Cycle Trading

The Dollar

The dollar rallied on Tuesday to break out to a new daily cycle high.   The new high on day 23 assures us of a right translated daily cycle formation.

The dollar formed a swing high on Thursday then delivered bearish follow through by closing below the 10 day MA and turning it lower on Friday to signal the daily cycle decline. However the dollar formed a bullish reversal on Friday above support from the 50 day MA. The dollar is currently in a daily uptrend. If the dollar forms a swing low and closes back above the 10 day MA that will indicate a continuation of the daily uptrend and signal a cycle band buy signal. In which we would then label day 25 as the DCL.

Stocks

Stocks closed below the converging 50 day MA and 10 day MA on Tuesday.  Stocks delivered bearish follow through into Friday, causing the 10 day MA to bearishly cross the 50 day MA.

My original thought was that even if this daily cycle left translates, stocks should still go ahead and break above the declining trend line and also turn the 10 day MA higher as they rally out of the DCL. However, stocks were rejected by the declining trend line. While day 46 was in the timing band for a DCL, failing to turn the 10 day MA higher and rejection by the declining trend line makes it more likely that this extends the daily cycle decline. Closing below both the 10 day MA and the 50 day MA looks to have started a bloodbath phase that could last 5 to 7 days. What is clear is that stocks are currently in a daily downtrend. Closing below the 200 day MA indicates a continuation of the daily downtrend and signals a cycle band sell signal.  

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