The dollar has formed a daily swing high and broke below the daily cycle trend line to confirm that it is declining into its daily cycle low.
Friday was day 19 for the daily dollar cycle, placing the dollar in its timing band for a daily cycle low. At this point, a swing low and a break above the declining trend line will signal a new daily cycle. The dollar currently is in a daily uptrend. It will remain in its daily uptrend unless it closes below the lower daily cycle band.
Stocks have formed a daily swing high.
Since stocks are emerging out of an intermediate cycle low, we should see a right translated cycle formation. Therefore stocks should decline into a half cycle low and then break to new highs. Stocks continue to close above the upper daily cycle band, which indicates a daily uptrend. Stocks will remain in its daily uptrend unless it closes below the lower daily cycle band.
Stocks have delivered some sell signals this week.
Stocks have formed a daily swing high and lost the 10 day MA. Also, the True Strength Indicator has printed a bearish crossover. So the question is are stocks heading into a daily cycle low or perhaps only into a half-cycle low.
While stock have sold off over the past two days, the Buying on Weakness numbers have printed 628 million and 715 million. This indicates big money positioning for stocks to go higher. Which aligns with our cyclical expectations. Stocks are in the first daily cycle for a new intermediate cycle. First daily cycles are normally right translated cycles that peak usually after day 20.
If a swing low forms above the lower daily cycle band that would signal that that this was only a move into a half-cycle low and stocks are poised to break out to new highs.
We noted that if oil forms a swing high & loses the 50 day MA then oil would be forming a left translated daily cycle.
And that’s what oil did on Friday. Oil formed a daily swing high an lost 50 day MA last Friday which signaled a left translated cycle formation is developing. After backtesting the 50 day MA on Monday oil delivered more bearish follow through on Tuesday by breaking close to 4% lower and losing the 10 day MA in a clear and convincing manner. Going forward, a close below the lower daily cycle band will proved further confirmation that oil has begun its daily cycle decline.
Our cyclical expectation is that oil needs to complete its yearly cycle decline. A left translated weekly cycle formation aligns with that expectation. A failed weekly cycle is needed to confirm that the yearly cycle is in decline. With a peak on week 11, the weekly cycle is setting up to form as a left translated cycle. A break below 39.19 forms a failed weekly cycle and will confirm that oil is in a yearly cycle decline.
Gold printed its lowest point on Friday. At 34 days, that placed gold late in its timing band to print a daily cycle low. So Monday’s swing low makes it likely that Friday hosted gold’s daily cycle low. While we would like to see a close above the lower daily cycle band for confirmation of a new daily cycle, gold did deliver a TSI bullish crossover buy signal on Monday.
At 25 weeks, gold is also in its timing and to print an intermediate cycle low. A break above 1220.90 will form a weekly swing low off of the long term support/resistance 1175 level. And as we discussed here last week, gold is in its timing band for a yearly cycle low. So if a weekly swing low forms, it is quite likely that gold has left behind its yearly cycle low, as well.
The dollar continued higher this week printing its highest point on Friday, day 14, shifting the odds towards a right translated daily cycle formation.
The dollar is 4 days shy of entering its timing band for seeking a daily cycle low. Bearish divergences are developing on the momentum indicators. A swing high and break below the daily cycle trend line will confirm that the dollar has begun its daily cycle decline. Still, the dollar is in a daily uptrend. It will remain in its daily uptrend unless it closes below the lower daily cycle band.
Friday was day 14 for the daily equity cycle and stocks closed at an all time high.
Stocks have reestablished its daily uptrend. They will remain in its daily uptrend unless it closes below the lower daily cycle band.
While gold formed a swing low on Tuesday, there was no confirmation of a new daily cycle …
Since gold was late in its timing band for a daily cycle low, it looked like an opportunity to “get back into the water” …
But then gold broke lower on Wednesday. Wednesday was day 33 for the daily gold cycle. With gold being this late in its daily cycle, it should bottom any day.
Gold printed its last yearly cycle low on 12/03/15. Gold is in its timing band for another yearly cycle low. Similar to last year there are divergences developing on the True Strength Indicator and the Money Flow Index. Which signals that once the daily cycle low is in it will most likely mark yearly cycle low as well.
Oil’s yearly cycle peaked in October, month 8, which means that oil has entered its timing band to seek out a yearly cycle low.
Oil did form a monthly swing high in November. But I do not believe that oil has completed its yearly cycle decline.
A failed cycle of a lower order confirms the cycle decline of a higher order. Specifically for oil, a failed intermediate cycle confirms the yearly cycle decline for oil. So oil would have to break below the previous intermediate low of 39.19 in order to form a failed weekly cycle to confirm the yearly cycle decline. The current weekly cycle high printed on week 11. If that holds as the weekly high sets up a possible left translated weekly cycle formation.
Our weekly framework needs a failed weekly cycle to complete its yearly cycle decline. A failed daily cycle aligns with that expectation. If oil forms a swing high & loses the 50 day MA then oil would be forming a left translated daily cycle.
Which should set things in motion for oil to complete its yearly cycle decline.
Monday was day 11 for the dollar’s daily cycle. The dollar is still 7 days shy of entering its timing band to seek a daily cycle low. However …
The True Strength Indicator has already exceed the level that has marked previous cycle highs. And the TSI is beginning to rollover. Now some bearish follow through should end the dollar into a daily cycle decline.
The intermediate cycle is either on week 29 or week 14. If week 29 is the correct count then once the dollar rolls over it should enter an intermediate cycle decline.
But if the dollar is on week 14, that would place the dollar 4 weeks shy of its timing band for an intermediate cycle low. Currently the daily cycle high printed on day 10. A peak on day 10 does shift the likelihood towards a right translated daily cycle formation. Allowing for 10 – 15 days for the dollar to print a daily cycle low would take the weekly cycle out to weeks 16 or 17. Then one more failed daily cycle would take the weekly cycle count out to weeks 21 – 24, which is right in the timing band for an intermediate cycle low.
Under a week 14 scenario the dollar potentially can trend lower 7 out of the next 9 weeks.
The dollar continued higher this week, printing a higher high on Friday.
Friday was day 10 for the daily dollar cycle. A new high on day 10 begins to shift the odds towards a right translated daily cycle formation. The dollar is in a daily uptrend. It will remain in its daily uptrend until it closes below the lower daily cycle band.
Stocks continued higher this week, printing a higher high on Friday. Stocks have begun to close above the upper daily cycle band to establish a new daily uptrend
Friday was day 10 for the daily equity cycle. The True Strength Indicator is beginning to roll over. This suggests that stocks may need to cool off and perhaps decline into a half cycle low, which could potentially see stocks back test the declining trend line.
In a perfect world, long positions are entered at the absolute bottom and therefore weather no drawdowns. In the real world, there is no perfect entry. But using cycles can help stack the odds in your favor.
The Miners are clearly in a yearly cycle decline. November is month 10 for the yearly Miner cycle. That places the Miners in their timing band for a yearly cycle low. Which means that it is time to hunt for the yearly cycle low.
Most yearly cycle lows will not form until there is a failed weekly cycle. Last week the Miners broke below the previous intermediate cycle low forming a failed weekly cycle. Then the Miners broke lower this week. At 25 weeks, the Miners are already in their timing band for an intermediate cycle low. There is a good chance that once a weekly swing low forms, that will signal the new weekly cycle. Which means that we turn our attention to the daily cycle.
The Miners printed their lowest point on Monday, following the day 16 peak. 24 days places the Miners in their timing band for a daily cycle low. The Miners have formed a swing low but have yet to close above the declining 10 day MA to signal a new daily cycle.
However, there is still a chance that the Miners could break lower. And if that happens then this may help keep things in perspective.
If the yearly cycle low is not already in then it should be with in a few days, which will correct any timing mistakes.