In the Weekend Report we looked at how gold had been drifting higher since day 11. And that gold had reached an inflection point. If gold went any higher we would be forced to consider an 11 day cycle. Today we saw that gold got rejected by this infection point.
An 11 day cycle would be just too early, but it also would have been hard to ignore a trend line break. By breaking lower today gold avoids a trend line break and will likely continue down into its daily cycle low. And I suspect that we will see gold eclipse the day 11 low. And the fact that gold could not muster a rally with the dollar also down is not a good sign.
Also in the Weekend Report we discussed how the dollar recovered so much that it was in position to form a swing low and deliver a trend line break. Well the dollar was also rejected by the its declining trend line today. Our framework of expectations calls for the dollar to continue into its yearly cycle decline. Today’s price action helps to reaffirm our expectations. And like gold, I expect the dollar to eclipse its day 11 low on the way down to its daily cycle low.
Our framework calls for this daily equity cycle to form as a left translated cycle that declines into an intermediate cycle low. Therefore we would expect this daily cycle to peak on or before day 20. I do not believe that the cycle has peaked yet. I think that we will see stocks break above the 1900 level to draw in as many johnny come lately’s as possible before correcting. Stocks did form a swing high on Monday. Since it is too early in the cycle to have formed a trend line I am watching the 10 MA. A break below the 10 MA would signal a daily cycle decline.