Cycle Trading: The Weekend Report Preview Inbox

The Dollar

The dollar closed convincingly above the declining trend line on Thursday.  Then delivered bullish follow through on Friday to confirm the new daily cycle.

The dollar breached the 50 day MA on Friday and then faded.  This eases the parameters for forming a daily swing high to set up a possible left translated daily cycle formation.  A break below 94.55 will form a daily swing high.  The dollar is in a daily downtrend & will remain so unless it closes above it the upper daily cycle band.

The dollar did form a weekly a swing low.

The dollar printed its lowest point the previous week, week 31, placing it deep in its timing band for an ICL.  So far only 1 intermediate cycle has exceeded 31 weeks during the current 3 year cycle.  So the odds favor that week 31 did host the ICL.  However, one of our confirmations for an ICL is turning the 10 week MA lower, which has not happened yet.  Which makes the dollar fading from the 50 day MA significant.  A left translated, failed daily cycle formation would extend the intermediate cycle decline which should allow the 10 week MA to turn lower.   However, a close above the 10 week MA would force us to label week 31 as the ICL.  

August was month 6 for the yearly cycle. The new high on month 6 begins to shift the odds towards a right translated yearly cycle formation. A right translated yearly cycle formation would align with February hosting an early 3 year cycle low.

It is not clear if the dollar has printed its intermediate cycle low. However the dollar did close below the 50 month MA, keeping the monthly swing high in play.  Any bearish follow through will confirm the yearly cycle is in decline.

The decline into the 2014 and the 2016 three year cycle lows were somewhat mild.  I highlighted the decline into the 2011 three year cycle low and the decline into the February low.  The decline into the February low does have the look of a three year cycle decline.  I think that we need to proceed with February being labeled as an early 3 year cycle low. 

The dollar did break above convergence of the declining 20 month MA and the 50 month MA to confirm that February hosted a yearly cycle low.  But a bearish monthly reversal formed in August.  And closing below the 50 month MA makes the monthly swing high still valid.  A close below the 20 month MA will confirm the continuation of the decline into the 15 year super cycle low.

The dollar cycles through a 15 year super cycle. Each 15 year super cycle is embedded with five 3 year cycles. The dollar’s last 15 year super cycle peaked in 2001 on month 106, then declined into its third 3 year cycle low. The topping pattern in 2001 is similar to the current set up.   The confirmation of a failed 3 year cycle back in August, 2017 confirms that the dollar has begun its 15 year super cycle decline (bear market).  Therefore we are looking for the dollar to be rejected by the declining multi year trend line to continue its decline into the 15 year super cycle low.

 

Stocks

Friday was day 31, placing stocks in their timing band for seeking out its DCL.

Stocks peaked on day 26, locking in a right translated daily cycle formation.  A swing high as formed and stocks have breached the daily cycle trend line.  Stocks will need to break below the daily cycle trend line and turn the 10 day MA lower in order to complete its daily cycle decline.

Stocks are in a daily uptrend.  If a swing low forms above the lower daily cycle band that will indicate that stocks remain in their daily uptrend and signal a cycle band buy signal.

I believe that stocks were prevented from declining into the week 20 low back in June.  That and the current right translated daily cycle formation makes me think that this week 13.  A swing high and close below the 10 week MA would confirm that the intermediate cycle is in decline.

September is month 7 for the yearly equity cycle.  The new high on month 7 shifts the odds towards a right translated yearly cycle formation.  Stocks are firmly in a yearly uptrend.  However, bearish divergences are beginning to develop on the monthly oscillators.  If stocks form a monthly swing high and close back below the upper monthly cycle band that would be our signal that stocks are declining into their yearly cycle low.