Cycle Trading: The Weekend Report Preview

The Dollar

The dollar formed a swing high and closed below both the 10 day MA and the 50 day MA causing the 10 day MA to turn lower.  This signals that the daily cycle is in decline.

A peak on day 7 indicates a left translated daily cycle formation.  The dollar did rally Thursday and Friday.  But if the dollar is rejected by the 50 day MA and forms a swing high then that will allow us to construct the declining cycle trend line. The dollar is in a daily downtrend & will remain so unless it closes above it the upper daily cycle band.

This is week 8 for the intermediate dollar cycle and the dollar closed below the 10 week MA  to set up an extremely left translated weekly cycle formation with a peak on week 2. This would align with the bearish outlook that is developing on the longer term charts.  The dollar is in a weekly downtrend & will remain so unless it closes above it the upper weekly cycle band.

The intermediate dollar cycle is only on week 8.  Which means that the dollar should trend lower for another 8 to 12 more weeks before printing its ICL.  April is month 7 for the yearly dollar cycle.   Allowing for 8 to 12 weeks for an ICL would place the dollar at months 9 or 10 months, which is in its timing band for a yearly cycle low. 

The dollar found support at the declining 200 month MA in February which aligns with week 23 hosting the ICL.  The bigger picture is that the dollar is already in a failed yearly cycle.  Our cyclical expectation is to see this intermediate cycle left translate and continue the yearly cycle decline. The dollar is in a monthly downtrend.  The dollar will remain in its monthly downtrend until it can close back above the upper monthly cycle band.

The dollar broke below the previous 3 year cycle low in September to form a failed 3 year cycle. A failed 3 year cycle confirms that the 15 year super cycle is in decline.  The dollar then delivered another failed yearly cycle in January.  Since the dollar broke below the May 2016 low in September to form a failed 3 year cycle it has been our expectation has been to see left translated yearly cycles form until the dollar prints its next 3 year cycle low.  

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. The topping pattern in 2001 is very similar to the current set up.   The confirmation of a failed 3 year cycle confirms that the dollar has begun its 15 year super cycle decline (bear market).

 

Stocks

Stocks continue to emerge from the day 34 DCL.

Stocks are being squeezed by resistance at the declining 50 day MA and support from the rising 10 day MA.  The large BOW on Friday favors a bullish resolution.  Still, stocks are in a daily downtrend.  They will remain in its downtrend unless they close above the upper daily cycle band.

Stocks confirming a new daily cycle makes is likely that week 24 hosted the ICL.  That would make this week 9 of the new intermediate cycle. Stocks are in a weekly downtrend.  They will remain in its downtrend unless they close above the upper weekly cycle band.

The yearly equity cycle peaked in January.   Stocks have formed a clear and convincing monthly swing high and delivered a break of the monthly trend line to signal the yearly cycle decline.  February was month 15, placing stocks late in their timing band for a yearly cycle low.   A monthly swing low is required in order to confirm a new yearly cycle. Barring a break lower, stocks would need to break above the February high of 2835.96 in order to form a monthly swing low.