Cycle Trading

The Dollar

The new high on Friday, day 10, begins to shift the odds towards a right translated daily cycle formation.

The dollar has become a bit stretched above the 10 day MA. A swing high here would signal a decline into a half cycle low, would allow the 10 day MA to catch up to price. The dollar continues to close above the upper daily cycle band which indicates a daily uptrend. The dollar will remain in its daily uptrend unless it closes below the lower daily cycle band.

Stocks

Stocks broke out to a new high on Friday to signal a new daily cycle.

We have discussed previously how the previous 2 intermediate cycle lows did not produce a failed daily cycle, providing us evidence of a change in behavior. Now the change has filtered down to the daily cycle as demonstrated by the very mild decline into the daily cycle low. Where usually a daily cycle decline would last 7 – 15 days and retrace 38 to 50%, the currency daily cycle decline lasted only 3 days and only briefly closed below the 10 day MA.

Our timing band tool is still helpful in spotting daily cycle declines. But with stocks being in such a strong daily, weekly and monthly uptrend, the daily cycle declines are becoming mild. So we will need to shift our focus to our cycle band tool. As long as stocks remain in a daily uptrend the correct strategy is to buy the dips. Stocks will remain in their daily uptrend unless they close below the lower daily cycle band.

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