Cycle Trading

The Dollar

The dollar broke out to a new high this week.

Breaking out to new highs this week ends the pattern of lower highs and lower lows. The dollar also continued to close above the upper daily cycle band this week. That maintains the daily uptrend and indicates that the June daily cycle low was also an intermediate cycle low. There are bearish divergences developing on the oscillators, which often precede a cycle top. Therefore a swing high and close below the 10 day MA will signal the daily cycle decline. The dollar should break below the daily cycle trend line in order to complete its daily cycle decline.

Stocks

While the status of the daily equity cycle remains unclear, stocks clearly broke out to new highs on Friday.

Stocks printed their lowest point on Thursday, day 32, following the day 29 peak. While that places stocks in the early part of its timing band for a daily cycle low, it is not clear if day 32 was the DCL. The bearish divergence on the oscillators and not turning the 10 day MA noticeably lower are the reasons that make it questionable if day 32 was a mild DCL. What is clear is that stocks are in a strong daily uptrend. Stocks will remain in their daily uptrend unless they close below the lower daily cycle band.

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