Cycle Trading: The Weekend Report Preview

The Dollar

The dollar continued lower this week, printing a lower low on Friday.

Friday was day 42, placing the dollar late in its timing band for a daily cycle low.  A swing low accompanied by a break above the declining 10 day MA should signal a new daily cycle.  A close above the declining trend line will confirm a new daily cycle.  The dollar is in a daily downtrend and will remain so until it can close above the upper daily cycle band.

The dollar printed another lower low this week.  At 24 weeks the dollar is in its timing band for an ICL.  So once a daily cycle low forms, there are good odds that it will also mark the ICL.  The dollar continues to close below the lower weekly cycle band which indicates a weekly downtrend.  The dollar will remain in its weekly downtrend until it closes above the upper weekly cycle band.

July is month 14 for the yearly dollar cycle. That places the dollar late in its timing band to print a yearly cycle low.  A monthly swing low is required to form a yearly cycle low. Since July printed a lower monthly low, the earliest a monthly swing low can form will be August.

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 July, 2017 month 14 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 was in January. 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 high on Friday.  A break below the daily cycle trend line would confirm the daily cycle decline.

If stocks deliver bearish follow through to Friday's swing high that would make day 14 the cycle peak.  A peak on day 14 favors a left translated cycle formation.  With the intermediate cycle on week 37, a left translated cycle would likely lead to the intermediate cycle decline.  Stocks would need to break below the previous daily cycle low of 2405.70 to form a failed daily cycle.  However, stocks continue to close above the upper daily cycle band indicating a daily uptrend.  They will remain in their daily uptrend until they close below the lower daily cycle band.

This was week 37 for the intermediate cycle.  Since this is very late for an intermediate cycle decline,  I believe that once stocks deliver a correction it will be brief.   While bearish divergences are developing on the weekly oscillators stocks remain firmly in a weekly uptrend. Stocks will continue in their weekly uptrend until they close below the lower weekly cycle band.

Stocks broke out to a new high in July locking in a right translated yearly cycle formation. Stocks are deep 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 July printed a higher monthly high, the earliest a monthly swing high can form will be in August. at this point if an intermediate cycle decline is confirmed, it will likely signal the yearly cycle decline as well.