Cycle Trading: The Weekend Report Preview

The Dollar

The dollar broke below the previous daily cycle low on Friday, forming a failed daily cycle.

The dollar is in a daily down trend that is characterized by peaks below the upper daily cycle band and lows forming below the lower daily cycle band. The dollar will remain in its daily down trend until it can close above the upper daily cycle band. With Friday being only day 13, the dollar still has another 5 days before entering its timing band for a daily cycle low.

The dollar broke lower this week, breaking below the week 33 low. This has extended the intermediate cycle. The dollar still needs to form a weekly swing low and break above the declining trend line to form an intermediate cycle low. A break above 95.10 would form a weekly swing low.

April is month 8 for the yearly dollar cycle. This places the dollar in its timing band to form a yearly cycle low. Since April printed a lower low, the earliest a monthly swing low can form is in May. A break above 95.21 will form a monthly swing low. Then a break above the declining monthly trend line will confirm that April hosted the yearly cycle low.

The 3 year dollar cycle peaked on month 10. The dollar broke below the 3 year cycle trend line in February signaling the 3 year cycle decline. That also locks in a left translated 3 year cycle formation. April was month 23 for the 3 year dollar cycle. The dollar is still 7 months away from entering its timing band to print a 3 year cycle low. That leaves plenty of time for the dollar to print a yearly cycle low and then form one more yearly cycle. I would expect that the new yearly cycle to form as a left yearly cycle and fail, to complete the 3 year cycle decline.

 

Stocks

I real time stocks peaked on day 34 and printed its lowest point on day 38. This followed a pattern of 30 - 55 point corrections. Since it was in the timing band for a daily cycle low we labeled day 38 as a daily cycle low.

Now it appears that day 38 was not the daily cycle low. Stocks went on to peak on day 43, formed a swing high and then declined. Stocks closed below the upper daily cycle band on Friday, which is a signal of a daily cycle decline. If day 38 was not the daily cycle low, that would make Friday day 51, placing stocks deep in their timing band for a daily cycle low.

The bullish reversal on Friday has eased the parameters for forming a swing low. A break above 2073.85 forms a daily swing low. That would also have stocks close above the upper daily cycle band, which would indicate a new daily cycle. Stocks are in a daily uptrend. They will remain in a daily uptrend until they close below the lower daily cycle band.

This is week 11 for the intermediate equity cycle. Stocks formed a weekly swing high this week. but if Friday was day 51, then its possible that stocks are in the process of setting a half weekly cycle low.

Stocks continue to close above the upper weekly cycle band, indicating a weekly uptrend. Stocks will remain in a weekly uptrend until they close below the lower weekly cycle band.

The yearly equity cycle peaked last May, which was month 7. Then stocks entered a period of volatility as they declined into their yearly cycle low. Stocks broke below the previous yearly cycle low on January, which confirmed the 7 year cycle decline. Then stocks printed a lower low in February. The swing low that formed in March signaled that February hosted the yearly cycle low. The break above the declining monthly trend line confirms that February was the yearly cycle low and indicates that stocks are also leaving behind their 7 year cycle low.