Cycle Trading

The dollar seems to be using every trick in the book over the past several weeks to try and mask its true intentions.

In November the dollar peaked on day 1 before declining into a shortened 15 day daily cycle low. Rallying out of that low the dollar appeared to have peaked on day 2 before printing that huge bullish reversal on day 5. That gave the impression that the dollar was leaving behind an intermediate low. Then the dollar printed an even shorter 11 day daily cycle low leaving behind a giant lower tail. The rally out of that 11 day daily cycle low started out aggressively, looking similar to how the dollar begins a new intermediate cycle.

But I think now the dollar is revealing its true intentions. Because right on cue the dollar formed a swing high on day 8. An 8 day peak is usually the outer limits for the peak of a left translated dollar cycle. The swing high and the clear and convincing trend break leaves little doubt but to expect the dollar to now roll over into a left translated failed daily cycle. With a 9 day cycle count we should see the dollar trend lower for the next 2 – 3 weeks.

Stocks

We will begin our discussion of stocks by observing that this is the fourth daily cycle to the current intermediate cycle.

Intermediate equity cycles typically are comprised of 3 daily cycles. Therefore our expectation for this fourth daily cycle is to lead into an intermediate cycle decline. Intermediate cycle declines are characterized by the last daily cycle forming as a left translated, failed daily cycle. Left translated failed daily cycles normally peak on or before day 20.

Currently we see the the daily equity cycle sports a day 8 peak. It appears that a bear flag is forming. While it is still possible for stocks to make a higher daily cycle high, I expect a bearish resolution to this next week.

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