Cycle Trading: Weekend Report Preview

The Dollar

The dollar formed a swing low on Friday.

The dollar printed it lowest point on Wednesday following the day 19 peak. That was day 33, placing the dollar deep in its timing band for a daily cycle low. The daily swing low that formed on Friday has good odds of marking the DCL. A close above the 10 day MA would signal a new daily cycle. It would also mean that the dollar did not break below the previous low of 99.19 to form a failed daily cycle. If day 33 is the DCL then the dollar would have formed a right translated daily cycle. A right translated daily cycle formation would indicate that the February DCL did host the intermediate cycle low. However, a break below the previous DCL of 99.19 will negate the right translated cycle formation. It will also signal a continuation of the intermediate cycle decline.

In real time week 24 looked like the ICL. But if the dollar breaks below the previous DCL of 99.19 then that extends the intermediate decline and will make this week 31.

March is month 10 for the yearly dollar cycle. That places the dollar in its timing band to seek out a yearly cycle low. A declining monthly trend line has started to form. The dollar will now need to break below the February low of 99.19 in order to complete its yearly cycle decline.

The dollar printed a failed yearly cycle in May to confirm the 3 year cycle decline. The dollar has since printed new monthly highs. Since a cycle cannot fail and then print a higher high, this confirms that May was an early 3 year cycle low. That makes March month 10 for the new 3 year cycle.

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. 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 multi year bull cycle.

 

Stocks

Stocks printed a lower low on Friday.

At day 57, that places stocks deep in in their timing band to print a daily cycle low. A swing low would signal a new daily cycle. I still would like to see a clear and convincing break of the (black) daily cycle trend line before being satisfied that the daily cycle low is in. However if stocks go on to rally from here and break above the declining (blue) trend line then that would signal that Friday hosted the daily cycle low. Stocks are in a daily uptrend. They will remain in their daily uptrend unless they close below the lower daily cycle band.

This is week 20 for the intermediate equity cycle. A weekly swing high was formed on week 18 and now stocks have broken below the weekly trend line. This signals that the intermediate cycle decline has begun. And quite likely that stocks have entered into their yearly cycle decline.

March is month 13 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. Once stocks begin their intermediate cycle decline that should also trigger the yearly cycle decline.