Cycle Trading

The dollar formed a swing high and broke below the day 28 low on Thursday to extend its daily cycle decline. The dollar went down to print a lower low on Friday.  Friday was day 34, placing the dollar deep in its timing band for a daily cycle low.  The dollar formed a bullish reversal on Friday, easing the parameters for forming a swing low.  A break above 100.62 will form a swing low.  Then a close back above the 10 day moving average will have us label day 34 as the DCL.  The dollar is currently in a daily downtrend. Forming a swing high below the lower daily cycle band indicates a continuation of its daily downtrend and signals a cycle band sell signal.

Stocks printed their lowest point on Monday, day 17, which was early to expect a daily cycle low to form.  The longer term weekly chart (above) shows stocks reversed off a previous resistance level.   At 35 weeks, there is a good chance that day 17 not only marked the daily cycle low, but the intermediate cycle low, as well. 

Stocks formed a swing low on Tuesday. Stocks closed above the 10 day moving average on Wednesday to signal day 17 as the daily cycle low.  However, stocks closed back below the 10 day moving average on Thursday, calling into question if day 17 was the daily cycle low. Stocks went on to close back above the 10 day MA on Friday so we will relabel day 17 as the DCL.

The decline into the day 17 low caused the 10 day moving average to decline steeply.  Stocks may need to consolidate in order to allow the 10 day MA time to flatten out before it can turn higher.  Stocks are currently in a daily downtrend. They will remain so unless they close back above the upper daily cycle band.

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