Cycle Trading

The dollar has done a masterful job over the previous two weeks masking its true intentions.

After the day 10 peak in early November, the dollar declined into its daily cycle low. The dollar printed a big reversal on day 18 that broke the declining trend line. In real time this looks like a daily cycle low.

Five days later the dollar broke below the day 18 low forming a failed daily cycle. A failed daily cycle is in line with our expectation is for this daily cycle to form as a left translated cycle. When the dollar formed a swing low off the day 5 print, we were forced to consider day 5 as part of the previous cycle making it day 23.

The more I study the dollar chart the more I believe that day 18 printed the trend change marking the daily cycle low. A failed daily cycle did print on day 5. But since there was such strong support at the 80.50 — 80.60 zone, the dollar needed to gather it self before breaking below it. Friday we witnessed the dollar being rejected after back testing the 80.50 — 80 .60 zone.

Stocks

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The daily equity cycle peaked a week ago Friday on day 36 and began its journey into a daily cycle low.

The doji printed on Wednesday marks the daily cycle low. Then we saw stocks break above the declining trend line in a clear and convincing manner to declare Friday as day 2 of a new daily cycle.

This was the third daily cycle of the current intermediate cycle. Intermediate equity cycles normally are comprised of 3 and sometimes 4 daily cycles. With this new cycle being the fourth daily cycle, our expectation is to see this cycle lead into an intermediate cycle decline. Therefore after breaking to new highs, we should see stocks peak by day 20 before rolling over into a left translated, failed daily cycle.

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