Cycle Trading

The Dollar
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The dollar printed its highest point on Monday since the daily cycle began on August 11th. A swing high formed on Tuesday.

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The dollar quickly formed a swing low on Wednesday and more bullish follow through on Friday. Considering that Monday was getting late in the dollar’s timing band I believe that Tuesday printed a stealth daily cycle low.

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This was week 19 for the intermediate dollar cycle. The higher high that printed on week 19 assures us that the intermediate cycle will form in a right translated manner. Since a failed daily cycle is required for an intermediate cycle decline our expectation is to see this new daily cycle form as a left translated, failed daily cycle. If I were to guess, I would say that it looks like the dollar will run the stops above the previous 3 year peak before rolling over into an intermediate cycle decline.

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September is month 4 for the new yearly cycle. The dollar has broken above the declining monthly trend line to provide final confirmation of a three year cycle low has been left behind. It is worth noting that the monthly TSI is now approaching a level that has been breached only 5 times over the past 24 years.

Stocks
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The daily equity cycle peaked on day 19. The lowest point since then printed on Monday, day 26. Stocks have gone on to rally to new highs.

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Monday was potentially a half cycle low. If Monday was a half cycle low, then a break of the (dashed) trend line would signal a daily cycle decline. However, I believe that stocks printed an early daily cycle low, which I discussed in Thursday’s Evening Report. The big Buying on Weakness number from Friday also supports this notion.

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The huge 1.114 billion Buying on Weakness number of Friday is the bigger than the type of number we would expect to see at an intermediate cycle low, let alone a daily cycle low.

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