Cycle Trading: The Weekend Report Preview

The Dollar

The dollar continued lower this week printing its lowest point on Thursday, day 46.

At 46 days the dollar is very deep in its timing band for a DCL so once a swing low forms it has good odds of marking the DCL. A break above 93.95 forms a swing low. A break above the declining trend line will confirm the new daily cycle.  The dollar is in a daily downtrend and will continue in its downtrend until it can close above the upper daily cycle band.

The dollar printed another lower low this past week.  At 25 weeks the dollar is in its timing band for forming an ICL so a weekly swing low has good odds of marking the ICL.  A close above the declining 10 week MA will signal the new intermediate cycle.  The dollar is in a weekly downtrend and will remain in its downtrend until it can close above the upper weekly cycle band.

The dollar has closed below the lower monthly cycle band, indicating the start of a monthly downtrend. July was 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. A break above 96.25 forms a monthly swing low to signal a new yearly cycle.

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 printed a new high on Thursday, day 19.  A new high on day 19 begins to shift the odds towards a right translated cycle formation.

The daily oscillators have turned bearish signaling an impending daily cycle decline. A break below the day 19 high of 2459.93 would form a daily swing high to signal the start of the daily cycle decline. However, Friday's 413 million Buying on Strength point to stocks continuing higher.  Stocks continue to close above the upper daily cycle band indicating a daily uptrend.  Stocks will remain in their daily uptrend until they close below the lower daily cycle band.

This was week 38 for the intermediate cycle and stocks printed another higher weekly high.   Since this is very late for an intermediate cycle decline,  I believe that once stocks deliver a correction it will be brief.  There two numbers that I am watching on the weekly chart.  The first is 2459.93.  A break below that number will form a weekly swing high, which is the first requirement to begin an intermediate cycle decline.

The second number is 2405.70.  A break below this number forms a failed daily cycle.   A failed daily cycle is required to confirm the intermediate cycle decline.

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.