Cycle Trading: The 1/20/17 Weekend Report Preview

The Dollar

The dollar peaked on day 16 and has printed its lowest point on Tuesday, day 26, which places the dollar in its timing band for printing a daily cycle low.

A swing low formed on Thursday.  But the dollar needs to break above the declining trend line to confirm the new daily cycle.

This is week 22 for the intermediate dollar cycle.  The weekly swing high signals that the dollar has begun its intermediate cycle decline.  The dollar should break below the weekly trend line in order to complete its intermediate cycle decline. We should also see a failed daily cycle in order for the dollar to complete the intermediate cycle decline.  Therefore if Tuesday did host the daily cycle low then our expectation would be that the new daily cycle will form as a left translated, failed daily cycle.  Still the dollar is in a weekly uptrend and will remain in its weekly uptrend unless it closes below the lower weekly cycle band.

The dollar has printed a new high in January.  A new high on month 8 assures us of a right translated yearly cycle formation.  Following a failed yearly cycle, if the dollar is still declining into its 3 year cycle low then the dollar should continue to form left translated, failed yearly cycles.  The right translated yearly cycle formation indicates that May hosted the 3 year cycle low.

Printing a failed yearly cycle in May confirmed the 3 year cycle decline for the dollar.  The dollar has now gone on to print a higher monthly high.  Since a cycle cannot fail and then print a higher high, this confirms that May was an early 3 year cycle low.  That makes January month 8 for the new 3 year cycle.

The dollar’s last 15 year super cycle peaked in 2001 on month 106, then declined into its third 3 year cycle low. There are some similarities developing to the current set up.  Currently, the dollar has printed a new high in January, which is month 105 for the 15 year super cycle.  Which is about when the previous super cycle rolled over into its 15 year super cycle decline.   At the previous super cycle peak the dollar was quite stretched above the 200 month MA as well as the 50 month MA — as it is right now. There are bearish divergences developing on the momentum indicators that also appeared at the previous 15 year super cycle peak.

May hosted the 3 year cycle low, which was a shortened 3 year cycle of only 24 months. Since most times cycle balances themselves out, we could be poised for the next 3 year cycle to be a stretched 3 year cycle just as the dollar is ready to begin its 15 year super cycle decline. And a stretched 3 year dollar cycle decline would align with gold beginning a new bull cycle.

 

Stocks

Stocks have been trading in a narrow range for over the past 6 weeks.  While stocks remain above the upper daily cycle band, indicating a daily uptrend, the momentum indicators have been developing a bearish divergence.

Friday was day 13 for the daily equity cycle.  If the intermediate cycle is to form as a left translated weekly cycle then the current daily cycle would need to also form as a left translated cycle.  Therefore a close below the daily cycle trend line should send stocks into their daily cycle decline.  It would also lock in an extremely left translated daily cycle formation.

The yearly equity cycle is normally comprised of 2 to 3 intermediate cycles.  Stocks printed their yearly cycle low last February. This is the 3rd intermediate cycle of the year.  Stocks should print a left translated failed weekly cycle to usher in the yearly cycle decline.  Currently stocks have a weekly high on week 9 with this being week 11.  A break below 2245.13 would form a weekly swing high to signal the intermediate cycle is in decline. Stocks are currently in a weekly uptrend and will continue in its weekly uptrend until it closes below the lower weekly cycle band.

January is month 11 for the yearly equity cycle.  The new high locks in a right translated yearly cycle formation.  Stocks are now in their timing band for seeking out their yearly cycle low.  A monthly swing high accompanied by a break of the monthly trend line will confirm the yearly cycle decline. The earliest that yearly cycle low will print is when the current intermediate cycle prints its low which should take the yearly cycle out to months 13 or 14.