Not Yet Convinced

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Stocks closed once again at new all time highs. The daily equity cycle broke above the previous daily cycle high on Monday, which confirmed the new daily cycle. A new high printed Wednesday, even though stocks closed lower on the day. Today stocks managed to close at a new all time high, but failed to print a new intra day high.

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There is a lack of clarity regarding the daily equity cycle is on day 10 of a new intermediate cycle or day 10 of the 5th daily cycle of the intermediate cycle.

As we discussed last night, the transports have not confirmed the new highs.

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The transports did recover a bit on Thursday, However, the trannies managed to print a lower low and are still in a technical down trend.

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Biotech, one of the leading sectors, also has not confirmed the new highs that printed in the broader market.

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And the financials have printed a swing high which was accompanied by a trend line break.

So while stocks closed at new all time highs, the lack of confirmation in these other key areas is concerning.

A Shot Across the Bow

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Stocks have struggled since closing at new all time highs.

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Stocks closed at an all time high on Monday. Stocks went on to print a higher high Tuesday, before closing lower. Although stocks printed a higher high once again today, they closed lower for a second consecutive day. A swing high and trend line break would open up the possibility of stocks forming a left translated cycle, which could lead to an intermediate cycle decline.

The transports have been printing lower highs since December.

Trannies

They lost the 50 day MA in March, backtested it and was rejected in April and in May. The transports were rejected by the declining 50 day MA once again on Tuesday and now lost the 200 MA today and formed a failed daily cycle.

The non-confirmation of new highs in stocks by the transports could be a shot across the bow for the stock market.

Clear & Convincing

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The bullish follow through today on the dollar delivered a clear and convincing trend line break to confirm a new daily cycle.

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Not only is there a swing low and declining trend line break on the daily chart, but also on the weekly chart as well.

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There is a lack of clarity on the weekly chart as to whether this is week 12 or week 30 for the dollar’s intermediate cycle. I tend to think week 30 is the correct labeling. What is clear is the the dollar’s weekly chart now hosts a declining weekly trend line break accompanied by a weekly swing low that signals a new intermediate cycle.

And with the dollar emerging out of an intermediate cycle low, that should signal trouble for precious metals.

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The previous intermediate cycle for the Miners was halted by the 200 day MA back in January. The current daily cycle peaked on day 6, where it was halted by the 200 MA. The big 3.61% drop today has this daily cycle set up to form as a left translated daily cycle, which should lead into an intermediate cycle decline.

Gold also formed a clear and convincing swing high today.

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Gold’s daily cycle closed above the 200 MA on day 10 and the peaked on Monday, day 11. A day 11 peak begins to shift the likelihood of this daily cycle forming as a right translated cycle. But if the dollar is emerging out of an intermediate cycle low then gold is at risk of forming a left translated cycle and failing, signaling an intermediate cycle decline.

The 5/19/15 Morning Update

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The dollar is delivering more bullish follow through.

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The dollar printed its lowest point Thursday, following the day 11 peak. A swing low formed on Friday. The bullish follow through on Monday tested the declining trend line. This morning the dollar has broke above the declining trend line confirming today as day 3 for the new daily cycle.

As the dollar rallies we can expect stocks to follow suit while gold & oil weaken.

A New Daily Cycle

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The cycle count was unclear when we last looked at the daily equity cycle.

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Stocks formed a bearish reversal on day 21 that sent stocks dipping below the 50 day MA. An early day 28 cycle low appeared to have formed followed by stocks regaining the 50 day MA. Since 28 days is a bit short of the normal timing band for a daily cycle low, we wanted to see if stocks would break lower extending the daily cycle decline or break higher thereby confirming a new daily cycle.

Today stocks broke higher.

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Stocks broke out to a new high on Monday. Breaking above the previous daily cycle high confirms day 28 as an early daily cycle low. Which makes today, day 8 for the new daily cycle.

The dollar now seems to be on the verge of confirming a new daily cycle.

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After peaking on day 11 the dollar lost the 50 day MA and printed its lowest point on Thursday, day 34. Friday saw the dollar form a daily swing low, but still closed lower. However the dollar delivered some bullish follow through on Monday, testing the declining trend line. The dollar is deep in its timing band for forming a daily cycle low. A clear and convincing break of the declining trend line will confirm a new daily cycle.

The 5/15/15 Weekend Report Preview

The Dollar

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The dollar’s daily cycle peaked on day 11, lost the 50 day MA and proceeded its daily cycle decline.

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The dollar printed its lowest point on Thursday, day 34. Friday saw the dollar form a daily swing low, but still closed lower. The dollar is deep in its timing band to print a daily cycle low. At this point a declining trend line break confirms a new daily cycle.

Stocks

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Stocks closed at an all time high on Friday. I suspect that stocks left behind an early 28 day, daily cycle low. We still are waiting on confirmation.

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Stocks printed a bearish reversal on day 21, which still remains as the all time, intra day high. Stocks went on to print its lowest point on day 28, following the day 21 high. A break above the day 21 high of 2125.92 confirms a new daily cycle making Friday day 7. But a break below the day 28 low of 2067.93 extends the daily cycle making Friday day 35.

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Getting Late

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Thursday was day 34 for the dollar’s daily cycle. It is getting late in its timing band to print a daily cycle low.

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The daily cycle peaked on day 11 and has been in decline since. And the dollar has failed to break the declining trend line to signal a new daily cycle. The lower shadow left behind by the dollar today is a signal of a possible reversal. Also there is a bullish divergence developing on the True Strength Indicator which signals a reversal could be imminent. A swing low accompanied by a declining trend line break will confirm a new daily cycle.

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The weekly charts shows a clear and convincing break of the weekly trend line. We do not know how far this intermediate cycle might correct. However, the break of the weekly trend line has fulfilled the requirement for an intermediate cycle decline. There is also a corresponding Bearish Zero Line Crossover on the weekly TSI that we also see happen en route to an intermediate cycle low. Therefore there is a possibility that the impending daily cycle low could also mark an intermediate low as well.

A rallying dollar could be a concern to the Miners.

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The previous intermediate rally by the Miners was halted by the 200 day MA. The Miners breached the 200 day MA today. We will need to keep an eye on the Miners once the dollar prints a cycle low to see if they get turned back here.

Clarity

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In real time, we were uncertain if day 27 or day 32 marked the daily cycle low. Today’s rally by gold has provided some clarity.

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If day 27 was gold’s daily cycle low, then day 32 was a break below the daily cycle low, which would mean that gold formed a failed daily cycle. But since a cycle cannot fail and then break out to a new high, by definition, we must label day 32 as gold’s daily cycle low. This makes Wednesday day 8 of a new daily cycle.

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This intermediate cycle continues to resemble the previous weekly cycle. Gold has broken above the previous declining weekly trend line, found support along the new weekly trend line and then launching higher.

A Look at Commodities

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The CRB printed its intermediate cycle low mid March. The CRB rallied out of that cycle low, peaking on day 20, and leaving behind a right translated, 24 day, daily cycle low. And now the CRB is in its second daily cycle following the March intermediate cycle low.

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This second daily cycle peaked on day 10 and then formed a swing high last Wednesday. If the CRB was to roll over into a left translated cycle, it should have done so last week. Instead, it appears as if the CRB has set the daily cycle trend line last Thursday. The CRB then delivered more bullish follow through today. Monday was day 14 for the CRB’ daily cycle.

With the current daily cycle high set at day 10, the odds are beginning to shift towards a right translated cycle formation. The bullish follow through today appears to readying the CRB to break out to a new daily cycle high. Should the CRB break above 233.53 it will form a new daily cycle high and also lock in a right translated nature to this daily cycle. It will also see the CRB form its first consecutive higher daily cycle high and higher daily cycle lows in over 10 months.

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The intermediate cycle began its yearly cycle decline in June, 2014. An intermediate low formed in March. And this week the CRB is breaching its 10 month old declining weekly trend line which confirms the new yearly cycle.

Gravitational Pull

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Stocks are getting late in their timing band to begin to decline into an intermediate low.

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The intermediate equity cycle peaked on week 28. Stocks are now in week 30 of their intermediate cycle. While stocks formed a weekly swing high and breached the intermediate cycle trend line last week, we need to see a clear and convincing close below the weekly trend line to confirm the intermediate cycle decline.

Currently, the daily cycle lacks clarity.

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The daily equity cycle peaked on day 21 and printed its lowest point on day 28. I suspect that stocks left behind an early daily cycle low on day 28. We need to see a break above the day 21 high of 2125.92 to confirm a new daily cycle.

However if day 28 did not mark the daily cycle low, then this would be day 31 of the daily equity cycle. With stocks late in its timing band for an intermediate cycle low, it is possible that stocks begin to feel the gravitational pull of the impending intermediate cycle low. And instead of breaking higher they break below the day 28 low of 2067.93. Should that happen then we begin to suspect that the previous daily cycle low of 2045.50 will be lost, producing a failed daily cycle.