Stormy Weather

00

The daily equity cycle peaked on day 15 and broke the daily cycle trend line on Friday. Monday saw stocks deliver a clear and convincing downside follow through.

SPX Index Price Chart for S P 500 Index

The follow through to the trend line break signals the daily cycle is in decline. With a timing band that stretches from day 30 to day 45, stocks can trend lower for the next 8 to 23 trading sessions.

The day 15 peak does indicate a left translated cycle decline. This aligns with our framework to see a left translated, failed daily cycle. A break below 1627.47 produces a failed daily cycle.

Gold also appears to be on the threshold of an intermediate cycle decline.

gold

Gold has printed two consecutive right translated daily cycles. The decline into the second daily cycle low broke below the intermediate cycle trend line signaling an intermediate cycle decline. This new (third) daily cycle appears to have peaked on day 1, the day after Fed Day, with a failed backtest of the intermediate cycle trend line. Gold has since broken down and is now crawling under the 50 MA. A break below the current daily trend line will send gold into an intermediate cycle decline.

It does look like both gold and equities may be sniffing out a temporary bottom in the dollar.

DXY00 Commodity Futures Price Chart for U S D

The daily dollar cycle peaked on day 12 and broke below the previous daily cycle low on Fed Day, day 21. The dollar managed a weak bounce but never printed a swing low. Monday saw the dollar print a lower low. The dollar is late in the timing band for a daily cycle low. Printing a lower low on Monday eases the parameters of forming a swing low. A break above 80.375 forms a swing low and quite likely a new daily cycle.

Since stocks as they already are declining into a left translated cycle low a dollar rallying out of a daily cycle low will likely add to the misery …

0

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s