Cycle Trading

This is the fourth daily cycle of the current intermediate cycle. Therefore our expectation is to see this daily cycle form in a left translated manner, peaking on or before day 20. Which will result in an intermediate cycle decline.

But simply because a swing high printed today along with a bearish crossover on True Strength Indicator does not mean that the sky is falling. Stocks could be setting a daily cycle trend line. In the absence of a trend line break a close below the 10 MA would signal a daily cycle decline. And a break below the break out level (dotted grey line) would confirm it for me. Having said that, I still believe that stocks will break above the 1900 level.

And that is because major pivots seem to like these big numbers and tend to overshoot them. And I believe that 1900 is too big of a target to ignore. But as previously mentioned a close below the 10 MA is our signal.

Now the dollar chart just got more complicated today.

The dollar had a big day today and today’s rally broke above the declining black trend line. Normally a trend line break is a signal of a new daily cycle. But that would mean that the dollar left behind an 11 day cycle low, which is 7 days shy of its normal timing band. The dollar was contained by the declining (red) trend line. If the dollar reverses and goes lower here then I would view this as noise. However since day 11 broke below the previous low, a break above the day 7 high of 80.83 would confirm a new daily cycle.