Cycle Trading

Friday’s plunge by the dollar looked like a failed daily cycle from the day 17 swing low printed on 2/19. However I am seeing a couple of things that makes me suspicious that the daily cycle low was really this past Friday.

One reason was the day 17 low was one day early. However the most compelling evidence to me is the bullish divergence developing on the True Strength Indicator. If the daily cycle low was still out in front of the dollar then I do not think we would be seeing the TSI bullish divergence here.

Still there are two things that will confirm that Friday was a daily cycle low. First is if the dollar rallies past four days. Over the past 3 years, after a daily cycle has peaked no counter trend rally lasted longer than 4 days without initiating a new daily cycle.

The second thing is if we see a break of the declining blue trend line. A break of that trend line confirms Friday as the daily cycle low.

I think that we need to keep an open mind on the daily cycle count for gold.

The decline into Friday’s low does satisfy the requirements for a daily cycle low. Day 20 is in the timing band for a low. It is the lowest point following the day 18 peak. However the reversal today may just be noise. But if the dollar is rallying out of a daily cycle low then Monday could be a day 21 peak. A break below 1319.80 would signal a daily cycle decline.

On the other hand a break above 1354.60 would support the day 20 low scenario.

Also, palladium appears to have left behind its daily cycle low and could be leading gold.

Palladium looks as if it printed a day 16 low on Thursday. A swing low formed on Friday with the big bullish follow though today.

And a word or two about stocks.

The daily equity cycle appeared to be declining into at least a half cycle low with the news about Russia on Monday. Today the news of easing Ukraine-Russia tensions seems to have truncated the half cycle decline. Stocks had a clear and convincing break to new all time highs today.