Cycle Trading

I want to start off this week discussing two things that happened to the dollar on Friday.
1) How badly the dollar tanked
2) How incredible the dollar recovered

The dollar tanked on Friday dropping almost 0.76.
Then the dollar reversed and recovered an incredible 0.706 into the close.

Friday was day 11 for the daily dollar cycle. The drop on Friday did two things for the dollar. First, the dollar broke below the daily cycle trend line confirming a daily cycle decline. Second, the dollar also broke below the previous daily low set on 12/11/13 making this a failed daily cycle.

At day 11, the dollar still has another 7 days until entering its timing band for a daily cycle low. However the strong recovery has the dollar in position to form a swing low. A break above 80.52 forms a swing low. Should that happen and be accompanied with a break of the declining trend line then we would be forced to recognize an early daily cycle low.

So after emerging from the October Intermediate low the dollar first printed a right translated daily cycle. The dollar then followed up with two consecutive failed daily cycles. Ths is in line with our expectation of failed daily cycles leading into the next intermediate low.

Now if Friday does mark an early daily cycle low the rally out of that daily low could potentially break the declining intermediate trend line. Which will then force us to recognize a new intermediate cycle.

Stocks

Stocks have rocketed out of its daily cycle low set on December 18th gaining 76 points over 6 days which is 4.3%. This is the fourth daily cycle to the current intermediate cycle. Therefore it is very likely that this cycle will form as a left translated, failed cycle resulting in printing an intermediate cycle low.

So at six days into the daily cycle stocks are starting to get overbought. There is a bearish divergence developing on the Money Flow Index and the True Strength Indicator is already at the level that has seen previous daily cycles turned back. Having said that I think that stocks will push for 1900 before rolling over.

The CRB

This past week was week 5 for the intermediate cycle. The CRB continued to follow through on the break of the declining trend line and now seems destined to test the weekly 50 MA.

The CRB has now rallied for four straight weeks and 5 out of the past 6 weeks. The last time the CRB had such a run was when it emerged from the June 2012 yearly low. The CRB is now fast approaching the declining three year trend line, which I have dubbed the Inflation Line. If the CRB is rejected by the Inflation Line, then we will continue in a deflationary spiral. A clear and convincing break above the Inflation Line will usher in an inflationary period that will bring to light the unintended consequences of QE, ZIRP, Operation Twist …

The entire Weekend Report can be found at Likesmoney Subscription Services

The Weekend Report discusses Dollar, Stocks, Gold, Miners, The CCI Index, & Bonds in terms of daily, weekly and yearly cycles.
Also included in the Weekend Report is the Likesmoney CycleTracker

To subscribe: http://likesmoneysubscriptionservices.wordpress.com/

For subscribers: the full Weekend Report can be found at Likesmoney Subscription Services at http://likesmoney.wordpress.com/

A free sample report can be found here: http://likesmoneystudies.wordpress.com/