Cycle Trading

The markets are still digesting the Fed statement from Wednesday. Here are a few things that I am watching.

The dollar’s daily cycle peaked on Monday, day 13. A swing high formed and then the dollar tanked on Wednesday, confirming a daily cycle decline. While the dollar recovered some today, it still printed a lower high. This lower high has allowed us to draw in a declining trend line. The dollar should not break above this declining trend line until a daily cycle low forms. With Thursday being day 16, the dollar is still two days shy of entering its timing band for seeking a daily cycle low. So we could see the dollar continue lower into next week.

Despite the dollar’s recovery today, gold posted a gain.

Since peaking in late January, gold printed its lowest point on Tuesday. Gold then formed a clear and convincing swing low on Wednesday, Fed Day. Now a break above the declining trend line will confirm a new daily cycle.

Stocks broke above their declining trend line on Monday, indicating a new daily cycle. Wednesday saw stocks back test the 50 day MA before launching higher. With the intermediate cycle on week 22, we need to be alert to this daily cycle forming in a left translated manner and failing, leading to an intermediate cycle decline. A breach of the developing blue trend line would signal trouble. A break below the dashed trend line confirms an intermediate cycle decline.