Swing High

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Both stocks and the dollar formed swing highs today. While not every swing high is significant, a daily cycle decline cannot begin without a swing high.

The daily equity cycle broke out to new all time highs on Monday. Tuesday saw stocks give back some if its gains, forming a swing high.

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Tuesday was day 14 for the daily equity cycle. As we discussed last night, stocks are rallying out of a daily, weekly and quite likely a yearly cycle low. Therefore we should see this first intermediate cycle form as a right translated daily cycle, peaking on or after day 20. The rally out of the October pivot has been quite strong causing stocks to become overbought. So further weakness will likely lead to stocks declining into a half cycle low. I suspect that we will see stocks test the 10 day MA, before rallying on to new highs.

The dollar also formed a swing high today.

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The dollar's daily cycle currently shows a peak on day 13 and a swing high today, day 14. The dollar is still 4 days shy of its timing band to print a daily cycle low. So a swing high here should be greeted with some skepticism. But a break of the black trend line would signal a daily cycle decline.

There is still a chance that the current daily cycle fails and that takes the dollar into its intermediate cycle low. However, a peak on day 13 continues to shift the likelihood of this daily cycle forming in a right translated manner.

Since the dollar broke out to a new high this week, that has the intermediate cycle setting a new high on week 26. The dollar is overbought and overdue for a correction. One possible scenario could see the dollar begin to decline into its daily cycle low. After a brief 4 or 5 day decline, the dollar prints a right translated daily cycle low. Then next daily cycle would be the terminal daily cycle to this intermediate cycle. During the next daily cycle the dollar would top by day 8 and then go on to decline into a failed daily cycle. Which would lead to the intermediate dollar low.

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