The 10/30/14 Reports

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The daily bond cycle peaked by printing a huge bearish reversal on day 20. Bonds printed their lowest point since then on Wednesday, day 30. Bonds broke higher today forming a swing low. The swing low signals that a 30 day, right translated daily cycle low printed. Which makes today day 1 of a new daily cycle

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Normally we would expect a right translated daily cycle to be followed up with the next daily cycle printing a higher daily cycle high.

However, bonds are currently in month 10 of their yearly cycle. Which means that they are in their timing band to seek out a yearly cycle low. In order for bonds to confirm their yearly cycle decline a failed weekly cycle is necessary.

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The intermediate bond cycle peaked on week 4. A weekly swing high formed on week 5 and this week has provided more bearish follow through. If, in fact, the intermediate bond cycle has peaked, then we should see failed daily cycles form until the intermediate (and yearly) cycle prints their cycle low. Therefore this new daily cycle that began today should peak on or before day 8, then roll over into a failed daily cycle decline.

At week 25, the dollar’s weekly cycle is beginning to get stretched as we wait on an intermediate cycle decline.

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Thursday was day 11 for the daily dollar cycle and the dollar broke out to a new daily cycle high. A day 11 peak certainly shifts the odds in favor of this daily cycle forming in a right translated manner. But with the weekly cycle at week 25, the dollar is getting late in its weekly timing band for an intermediate cycle low. So the dollar needs to reverse immediately in order to preserve the possibility of this daily cycle resolving as a failed daily cycle. A break below 86.07 forms a daily swing high. And a failed daily cycle would signal the intermediate cycle decline.

Miner Breakdown

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We discussed last night since the Miners are still shy of their timing band of a daily cycle low that we expected to see the Miners break lower. Well, the Miners did break lower today.

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At day 16, the Miners are still two days shy of their timing band for a daily cycle low that can extend out to day 26. The task at hand now is to hunt for a swing low accompanied by a declining trend line break to signal a new daily cycle.

I believe that the Miners break lower was in response to the dollar breaking higher today.

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The dollar broke out to new highs today. Wednesday was day 9 for the daily dollar cycle. The new high on day 9 begins to shift the odds of this daily cycle forming in a right translated manner. Still with this being week 25 our expectation is to still see a failed daily cycle form. That means that the dollar will need to reverse lower soon.

Still Waiting

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The dollar printed another lower low on Tuesday, but has yet to breach the daily cycle trend line.

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As we discussed last night, our expectation is to see this daily cycle form in a left translated manner and fail. A break of the daily cycle trend line will confirm the daily cycle decline. And a break below 84.53 delivers a failed daily cycle. With the dollar being on day 9, that leaves up two to three more weeks for the dollar to print its cycle low. Which will likely be an intermediate cycle low.

A bearish trend line break on the dollar could be bullish for the Miners.

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After breaking through the declining trend line on day 1, the Miners have been consolidating the two month sell off. The lowest point since the day 1 peak was Thursday, which was day 12. A 12 day cycle low would be an outlier. Therefore, I would expect to see one more break lower, breaking below the day 12 low of 20.05 to print the daily cycle low. A break above the declining solid blue trend line would signal a new daily cycle. And with the Miners on week 22, likely a new intermediate cycle as well.

The Look Test

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The dollar is currently on week 25 for its intermediate cycle, which means that the dollar is in its timing band to print a intermediate cycle low.

The hallmark of an intermediate cycle decline is a failed daily cycle. The dollar has yet to form a failed daily cycle so far.

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The previous daily cycle peaked on Friday, October 3rd, which was day 8.
A bearish reversal formed on Monday, October 6th which sent the dollar into its daily cycle decline. The dollar then formed a daily cycle low on day 16. But that daily cycle low did not break below the previous daily cycle low, so the dollar did not print a failed daily cycle.

Because the dollar is getting late in its weekly cycle we are expecting the current daily cycle to print a left translated daily cycle and fail. The peak on day 6 aligns with our expectation of a left translated cycle forming. A break of the daily cycle trend line will confirm the daily cycle decline. Then a break below the previous daily cycle low of 84.53 produces a failed daily cycle.

Meanwhile, stocks appeared to have stalled.

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Monday was day 8 for the daily equity cycle. Stocks seemed to have stalled and it is beginning to look like stocks are forming a crawl pattern along the 50 day MA. Crawl patterns are typically continuation patterns. And the BOW numbers do suggest stocks will continue higher.

We have been commenting on and off on the Buying on Weakness days that have been adding up. Today added another BOW day. Since the daily equity cycle peaked on 9/19, stocks have printed 4427 billion in Buying on Weakness.

To put that into perspective, stocks printed ‘only’ 1.48 billion BOW going into the August intermediate low.

And the current BOW numbers far exceed the numbers printed during the last yearly cycle decline.

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The last yearly cycle decline occurred in June, 2012. The BOW numbers that printed as stocks declined into that yearly low was 1.12 billion. So the BOW numbers since the 9/19 peak has almost quadrupled the numbers for the last yearly cycle low.

So now let’s look at the yearly cycle.

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The yearly equity cycle peaked in September, which was month 27. October saw stocks form a monthly swing high and delivered a clear and convincing monthly trend line break to confirm the yearly cycle decline, which passes the ‘look test’.

Stocks have found support at the 20 month MA and now has begun to reverse higher. Besides the decline into the 2009 low, the other 7 yearly lows shown above all tested the 20 month MA before reversing. Since October printed a lower low, the earliest that a monthly swing low can form will be November. With a failed intermediate cycle in hand, stocks has satisfied the criteria for a yearly cycle decline. A monthly swing low and a break to new highs will confirm a new yearly cycle.

The 10/24/14 Weekend Report Preview

The Dollar
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The current daily cycle peaked on day 6 and formed a swing high on Friday day 7. That is in line with our expectation to see a left translated cycle form here.

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The dollar’s previous daily cycle peaked on day 8 and formed a daily cycle low on day 16. Wednesday saw the dollar break above the declining trend line to confirm a new daily cycle. Keep in mind that this weekly cycle is in the timing band for a weekly cycle low. We need to see a failed daily cycle to mark the weekly cycle decline. Failed daily cycles often times peak on or before day 8.

A loss of support at the 85.50 level will signal the daily cycle decline. A break below the (black) trend line confirms the daily cycle decline.

Stocks
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Stocks delivered a declining trend line break this week confirming a new daily cycle.

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Stocks tested the declining trend line on Tuesday, then struggled with it on Wednesday. Thursday saw stocks break above the declining trend line in a clear and convincing fashion and Friday saw more bullish follow through.

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Friday was day 7 and stocks have confirmed a new daily cycle. Backing out our view of the daily chart we can see that stocks are currently at resistance at the convergence of the extended trend line and the 50 day MA. If stocks are rejected here, then we could seen another 6 to 7 weeks of downside. But if stocks can break through here, then this could indicate a new yearly cycle has begun.

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Smoke em if you got em …

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Tuesday night we discussed how stocks were close to confirming a new daily cycle but at the time, no cigar…

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Well today stocks broke above the declining trend line to confirm a new daily cycle. Stocks are emerging from a failed daily cycle. With last week being week 10, stocks have up to 7 to 11 more weeks before an intermediate cycle low is due. The failed daily cycle means that our expectation is to see left translated, failed daily cycles until an intermediate cycle low has formed. However, should stocks break to a new high then we will be forced to recgonize 10/15 as a shortened intermediate cycle low.

Bonds continued lower today.

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Thursday was day 26 for the daily bond cycle. Bonds are moving into the later stages of their timing band to print a daily cycle low. The bullish reversal today off the September high could mark a daily cycle low. A break above 120.18 forms a swing low and quite possibly the daily cycle low.

Bonds are in month 10 of their yearly cycle. So bonds have entered their timing band for a yearly cycle low, as well. A failed daily cycle and a failed weekly cycle is needed to mark the yearly cycle decline. Therefore our expectation is to see the new daily cycle form in a left translated manner, peaking by day 8. Then rolling over into a failed daily cycle.

Trend Line Break

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The dollar broke above the declining trend line signaling a new daily cycle.

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Since the daily cycle count has not been clear, we still need to see a break above 86.13 to form a daily swing low and confirm a new daily cycle.

Last week was week 22 for the intermediate dollar cycle. Since the dollar has yet to print a failed daily cycle during this intermediate cycle, our expectation is to see this new daily cycle fail.

Gold also printed a trend line break today.

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Wednesday was day 12 for the daily gold cycle. Gold’s daily cycle peaked on Tuesday, breaking just above the declining 50 day MA. Gold lost the 50 day MA today as it formed a swing high. Gold also delivered a trend line break which signals a daily cycle decline. While gold does sport a day 11 cycle peak, that does not insure that this daily cycle will not fail.

More of a Nudge …

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In last night’s post, When Push Comes to Shove, we discussed that gold needs a shove to either declare a new daily cycle high or commit to a daily cycle decline.

Instead of a shove, we go more of a nudge. Let’s take a look.

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Gold managed to rally enough to close above the declining 50 day moving average. While that was not a clear and convincing move, here is what it did.

It has shifted the daily cycle high from day 7 out to day 11. This shift dramatically increases the likelihood that this daily cycle will form as a right translated cycle. Which means that this would be the first daily cycle of a new intermediate cycle.

So let’s see what this looks like on the weekly chart.

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Gold printed its lowest point on week 18 and then went on to break above the declining weekly trend line. Gold then formed a weekly swing low last week. And this week (so far) gold is delivering more bullish follow through.

This is looking more and more like an intermediate low has been left behind for gold. And if an intermediate low has been left behind, then there is a good chance that a yearly cycle low has been left behind as well.

Meanwhile, stocks came close to confirming a new daily cycle.

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Stocks printed its lowest point last Wednesday, day 48. Since then stocks have formed a swing low and now has rallied 4 straight days. We are looking for a clear and convincing break of the declining trend line before we declare a new daily cycle.

Today was close, but no cigar.

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When Push Comes to Shove

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It looks like we are getting to a point with gold where push comes to shove.

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We are still waiting to see if gold is through with its intermediate cycle decline. A right translated daily cycle would signal a new intermediate cycle. Right translated cycles typically rally past day 12. So far, gold has peaked on day 7. Since then it has drifted sideways. Today gold was halted by the declining 50 day MA. Regaining the 50 day MA would be a bullish signal shifting the likelihood of this daily cycle forming in a right translated manner. If gold is rejected by the 50 day MA here, then we will likely see gold go on to print a failed daily cycle.

The dollar is also approaching a point where push comes to shove.

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The intermediate dollar cycle peaked in early October. It has drifted lower since then. The dollar has done a masterful job obscuring its daily cycle count. A break above the declining trend line here would signal that Wednesday was the daily cycle low. A break lower here would see the dollar continue into its intermediate cycle low.

Miner Problems

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The bullish reversal printed the previous week broke above the declining trend line signaling a new daily cycle.

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The Miners have not yet formed a daily swing low, which is concerning. Since that bullish reversal the Miners have drifted sideways. They printed the highest point since the bullish reversal on Wednesday. The Miners drifted lower on Thursday and made a bearish break on Friday. This is beginning to look a lot like the high volume reversal from last year.

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Last year the Miners printed a high volume surge that reversed in a few days, leading to a failed daily cycle.

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Back to the current chart. The Miners formed a swing high off of Wednesday’s candle. The bearish follow through on Friday was accompanied by a bearish TSI crossover which signals that the daily cycle is in decline. At day 9, the Miners have another 2 to 3 weeks before finding their daily cycle low.

One metal has already printed a failed daily cycle.

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Palladium often leads the precious metals sector. Palladium’s daily cycle peaked on day 2, where it was rejected by the 200 day MA. A swing high formed the following day. On Wednesday Palladium reversed off the declining trend line and Thursday saw Palladium break below the previous daily cycle low, forming a failed daily cycle.

As we stated that Palladium often leads the precious metals sector. With the Miners printing that bearish break on Friday, it seems that the are destined to follow suit.