Cycle Trading

The dollar delivered a bullish surprise today.

After a quick burst to a day 5 peak the dollar drifted into a sideways consolidation which was contained by the declining 50 MA — until today. Thursday’s upside surprise means that day 14 set the daily cycle trend line. With a new daily cycle high on day 15, this locks in a right translated nature to this daily cycle.

Since our framework has labeled the current daily cycle as the first daily cycle of the new intermediate cycle, we should not be surprised that this daily cycle formed in a right translated manner. However if the dollar is still declining into its three year cycle low, then we should see this intermediate cycle form a left translated cycle peaking on or before week 8. And we will watch for this as the weeks unfold.

But this new daily cycle has cause monthly TSI to signal of a new three year cycle.

We previously discussed the possibility of October hosting the three year low. The dollar delivering a monthly bullish TSI crossover forces us to revisit this. Keep in mind that the bullish TSI crossover is not conclusive evidence and we could still see that reverse. But we will watch for other signals.

Another signal that the three year low may be in is the way the dollar has been coiling since October. The previous 3 year cycle decline saw the dollar drop 15 handles into its three year low. It was only after that drop did the dollar form a monthly coil. While the dollar did not experience the 15 point drip into October, this 5 month coil is similar to the consolidation following a three year low.

The next two things to watch for on the monthly chart is if the monthly TSI crosses above the zero line and if the monthly candle closes above the 20 month moving average.

On to Bonds.

Last night we discussed that at 18 days bonds had entered their timing band for a daily cycle low and wondered if the rising 50 MA would provide support.

Well bonds did find support at the rising 50 MA and bonds formed a swing low today. It is too early to say if today did mark day one of a new daily bond cycle. We will need to see some more bullish follow through. However if this is a new daily cycle then bonds just formed a right translated cycle. If that is the case then we would expect to see the new daily bond cycle to go out and print a new, higher daily cycle high.