Cycle Trading

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After the big bullish reversal gold delivered, it is understandable that gold will need some time to consolidate yesterday’s move. So we will turn our attention to the dollar.

In the Weekend Report we discussed how this dollar consolidation has obscured our daily cycle count and made our trend line tool ineffective. Then last night we discussed how one scenario has the dollar breaking out higher, well the dollar did that today.

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Under the scenario of a November 17th daily cycle low that would make today day 10. There are two reasons why I do not think this scenario is valid.

1) A new high on day 10 shifts the likelihood that this daily cycle will form as a right translated daily cycle. The dollar forming a right translated cycle now is not aligned with the dollar being overdue for an intermediate decline. Today being day 3 keeps open the possibility that this daily cycle will form in a left translated manner.

2) The dollar closed below the 10 day MA last Wednesday. Acknowledging that our trend line tool is not effective during this daily cycle we turn to the 10 day MA. The dollar closed below the 10 day MA last Wednesday, making Wednesday day 30. Breaking to a new high makes today day 3 of a new daily cycle.

Bonds also merit some attention tonight.

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The daily bond cycle peaked on Monday, day 22. Today bonds gapped lower forming a swing low and breaking below the daily cycle trend line confirming the daily cycle decline. Tuesday was day 23 for the daily bond cycle. Bonds are in their timing band to print a daily cycle low. A peak on day 22 assures us of a right translated nature to this daily cycle. Which means that our expectation is for bonds to print a higher low here.

The yearly bond cycle peaked in October, month 10. December is month 12 and bonds are in their timing band for a yearly cycle low. So bonds are “due” for a yearly cycle decline. We need to be open to the possibility that the break to a new high was a false breakout. And there is a possibility that bonds will produce a failed daily cycle that would lead to an intermediate cycle decline, and then a yearly cycle decline.