Cycle Trading

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In the Weekend Report we discussed labeling 1/29 as an 18 day, daily cycle low. The trend line break on February 3rd helped to confirm the new daily cycle. Gold has declined steadily since then.

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This sell off in gold is taking gold into an intermediate cycle low. The labeling of day 18 as a daily cycle low accurately reflects gold’s cyclical behavior and allows us to recognize that this is a failed daily cycle. Failed daily cycles are the hallmark of an intermediate cycle decline.

Tuesday was day 17 for gold’s daily cycle. Gold is just one day shy of entering its timing band for a daily cycle low. While gold can still go lower, a break above 1204.40 forms a swing low. Then a trend line break signals a new daily cycle.

If gold does form a daily cycle low soon, we will need to keep an eye on both the 50 day MA and the 200 day MA. Failure to regain both of these moving averages will likely signal a continuation of the intermediate decline.

However, the pattern of gold’s decline is emerging as a falling wedge pattern, which tends to resolve bullishly.

Which brings us to gold’s weekly chart.

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Gold’s intermediate cycle peaked on week 11 and has declined steadily to this week, week 16. Gold is two weeks shy of entering its timing band for an intermediate cycle low. There is plenty of time left in this intermediate cycle to allow for one more daily cycle.

However, there is the possibility that a new daily cycle for gold could lead to an early intermediate cycle low. A break of the declining weekly trend line would signal a new intermediate cycle.