Open to the Possibilities …

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Tuesday was day 6 for the daily equity cycle. Stocks managed to break above the resistance at the 1870 level and now is facing resistance at the 1880 level.

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The previous daily cycle printed a daily 46 day cycle low on April 11th. Since the previous daily cycle formed in a right translated manner, we expect to see the current daily cycle break out to a new, higher daily cycle high. However, stocks have been known to forgo following a right translated daily cycle with a higher high if the intermediate cycle is in decline. That just may be the case here.

$ SPX weekly

The last yearly cycle low printed in June, 2012. Stocks typically form a left translated, failed weekly cycle that declines into the yearly cycle low, and we are overdue for a yearly cycle decline.

Left translated intermediate cycles usually peak on or before week 8. If stocks go on to print a higher weekly high now, that would dramatically shift the possibility of this weekly cycle from forming in a left translated manner to a right translated manner. However, if stocks cannot print new highs here, then the eight week peak would lock in a left translated nature to the current weekly cycle.

Also please notice the weekly True Strength Indicator. It has been forming a bearish divergence for four plus months. I do not anticipate a bullish breakout to the (blue) trend line until the intermediate cycle low prints, probably in late /June early July.

Another area that we need to be open to the possibilities is the Miners.

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Monday saw the Miners form a bullish reversal that broke below the previous daily cycle low and print a failed daily cycle. The intermediate cycle has been in decline since March 14th and and printing a lower low on Monday fulfills its cyclical expectations. Tuesday saw the Miners print a daily swing low. A break above the declining trend line will signal a daily cycle low and possibly an intermediate cycle low.

GDX weekly

This is week 18 for the intermediate Miner cycle. The Miners are in the timing band for printing an intermediate cycle low. Since the Miners printed a lower low this week, the earliest a weekly swing low can form will be next week. A break above the declining weekly trend line will confirm a new intermediate cycle.

The 4/21/14 Evening Report

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Gold’s intermediate cycle peaked on March 17th then declined through April 1st into a daily cycle low. After a 9 day countertrend rally gold is continuing its intermediate cycle decline.

$ GOLD Sharp Charts Workbench Stock Charts com

Monday was day 13 for the current daily cycle. Gold has 5 more days before it enters its timing band for a daily cycle low. Since gold is in an intermediate cycle decline and the previous daily cycle failed, we expect this daily cycle to fail as well.

The Miners daily cycle failed today.

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Like gold, the Miners have been in an intermediate cycle decline that saw the previous daily cycle fail. The Miners have been finding support at the 23.50 level the past few days. But today the Miners broke below that level. They continued lower braking below the previous daily cycle low.

I do not think that it is coincidental that the Miners broke below support as the dollar broke above resistance. And I think that we can expect to see the Miners continue lower until the dollar’s daily cycle peaks.

$ USD daily

The dollar was running into resistance the previous three sessions. Today the dollar broke above that resistance level. The current daily dollar cycle follows a right translated cycle. Therefore we expect the dollar to print a higher daily cycle high during this cycle.

The 4/18/14 Weekend Report Preview

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The new daily dollar cycle continued higher printing its 5 straight higher closing high.

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Thursday was day 5 for the daily cycle. Since this is following a right translated cycle our expectation is to see the dollar go on to print a higher high during this daily cycle.

Stocks
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Stocks have done a masterful job obscuring the daily equity cycle count lately. March 27th was day 35 for the daily equity cycle. It met the criteria for a daily cycle low and we labeled it as such. After a spike up stocks declined into a lower low on 4/11. The evidence is piling up to support 4/11 as an extended daily cycle low.

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After the day 35 low, stocks peaked on what would have been day 6 and then declined into a lower low. If day 35 was the daily cycle low, then 4/11 would have been day 11 of a new, failed daily cycle. If the daily cycle failed, then we should not see stocks break above the declining trend line. The break above the declining trend line is characteristic of stocks emerging out of a daily cycle low. Which makes Friday day 4 of a new daily cycle. And what we see on the NASDAQ helps to confirm this view.

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The NAS printed what looked to be in “real time” a 35 day daily cycle low. The subsequent break of that pivot looked as if the new daily cycle failed. But, the strong rebound off the 200 MA supports the notion that the NAS printed a daily cycle low on Tuesday. There is a bullish divergence developing on the TSI. A break above the declining trend line will confirm the new daily cycle.

And the bigger picture of the NAS foreshadows what I believe is in store for the equity market, which I discuss further in the member’s report.

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Positive Review

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Stocks gained on Yellen’s message.

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Today saw stocks break the developing declining trend line. Which causes us to reconsider if 4/11 was day 11 of a new daily cycle or day 46 of the previous daily cycle. A break above 1872.53 would provide a clear and convincing follow through to the break of the declining trend line.

The dollar still managed to close higher today after Reserve Chair Janet Yellen reaffirmed the central bank’s commitment to keeping interest rates low

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The dollar is on day 4 in a new daily cycle that should see a high that exceeds the previous daily cycle high.

And as the dollar continues to rally, we should see gold continue into its intermediate cycle decline.

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Wednesday was day 11 for gold’s daily cycle. Gold has 7 more days before it encroaches on its timing band for a daily cycle low. The preceding daily cycle failed. And since this is still the same intermediate cycle, we expect this daily cycle to fail as well, which should include a panic sell off into its intermediate low.

Body Slammed

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Gold got slammed in the overnight. At one point gold was down over 38 points before recovering a bit. But still gold ended down over 26 points for the day which was over 2%.

$ GOLD Sharp Charts Workbench Stock Charts com

Gold formed a clear and convincing swing high today and broke below the daily cycle trend line to confirm the daily cycle decline. With a day 9 peak, gold can trend lower for the next two to three weeks. Gold seems destined to print a second consecutive failed daily cycle.

Gold began its intermediate cycle decline on March 17th. Which was about when the dollar began its new intermediate cycle.

$ USD Sharp Charts Workbench Stock Charts com 2

The dollar printed its intermediate low on March 13th. It consolidated for a few days before rallying and when it did gold began its intermediate cycle decline. Now as the dollar is emerging out of its daily cycle low gold once again is caught in a cycle decline. This was day 3 for the dollar. Minimally since the dollar just printed a right translated cycle we expect to see the dollar print a higher daily cycle high. And as the dollar continues to rally we can expect to see gold tank.

Bag to the Mail Bag

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An email begins our discussion tonight.

“Know it is a long shot, but what are the chances that the equities are still in the first Daily Cycle?”

To begin I think that it is important to remember our framework. Stocks are on month 22 of the yearly cycle and are clearly overdue for the yearly cycle decline. A left translated weekly cycle is necessary for a yearly cycle decline. Left translated weekly cycle typically peak on or before week 8. So the first chart that I want to look at to address this will be the weekly equity chart.

spx weekly

The first thing we notice on the weekly chart is the bearish reversal on week 8. It is followed up by a clear and convincing weekly swing high which was accompanied by a weekly trend line break signaling an intermediate cycle decline. The hallmark of an intermediate cycle decline is a failed daily cycle.

So now we look at the daily equity chart.

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The swing high that follows the day 31 peak delivers a trend line break that leads to the day 35 low. The day 35 low hits right in the normal timing band for a daily cycle low. In order for Friday to be the daily cycle low, that would have stretched the daily cycle out to 46 days. While possible, I believe that it is a low probability event.

One reason is that the day 35 low does fit well in our equity overall framework. We are expecting a left translated weekly cycle. The 35 day low means that stocks are now in a failed daily cycle, which syncs up with what we discussed on the weekly chart.

The dollar rallying out of an intermediate low also ties into what we see happening with equities.

$ USD Sharp Charts Workbench Stock Charts com 2

Thursday was the lowest point following the day 16 peak. Friday was an inside day and Monday formed a clear and convincing swing low and trend line break to make today day 2 of the new daily dollar cycle. 20 days makes this previous cycle a right translated daily cycle. And by printing a higher daily cycle low, the dollar continues to emerge from the March intermediate cycle low.

And we usually do see stocks declining into an intermediate cycle low as the dollar emerges from an intermediate cycle low.

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We see above, every intermediate equity decline was accompanied by the dollar emerging out of an intermediate low. And it appears that the pattern is repeating again.

The 4/11/14 Weekend Report Preview

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The dollar’s daily cycle peaked a week ago Friday on day 16. A swing high formed on Monday and the dollar continued lower through out the week.

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Thursday was lowest point since the day 16 peak, stopping just short of printing a failed daily cycle. The dollar printed an inside day on Friday, easing the parameters of forming a swing low. A break above 79.65 forms a swing low and a break of the declining trend line confirms a new daily cycle.

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Last week I commented here “generally speaking, surprises should confirm the trend. Meaning in an uptrend surprises should come to the upside and in a downtrend surprises should come to the downside. Stocks have been in an uptrend for the past 22 months. Friday‚Äôs print is a warning that this daily cycle can quickly develop into a failed daily cycle.”

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Stocks went on to break below the day 35 low on Monday forming a failed daily cycle. A failed daily cycle signals an intermediate cycle decline. Stocks bounced off the 50 day MA on Tuesday and followed through higher on Wednesday. Thursday saw stocks reverse hard and giving up the gains from the previous two days and then some. In the process set the declining cycle trend line on Thursday. Friday saw stocks continue lower.

Friday was day 11 for the daily equity cycle. Since the timing band for a low begins on day 30, that gives stocks about another 4 weeks to trend lower.

The entire Weekend Report can be found at Likesmoney Subscription Services

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Also included in the Weekend Report is the Likesmoney CycleTracker

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You can email me at likesmoney@gmail.com to receive a sample copy of the Weekend Report

About Face

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Yesterday it looked as if stocks were going to paint us into a corner and force us to shift the daily low label away from day 35 to Tuesday. But the about face printed today makes that not necessary.

$ SPX Sharp Charts Workbench Stock Charts com 2

Stocks printed a huge down day today, dropping over 2%. The big drop erased the previous two day’s gains and saw stocks close below the 50 MA.

Had stocks broke to new highs we would have been forced to move the daily cycle low label to Tuesday. Instead, todays reversal appears to have set the declining cycle trend line for stocks. And at 10 days, stocks still have another 20 days to enter their timing band for a daily cycle low.

While stocks gave us an about face, the dollar continued to march lower.

$ USD Sharp Charts Workbench Stock Charts com 2

Thursday was day 20 for the daily dollar cycle and the dollar printed another lower low. At 20 days, the dollar is in the timing band to print a daily cycle low. A failed daily cycle here would have us view this as an extend intermediate cycle, with this being week 24.

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A break below the weekly trend line would confirm an extended weekly cycle count.

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Gold printed another higher high today, which was day 7 for gold’s daily cycle. However, the Miners did not take advantage of the weakness in the dollar.

The Miners tested the 50 MA and then pulled and about face and closed almost 2% lower today. Should the Miners continue lower and break below 24.50 they will form a swing high and likely mark the daily cycle peak. If that happens, that would continue a pattern of lower highs.

Painted into a Corner

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The dollar’s daily cycle peaked on day 16 and has since dropped like a rock.

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Normally a day 16 peak all but guarantees a right translated cycle. However, the dollar is just $0.31 away from printing a failed daily cycle. A failed daily cycle would paint us into a corner and force us to reevaluate things.

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In real time week 20 looks like an intermediate cycle low. But with the prospect of a failed daily cycle occurring at the tail end of a triangle consolidation makes this look like an extended weekly cycle is forming.

Stocks also appear to be trying to paint us into a corner.

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The day 35 pivot in real time does look like a daily cycle low. The corresponding break to new highs appeared to confirm a new daily cycle. The break to the low printed on Tuesday, April 8 looked as if an early failed daily cycle occurred. Which would have been day 8 of a new daily cycle.

However, the swing low formed today gives the appearance of a new daily cycle beginning. Since a new daily cycle cannot fail and then go on to print a new high, a break to new highs would make Tuesday the daily cycle low at day 43.

If it looks like a …

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Dollar Decline

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The dollar formed a bearish reversal on Friday, day 16. A swing high formed on Monday and Tuesday saw a clear and convincing break of the daily cycle trend line to confirm the dollar has entered its daily cycle decline.

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The dollar peaked on day 16, which locks in a right translation to this daily cycle. So once a low is formed our cyclical expectation is to see the dollar go on to print a higher daily cycle high. The caveat to that would be if this daily cycle fails, which would change the expectation to lower highs and lower lows.

$ USD weekly

If the dollar is going to avoid being drawn into a left translated intermediate cycle decline then it will need to find its footing immediately. The dollar is on the verge of losing the support at the weekly 200 MA. And if that happens then there would be little to stop the dollar from declining into an intermediate cycle low.

Gold continues to rally, closing above the 200 MA and pierced the 50 MA today.

$ GOLD Sharp Charts Workbench Stock Charts com

Gold still faces several hurdles if it is to print a right translate cycle. Today gold closed above the 200 MA and now has pierced the 50 MA. Gold will need to rally past the 50 MA and also break above the resistance at 1330 if it wants to avoid forming another left translated daily cycle.

One thing to keep in mind is that if gold is going to form a left translated daily cycle, then gold normally would peak by day 8. And there was 23 million printed today on the Selling on Strength. Of course the reason why we are keeping an open mind about this is that gold is only on week 14 of the intermediate cycle.

gold weekly

Gold’s weekly cycle peaked on week 11 and is now currently on week 14. It is still to early for the weekly timing band for an intermediate cycle low. With the daily cycle currently at day 5, it can easily go another 4 – 5 weeks. And if that daily cycle forms as a left translated cycle that would take the intermediate cycle out to weeks 19 or 20 which is right in the timing band for an intermediate cycle low.