Cycle Trading

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The dollar’s daily cycle peaked on day 19 by printing a huge bearish reversal which signaled the daily cycle decline. Friday’s narrow range day printed a lower low forming a swing high.

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The dollar delivered a surprise on Monday by breaking above Friday’s high, regaining the 200 MA and forming a swing low. Surprises tend to occur in agreement with the trend. So if the dollar did leave behind a three year low in May a surprise shortened cycle would be in agreement with the new trend. Now the dollar could simply be setting the declining trend line so we need to see a break above Thursday’s high of 81.06 confirms a new daily cycle.

Meanwhile stocks continued higher on Monday.

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Monday was day 39 for the daily equity cycle. Stocks are in their timing band to print a daily cycle low. The normal timing band lasts until day 45. Stocks will need to break below the daily cycle trend line to form a daily cycle low. This suggest that once a swing high forms we will see a brief but sharp decline into a daily cycle low.