While stocks can still go lower, they did post their first solid gain in over a week. At day 35, Friday sits right in the timing band for a daily cycle low and the swing low that formed today could mean that today was day 1 of a new daily cycle.
Typically we like to see a break of the declining trend line to confirm a new daily cycle. With a potential declining trend line break being north by about 30 handles we need to look at other clues that the daily cycle low was Friday.
One clue is the Bollinger Band crash. It is a reliable indicator of a daily low when it occurs during the timing band for a low. Another reliable signal of a new daily cycle is the RSI (05) breaking above the 30 line.
The dollar’s daily cycle peaked on Thursday, formed a swing high on Friday, and closed lower on Monday. Today was day 22 for the dollar’s daily cycle. The dollar has begun its decline into a daily cycle low. With May being the three year low, I anticipate the dollar should find support above the upper stem of the 8 month consolidation pattern and then bounce into a new daily cycle.
With the dollar likely to find its daily low over then next week that should help
gold bounce here. If gold does bounce into a new daily cycle here that would indicate that Friday was day 13 and that gold left behind a shortened daily cycle.
However if Friday was day 13 then gold left behind a failed daily cycle. Setting up the expectation of lower highs and lower lows until the intermediate cycle low prints. Should gold break above 1325.90 then that changes the picture for gold. Instead of a failed daily cycle it would mean that this was one very stretched cycle. And it would set the expectation to see gold pass the day 26 high of 1346.80.