reversal that formed on Wednesday.

Thursday was day 16 for the daily equity cycle. The bearish crossover on the True Strength Indicator does signal a possible cycle in decline. However, the Buying on Weakness numbers over the past two days suggest things are not what it may appear.

Over the past 2 days the SPY printed close to 200 million Buying on Weakness (BOW). We will need to be open to the possibility that stocks may only form a half cycle low before another push for a new all time high.

Meanwhile the dollar continued to rally higher.

Thursday was day 4 for the new daily dollar cycle. However I have the weekly dollar chart above to better track if an intermediate cycle low has been left behind. We discussed last night how the dollar formed a weekly swing low. Well the dollar delivered a bullish crossover on the weekly True Strength Indicator. That is another signal that this may be a new intermediate cycle. Of course final confirmation arrives with a break of the declining weekly trend line.

And gold has reacted to the dollar strength with more selling.

Thursday was day 12 for the daily gold cycle. It is no coincident that the daily gold cycle peaked on the first day of the new dollar cycle. We see that gold has continued to sell off as the dollar rallied.

It does appear is if gold has begun its daily cycle decline. Gold will need to print a low above the previous low of 1251 in order to maintain a bullish posture.