Cycle Trading

… and get comfortable, I have a few charts that I want to go over tonight.

Starting with gold:

http://postimg.org/image/ywjn0974n/

Gold broke below the day 29 low today. We speculated on either day 22 or day 29 as being the daily cycle low. Today makes either scenario result in a failed daily cycle.

http://postimg.org/image/6hvdeebsh/

A weekly swing high formed two weeks ago and today’s action has caused a weekly trend line break which signals an intermediate cycle decline. So at week 7, gold faces another 11 – 14 weeks of trending lower.

Yesterday morning Mika commented,

“I think what we’re seeing is a stretched daily cycle which has yet to bottom, and still very much RT. We will soon see a monstrous rip to the upside once this 1st daily cycle in this new IC has bottomed.”

Trying to keep an open mind I decided to see if there is any evidence to support this scenario. Right away we can acknowledge that gold has seen (few) daily cycles extend past day 30. So it is a possibility here.

What is unfolding on the dollar could align with an extended daily cycle for gold.

http://postimg.org/image/swd1umek1/

The dollar has been caught in a weekly consolidation since October. The dollar is testing the upper stem of the triangle. If the dollar has left behind a three year low in May, then this weekly consolidation should resolve bullishly.

Today was day 16 for the daily dollar cycle. The dollar is two days shy of entering its timing band for printing a daily cycle low. So the daily cycle is potentially aligned to decline as it is reaching the upper stem. And the dollar declining is generally bullish for gold …

Now let’s look at couple of things on gold’s daily chart that can still lead to an extended daily cycle.

http://postimg.org/image/xdmmzvfyl/

The two things in particular is the reversal off the 200 MA and the declining trend line. If gold loses the support of the 200 MA then the bullish case of an extended daily cycle begins to evaporate. But if that support holds then a break of the declining trend line would signal a new daily cycle.

And the Buying on Weakness Number for GDX supports an extended cycle scenario.

http://postimg.org/image/b8v8wf4mp/

The Miners printed 137 million Buying on Weakness today. This is a big number for the Miners. This number is more characteristic of a major low instead of a failed cycle.

So a clear and convincing close below the 200 MA supports the bearish view of a failed daily cycle. But a swing low off of today’s reversal followed by a declining trend line break signals a new daily cycle.