Cycle Trading: Weekend Report Preview

The Dollar

The dollar formed a swing low on Friday.

Thursday was day 30 for the dollar's daily cycle. Therefore Friday's swing low has good odds of marking the daily cycle low.

There are some bullish divergences developing with the dollar. A break of the daily cycle trend line will confirm the new daily cycle.

The dollar has entered its intermediate cycle decline but has yet to print a failed daily cycle. This was week 23 for the intermediate dollar cycle. The dollar should break below the weekly trend line in order to complete its intermediate cycle decline. If a new daily cycle did begin on Friday then we should see one more daily cycle to complete the intermediate cycle decline. Which would stretch the intermediate cycle out to about week 30. 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 broke out of consolidation on Tuesday and printed a higher high on Thursday. But Friday's swing high sets up a potential left translated daily cycle formation.

We need to keep in mind that stocks are in their timing band for a yearly cycle low. A left translated cycle formation should send stocks into its yearly cycle decline. A close below the upper daily cycle band would signal that stocks are declining into their daily cycle low. Stocks continue to close above the upper daily cycle band remaining in its daily uptrend. It will maintain its daily uptrend until it closes below the lower daily cycle band.

A new high on week 12 now shifts the odds toward a right translated weekly cycle formation. If this intermediate cycle is going to host the yearly cycle decline then either it will need one more daily cycle or the current daily cycle will need to stretch. Stocks continue it their weekly uptrend. They will remain in their weekly uptrend until they close 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.