The 9/22/18 Weekend Report Preview

The Dollar

The dollar formed a failed daily cycle this week confirming the intermediate cycle decline.

The dollar printed its lowest point on Friday day 17, placing it in its early part of its timing band for a DCL. The dollar could trend lower for another 2 or 3 weeks, but Friday’s bullish reversal eases the parameters for forming a swing low. A break above 93.93 forms a swing low and a break above the declining trend line would have us then label day 17 as a DCL. The dollar is currently in a daily downtrend and will remain so unless it closes above it the upper daily cycle band.

Stocks

Stocks printed a new high on Friday, day 26, shifting the odds towards a right translated daily cycle formation.

Stocks are 4 days shy of entering their timing band for a daily cycle low. Bearish divergences are beginning to develop which signal the impending daily cycle decline is near. A swing high and close below the daily cycle trend line will confirm the daily cycle decline. Friday’s bearish reversal has eased the parameters for forming a swing high. A break below 2927.11 forms a swing high. Stocks are currently in a daily uptrend. They will remain in their daily uptrend until they close below the lower daily cycle band.

The entire Weekend Report can be found at Likesmoney Subscription Services

The Weekend Report discusses Dollar, Stocks, Gold, Miners, Oil, & Bonds in terms of daily, weekly and yearly cycles.
Also included in the Weekend Report is the Likesmoney CycleTracker

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You can email me at likesmoney@gmail.com to receive a sample copy of the Weekend Report

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Bullish Breakout

Stock broke out to new highs on Thursday.
Breaking out to new highs is a bullish development.
Traders may feel compelled to buy the breakout,
thinking that stocks are beginning another leg up.
Cycles tells a different story.

Thursday was day 25 for the daily equity cycle, placing stocks 5 days shy of its timing band for a daily cycle low. More importantly stocks are on week 32 for the intermediate equity cycle, placing stocks deep in their timing band for an intermediate cycle decline.

That intermediate cycle decline can unfold in one of 2 scenarios. The first scenario is for the currently daily cycle to fail, leading to stocks printing their intermediate cycle low. Stocks would need to break below the previous daily cycle low of 2808.49 to form a failed daily cycle. A peak on day 25, or later, indicates a right translate daily cycle formation. So if this daily cycle were to fail, it would likely unfold as a semi crash

The other scenario would be an improbable 6th daily cycle. A failed daily cycle is needed to complete an intermediate cycle decline. If the current daily cycle prints a higher low, then stocks would need another daily cycle to usher in the the intermediate cycle decline. This new daily cycle would need form as a left translated daily cycle resulting with stocks printing an intermediate cycle low.

Only one intermediate cycle since 2009 (19 intermediate cycles) has exceeded 32 weeks. That cycle ran 35 weeks. This indicates that in either scenario, any gains here will likely be given right back when stocks begin their intermediate cycle decline.

Miner Reversal

The Miners have closed above the declining trend line and have begun to turn the 10 day MA higher which confirms that Wednesday was day 6 of the new daily cycle.

The Miners have also formed a weekly swing low.

The Miners printed their lowest point on week 31, placing them deep in their timing band for an ICL. We now have confirmation of a new daily cycle so the weekly swing low signals that the Miners have also begun a new intermediate cycle.

The Miners had been in consolidating for over 20 months before finally breaking down and declining into what should end up being their yearly cycle low. The long consolidation should yield a strong trending move. I think that the move into the cycle low is got everybody on the wrong side of the boat and the weekly swing low above the previous yearly cycle low is a signal that this is about to reverse.

Natgas Recognition

Natgas broke above both the 10 day & the 50 day MA’s and closed above the upper daily cycle band to confirm the new daily cycle.

I think that Tuesday may be a possible recognition day. Natgas has been contained by a declining multi year trend line, which I discussed in this week’s Mid Week Update. And it looks like Natgas will finally be breaking above the declining 4 year trend line.

Miner Downtrend

The Miners signaled a new daily cycle on Monday.

The Miners printed their lowest point last Tuesday, day 17, placing them in the early part of their timing band for a DCL. The Miners were already exhibiting a huge bullish divergence on the oscillators by day 17. These bullish divergences ofter accompany cycle lows. Then on Monday the Miners closed above the declining trend line to signal a new daily cycle.

A swing low and trend line break in the timing band for a DCL are some of the signals that we look for to make a long entry. However, there are 2 reasons why I am not ready to label day 17 as the DCL.
1) gap fill /timing band
2) Daily down trend.

The Miners gapped lower following Labor Day Weekend. That gap lower has not been filled. Since the Miners are in the early part of their timing band for a DCL, a very possible scenario would be for the Miners to back-fill the gap and then continue lower.

The other concern is the the Miners are currently in a daily downtrend. They have been in this downtrend for the past two months. And they will remain in their daily downtrend unless they can close above the upper daily cycle band. So while the Miners could break above the Labor Day Weekend gap, they would still need to close above the upper daily cycle band to signal an end to the current daily downtrend.

Steel Alignment

The yearly cycle low presents the best likelihood of gains for any asset class.

This is month 16 for the yearly steel cycle. Steel normally prints a YCL every 10 – 12 months so at 16 months it is very deep in its timing band to print a yearly cycle low. And steel is forming a bullish monthly reversal, which will ease the parameters for forming a yearly cycle low.

A yearly cycle low cannot form unless an intermediate cycle low is also forming …

Steel printed its lowest point his past week, week 24, placing still in its timing band for an ICL. The bullish weekly reversal eases the parameters for forming a weekly swing low. A break above 43.656 forms a weekly swing low to signal the new intermediate cycle. A break above the declining trend line will confirm the new weekly cycle.

And just like a yearly cycle low cannot form unless an intermediate cycle low has also formed, an intermediate cycle low cannot form unless a daily cycle low has also formed.

Steel printed its lowest point on Tuesday, day 18, placing it in its timing band for a DCL. A swing low formed on Wednesday, then steel broke above the declining trend line to close above the 10 day MA on Friday to confirm a new daily cycle.

Confirming the new daily cycle is a signal that a new intermediate cycle has begun.
And if a new intermediate cycle has begun, then that signals that a new yearly cycle has also begun.

My thanks to Andrew who alerted me that steel was in the process of forming multiple cycle lows ;0)

The 9/14/18 Weekend Report Preview

The Dollar

The peak on day 4 indicates a left translated daily cycle formation.

The dollar closed below both the 10 DMA & the 50 DMA on Thursday to indicate the daily cycle decline. The dollar still needs to turn the 10 day MA lower. A break below the previous DCL of 94.34 forms a failed daily cycle to confirm the intermediate cycle decline. A failed daily cycle would align with our weekly cycle framework. The dollar is in a daily downtrend & will remain so unless it closes above it the upper daily cycle band.

Stocks

Stocks had 3 days this week with significant Selling on Strength numbers that totaled 989 million. A clustering of SOS days often precede a cycle decline.

Friday was day 21 for the daily equity cycle, placing stocks 2 weeks shy of the timing band for a DCL. The peak on day 10 indicates a left translated daily cycle formation. This aligns with our longer, intermediate cycle framework calling for stocks to decline into an intermediate cycle low. A break below the solid blue trend line should send stocks into their final decline into their intermediate cycle low.

The entire Weekend Report can be found at Likesmoney Subscription Services

The Weekend Report discusses Dollar, Stocks, Gold, Miners, Oil, & Bonds in terms of daily, weekly and yearly cycles.
Also included in the Weekend Report is the Likesmoney CycleTracker

For subscribers click here.

You can email me at likesmoney@gmail.com to receive a sample copy of the Weekend Report

Stocks – The Big Picture

Stocks closed above the day 10 MA on Thursday, casting some doubt if day 33 hosted the DCL. As I have stated previously, I am in the camp that recognizes day 33 as a DCL. Which would make Thursday – day 20.

The other scenario does not recognize day 33 as the DCL, which would make Thursday – day 53. And then we still need to allow for a decline into a daily cycle low. Allowing 7 to 10 days for decline would take stocks to day 60 or beyond. Only two of the last 12 daily cycles stretched to 60 days or longer. Which makes the likelihood of a stretched daily cycle – a low probability scenario. I think that the Fed intervened on day 33 and prevented stocks from declining into a more recognizable DCL.

The big picture is that stocks are deep in their timing band for an intermediate cycle decline.

This is week 31 for the intermediate equity cycle. Only 1 weekly cycle in the last 10 weekly cycles stretched past week 31. Stocks are over due to begin their intermediate cycle decline. A left translated failed daily cycle usually ushers in the intermediate cycle decline. Which is why I am in the camp that day 33 hosted a DCL. A day 33 DCL means that the current daily cycle peaked on day 10 — which would set this daily cycle up as a left translated daily cycle.

Stocks Deliver Bearish Singal

Stocks rallied on Tuesday. But despite stocks closing higher for the day, they still delivered a bearish signal.

Stocks printed 511 million in Selling on Strength on Tuesday. Stocks tend to cluster large Selling on Strength numbers like this prior to a cycle decline. This also aligns with our longer, intermediate cycle framework calling for stocks to decline into an intermediate cycle low. A break below the solid blue trend line should send stocks into their final decline into their intermediate cycle low.

The Bearish Case for Stocks

The status of the daily equity cycle has been unclear. But what is clear is that either scenario has a bearish outcome.

Monday was either day 50 or day 17 for the daily equity cycle.

Under the scenario that Monday was day 50, that would place stocks deep into its timing band for a daily cycle low. Stocks have closed below the 10 day MA for the third straight day. At this late stage of the daily equity cycle, losing the 10 day MA should send stocks into their final decline into their daily cycle low. Stocks would need to break below the (solid blue) daily cycle trend line in order to complete its daily cycle decline.

I am in the camp that a daily cycle low formed back in August on day 33 making Monday day 17 for the daily equity cycle. Under this scenario that makes this the 5th daily cycle for the current intermediate cycle. Intermediate cycles usually consist of 3 or 4 daily cycles. Having an intermediate cycle with over 4 daily cycles is rare. That makes it likely that with this being the 5th daily cycle that it will be the terminal daily cycle to the intermediate cycle. The final daily cycle typically left translates and fails in order to print the intermediate cycle low. Therefore stocks should break below the day 33 low of 2802.49 in order to form a failed daily cycle and complete its intermediate cycle decline.