Cycle Trading

The Dollar

The dollar printed its lowest point on Tuesday, day 36, following the day 27 peak. A swing low formed on Wednesday. Then the dollar closed above the 10 day MA on Friday to signal a new daily cycle.

While the dollar still needs to break above the declining daily cycle trend it appears that the dollar is now in its 6th daily cycle. The dollar has already formed a weekly swing high (see below) and closed below the weekly trend line to signal that the intermediate cycle decline has begun. Since a failed daily cycle is required for an intermediate cycle decline our expectation will be for this new daily cycle to left translate and fail, which will usher in the intermediate cycle low. The decline into the day 36 DCL caused the dollar to close below the lower daily cycle band indicating a daily downtrend. The dollar will remain in its downtrend until it can close above the upper daily cycle band.

Stocks

While there is a little uncertainly regarding the status of the daily equity cycle, both scenarios favor a move into a daily cycle low.

I am in the camp that stocks hosted a mild DCL on day 33. Under this scenario, stocks would be in their 5th daily cycle. And the swing high that formed on Thursday, day 11, signals a left translated daily cycle formation. That would align with stocks being at 29 weeks for the intermediate cycle and being in their timing band for an intermediate cycle decline.

If day 33 was not the DCL, then that would make Friday day 45, placing stocks late in their timing band for a daily cycle low. Therefore Thursday’s swing high has good odds of sending stocks into their daily cycle decline. In either scenario, a close below the 10 day MA is needed to signal that stocks have begun their daily cycle decline.

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