Cycle Trading: The 5/19/17 Weekend Report Preview

The Dollar
The dollar continued lower this week.

While Friday could be day 8, since 5 of the previous 7 dollar daily cycles stretched 30 days or longer makes it likely that Friday was day 37. That places the dollar deep in its timing band for a daily cycle low. At this point a swing low has good odds of marking the DCL, The dollar is in a daily downtrend and will continue in its downtrend until it closes above the upper daily cycle band.

This is week 15 for the intermediate dollar cycle. The dollar has closed convincingly below the lower weekly cycle band to confirm that the dollar is in a weekly downtrend. At 15 weeks, there is enough time for the dollar to print another failed daily cycle to bring the weekly cycle into its timing band for an intermediate cycle low.

The dollar has printed its lowest point in May, following the month 8 peak. May is month 12, placing the dollar in its timing band to print a yearly cycle low. Since the dollar has printed a lower monthly low in May, the earliest a monthly swing low can now form will be in June. The yearly cycle low will likely arrive when the dollar completes its intermediate cycle decline.

The dollar printed a failed yearly cycle in May, 2016 to confirm the 3 year cycle decline. Then the dollar went on to printed a higher monthly high. Since a cycle cannot fail and then print a higher high, this confirms that May, 2016 was an early 3 year cycle low. That makes May, 2017 month 12 for the new 3 year cycle. The dollar has now broke convincingly below the 3 year trend line, indicating that start of the 3 year cycle decline. If that is the case then the subsequent yearly cycles should form as left translated yearly cycles until the 3 year cycle low forms. And if the 3 year cycle decline has begun, then it is setting up as a left translated 3 year cycle. That aligns with our 15 year super cycle analysis.

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, 2016 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 formed a swing low on Friday to indicate that Thursday hosted the daily cycle low.

A break of the declining trend line is normally used to confirm the new daily cycle. However the recovery on Thursday and Friday following Wednesday's steep sell off does not allow for the construction of a declining trend line. Since stocks faded into the close on Friday, I would like to see a close above the upper daily cycle band before labeling Thursday as the daily cycle low.

In real time is was tempting to label week 21 as a mild intermediate cycle low. But the fact that stocks did not form a failed daily cycle has us labeling this as week 28. Stocks broke out to a new high this week locking in a right translated weekly cycle formation. Stock did break below the weekly trend line to signal the beginning of the intermediate cycle decline. That aligns with the bearish divergences developing on the weekly oscillators. This sets up the scenario for the new daily cycle to form as a left translated cycle to usher in the intermediate cycle low. A weekly swing high is necessary to begin the intermediate cycle decline. A break below this week's low of 2352.72 will form a weekly swing high.

May is month 15 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. Since stocks printed a higher high in May, the earliest a monthly swing high can form will be in June.