Cycle Trading

The dollar printed a left translated, 15 day, failed daily cycle low on Wednesday, 12/11. The dollar emerged from that low and peaked on day 2 then proceeded to decline into what looked to be another failed daily cycle. After the FOMC minutes on Wednesday the dollar printed a bullish reversal and rallied. This has caused me to re-examine this intermediate cycle. And I believe that it is prudent to be open to the possibility that instead of a 15 day daily cycle low, December 11 may have printed a 33 day – daily cycle low.

If the 15 day label is accurate then we will likely see the dollar roll over early this week into a daily cycle decline. That is because our framework of the dollar declining into a yearly cycle low is valid. But what if the dollar breaks higher?

Backing out the daily chart we can see that the dollar is at an important inflection point. The dollar is testing a resistance/support level as well as testing the declining trend line. My view is a rejection by these two points will see the dollar continue into its yearly cycle decline. A clear and convincing break above signals something has changed. I develop this idea further in the Weekend Report. http://likesmoney.wordpress.com/

Stocks

The daily equity cycle peaked on Friday, 11/29 at day 36. A double top formed on day 42 before finally rolling over into an extended 49 day – daily cycle low.

Stocks printed a bullish reversal on Wednesday, delivering a clear and convincing trend line break and then followed through higher on Friday confirming a new daily cycle.

So let’s take a look at the daily chart for the current intermediate cycle.

Stocks printed the intermediate cycle low in June. Since then stocks have printed 3 right translated daily cycles and has started a fourth. Intermediate cycles are comprised of sometimes 2 but mostly 3 daily cycles, rarely 4. Thursday began the fourth daily cycle for this intermediate cycle. The odds are pretty good that this will be the last daily cycle for this intermediate cycle. So we will need to watch of signs that the intermediate cycle is topping.

One such signal are the Selling on Strength numbers.

When stocks printed the bullish reversal on Wednesday it seems as if the Big Boys started to cash in and 151 million S.O.S. printed. And then again when stocks delivered some follow through on Friday we again see another Selling on Strength day to the tune of 178 million. That’s 329 million over three days so it is starting to add up. And it is hard to ignore the smart money bailing on Apple.

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