Stocks managed an oversold bounce on Tuesday only to see those gains evaporate on Wednesday.
Wednesday was day 27 for the daily equity cycle. Stocks not only gave back the gains on Tuesday but also printed a lower low. Stocks appear to be crawling along the support level from the previous daily cycle low. Crawl patterns tend to be continuation patterns. I suspect that once stocks break below the previous daily cycle low we will witness an acceleration into a daily cycle low. Stocks are three days shy of entering their timing band for a daily cycle low. And since the timing band goes to day 45, that leaves almost 4 more weeks for stocks to go lower.
The dollar’s daily cycle peaked on day 16, formed a swing high the next day and then plunged the following day, which was last Thursday. Friday was day 19 and also the lowest point since the day 16 peak. The dollar has entered its timing band for daily cycle low. Although a swing low has formed, the dollar would need to break above the declining trend line (around the 81.20 level) to confirm a new daily cycle. Instead the dollar appears to be forming a bear flag, which should lead to one more push lower for the dollar.
Commodities appear to be benefiting from the weak dollar.
Wednesday was day 13 for the CRB daily cycle. Not only did the CRB close above the 200 MA, it also closed above the previous daily cycle high. This is a bullish development that signals that the CRB has broken the pattern of lower highs.