Cycle Trading

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On Friday gold formed a swing high and delivered a clear and convincing trend line break to confirm the daily cycle decline.

(Below is Friday’s Chart)

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The declining 50 day MA halted gold’s rally on day 11. You will notice that the previous daily cycle also peaked on day 11 when it got rejected and then declined into its daily cycle low.

Back to Friday. Gold closed below the daily cycle trend line on Friday which is required for the daily cycle decline.

That all changed today.

(Below is today’s chart)

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Gold plunged overnight testing the 1140 level. Then the buyers stepped in and gold rose almost $80 from low to high and closed 3.9% higher on the day. More importantly gold managed to close above the declining 50 day MA.

Normally the lowest point following the daily cycle peak is where we label the daily cycle low. But for the second daily cycle in a row the power of the reversal forces us to label the cycle low as day 1 of a new daily cycle.

And I think we can attribute gold’s powerful reversal to gold sniffing out a top to the dollar’s intermediate cycle.

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Last week the dollar printed another higher weekly high pushing the intermediate cycle out to week 29. The dollar is overdue for an intermediate cycle decline. And the dollar’s daily cycle just may have peaked.

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There are 2 possible scenarios for the dollar. One scenario would have us label last Wednesday as a 30 day daily cycle low. That scenario becomes valid if the dollar reverses and breaks to a new high.

The other, and more likely, scenario is that the dollar printed a 23 day daily cycle low on November 13th. The dollar peak last Monday on day 5. Today the dollar failed to break higher. Now a break below the blue daily cycle trend line confirms a daily cycle decline. And with a peak on day 5, that will lock in a left translated nature to this daily cycle. Which should lead into a failed daily cycle. And a failed daily cycle confirms the intermediate dollar decline.