The dollar’s daily cycle peaked on Monday, formed a swing high on Tuesday and then has stalled.
The unrelenting dollar rally has obscured both the daily and weekly cycle counts. If Monday was day 26, then the dollar is in its timing band and a cycle decline is imminent. If Monday was day 3, then a cycle decline is still imminent, but for a different reason. Allowing for 3 – 4 weeks to print a daily cycle low will take the dollar to weeks 18 or 19 (or 41-42) which is in the timing band for an intermediate cycle low. Therefore we would expect a left translated daily cycle to form here to lead and fail, to lead into the intermediate cycle decline. A left translated cycle typically peaks by day 8.
The daily equity cycle peaked on day 8. It has since been in a volatile trading range that has seen it lose the 50 day MA 3 separate times. The breach of the daily cycle trend line on Thursday sets up 3 possible scenarios.
The first scenario is that stocks closed lower on Friday and will continue lower next week into their daily cycle low.
The second scenario is that stocks can bounce here off the lower stem of the triangle consolidation. Then a test and rejection of the upper stem will see stocks make their final decline into a daily cycle low.
A third scenario would be that Thursday was a daily cycle low. Stocks have printed daily cycle lows on day 29 before, so this is not uncommon. While Friday closed lower, stocks remained in the consolidation pattern. At this point the gravitational pull of the impending daily cycle low should cause stocks to continue into their final decline into a daily cycle low. If stocks bounce higher here, then we need to be open to the possibility that Thursday was the daily cycle low. Confirmation arrives with a bullish break of the upper trend line.
Something to be aware of is that triangle consolidations can obscure the daily cycle count. In a triangle consolidation the cycle low is not the lowest point following the cycle peak, but the last lowest point on the lower stem prior to the upper trend line break. Because of this, left translated daily cycles do not fail in a triangle consolidation.
While we should be open to the 3 different possibilities, it seems that the weekly chart favors the first scenario.
The weekly intermediate cycle is covered in the Weekend Report.
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