The previous week on February 28th the dollar plunged, breaking below the previous daily cycle low confirming a failed daily cycle. This past week saw a counter trend rally that worked off some of the oversold conditions. Once the dollar has entered its primary cycle decline, counter trend rallies that extended past 4 days have initiated new daily cycles. This counter trend rally peaked on Wednesday, setting the declining trend line. The dollar was firmly rejected on the back test of the trend line on Thursday and continued lower on Friday.
Friday was day 12 for the dollar’s daily cycle. The timing band for a daily cycle low runs from day 18 to day 25 so the dollar can continue lower for another 6 to 13 days. Once a swing low forms a break of the declining trend line will confirm a new daily cycle.
The daily equity cycle began this week forming a swing high. The reversal on Tuesday negated the swing high and set the daily cycle trend line. Stocks then continued higher into Friday.
Friday was day 22 for the daily equity cycle. A peak on day 22 has shifted the odds considerably to this cycle forming in a right translated manner printing a higher low. I am beginning to see topping signals to this daily cycle. One of signals is that the SPY topped the Selling on Strength (SOS) listed on Friday.
We typically will be larger numbers on the SOS and the BOW preceding an intermediate cycle turn. And do not always see any significant numbers preceding a daily cycle inflection. The SOS is not a precise timing indicator, but should still be acknowledged.
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