Cycle Trading

Last week we kicked off the Weekend Report discussing how badly the dollar tanked last Friday and its remarkable recovery. We also noted that last Friday, day 11, also saw the dollar break below the previous low making this a failed daily cycle.

This past week the dollar consistently printed higher lows. The dollar finally broke above the previous daily cycle high. Since a cycle cannot fail and then go on to make a higher high that means that the previous Friday marks an 11 day daily cycle low. By breaking above the previous daily cycle that confirms this past Friday as day 3 for a new daily cycle.

So not only does it appear that the dollar printed an early daily cycle low, it also looks like an early intermediate low formed as well.

Stocks

Stocks began the new year by forming a swing high off the day 8 peak.

Our expectation is for this daily equity cycle to form as a left translated cycle peaking by day 20. I still expect stocks to break above 1900. But, losing the 10 day moving average and having a bearish crossover delivered on the True Strength Indicator certainly are signals of a daily cycle decline. Not having a clear and convincing trend line break does not allow for us to say conclusively that a daily cycle decline has commenced. A break below the break out level, as marked by the dotted grey line, will confirm a daily cycle decline.

The CRB

Last week we observed that the CRB was testing the 200 MA late in the cycle and was ripe for a cycle decline.

The CRB formed a swing high on Monday and proceeded to plummet all last week closing below the 50 MA. Our cycle counts had us expecting the cycle decline but I have to admit that the severity of the decline was surprising. And I believe that the reason of the sharp decline is tied to the dollar rallying out of an intermediate low.

The last two times the dollar rallied out of an intermediate low the CRB tanked. And we are witnessing it again. This helps to reaffirm my belief that the dollar has printed an intermediate low. The severity of the sell off is very apparent on the weekly chart.

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