Oil Confirms Daily Cycle Decline

On Thursday we discussed how the bearish reversal was setting oil up for a decline into its daily cycle low. On Monday oil confirmed that it has begun its daily cycle decline.

Oil formed a swing high on Monday that closed convincingly below the 10 day MA. Oil also pierced the daily cycle trend line. Both of these signals indicate that oil has begun its daily cycle decline. With Monday being only day 21 that will allow enough time for oil to drop further so as to turn the 10 day MA lower.

Oil still managed to close above the upper daily cycle band, indicating that oil is in a daily uptrend. Oil will remain in its daily uptrend unless it closes below the lower daily cycle band.

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Stocks Form Bearish Reversal

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Stocks printed a bearish reversal on Tuesday.

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Tuesday was day 27 for the daily equity cycle. That places stocks 3 days shy of their timing band to seek out a daily cycle low. Stocks formed a bearish reversal after breaking out to a new high on Tuesday. The bearish reversal eases the parameters for forming a swing high. A break below 2472.99 will form a swing high to signal that stocks have begun their daily cycle decline.

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As we discussed here last week, even if stocks form a daily swing high to begin their daily cycle decline the bigger picture is that stocks are in a daily uptrend. This uptrend is characterized by peaks above the upper daily cycle band and lows forming above the lower daily cycle band. So even is stocks decline into a daily cycle low, they will remain in their daily uptrend until they close below the lower daily cycle band.

The 2/17/17 Weekend Report Preview

The Dollar
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The dollar broke above the 50 day MA on Wednesday. But then formed a bearish reversal and closed below the 50 day MA. Thursday the dollar formed a swing high to signal the daily cycle decline.

The dollar recovered on Friday. We could see the dollar back test the 50 day MA before continuing into its daily cycle decline. A “kiss good-bye” will set up a declining trend line. A peak on day 9 can still result in a left translated failed daily cycle. A break below 99.19 will form a failed daily cycle.

Stocks
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Stocks have entered their timing band to seek out a daily cycle low. Thursday’s new high on day 32 locks in a right translated daily cycle formation.

A swing high and a break of the accelerated trend line will signal the daily cycle decline. Stocks continue to close above the upper daily cycle band remaining in its daily uptrend. Stocks will continue its daily uptrend until it closes below the lower daily cycle band.

Bearish Signal for the Miners

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The Miners delivered a bearish signal on Thursday.

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The Miners printed an exhaustion candle on Wednesday. Then followed up on Thursday by printing a bearish reversal. (Note how the previous daily cycle peaked on day 12) Thursday has eased the parameters for forming a daily swing high. A break below 30.968 will form a daily swing high then a break of the daily cycle trend line will confirm the daily cycle decline. Still the Miners are in a daily uptrend. They will remain so unless they close below the lower daily cycle band. oil

On the other hand, oil continues to develop bullishly.

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After closing above the 10 day MA on Monday, oil stalled on Tuesday. Oil back tested the 10 day MA on Wednesday and then had a big day on Thursday. Thursday was day 6 for the daily oil cycle and oil closed above the lower daily cycle band providing more confirmation of the new daily cycle. Oil still needs to close above the declining trend line to provide final confirmation of the new daily cycle.

Bearish Reversal

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Stocks delivered a bearish reversal on Wednesday.

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Wednesday was day 24 for the daily equity cycle. Stocks breached the 1680 level before reversing. The low of the day managed to tag the (blue) daily cycle trend line. A break below 1648 forms a swing high and also breaks below the daily cycle trend line signaling a daily cycle decline.

If today holds as the daily cycle peak, at 24 days the odds are good that this cycle will form as a right translated daily cycle. The timing band for a low is normally between days 30 and 45. Then the next cycle will likely be the terminal cycle to this intermediate cycle. The next cycle should then peak before day 20 before rolling over into a left translated, failed cycle.

The dollar also rallied to a new daily cycle high today.

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Wednesday was day 15 for the daily dollar cycle. We see that since the dollar breached the Bollinger Band on day 12, the dollar has traded sideways. Also notice that the Bollinger Bands have opened up. It looks like the dollar is getting set for one more leg higher. Since the dollar’s daily cycle runs through day 28, there is plenty of time for one more push higher before rolling over in to a daily cycle decline.

Back to the Mail Bag

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pk34145 asked,
“LM, Could you please give us your long term view of $GOLD for the current Intermediate cycle?

Is it likely, or at least “possible” that we are on track to test all time highs in $GOLD for this Intermediate Cycle?

I just looked at the 2008 bottom and this is what I found.
2008 bottom
25% below 200dma – (recovered 200dma in about 1 1/2 months)
45% rally to A-wave high (700 to 1000 in about 3 1/2 months)

2013 bottom (Assuming we have already seen ICL and YCL)
20% below 200dma – (still possible to recover this during 2nd Daily Cycle)
40% below 1900 – (should be able to do this during current Intermediate cycle)

The slow beginning off of this bottom does not look all that different than the 2008 bottom.

http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&st=2008-05-22&en=2009-04-01&id=p91950315237

Your thoughts on this would be appreciated. (turn on your “crystal ball”)”

Nice work. I also think that this reminds me of 2008 yearly cycle low.

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Above is the big picture.

The pattern does seem similar to the 2008 yearly cycle low. Of course this was a bigger rally and the correction was more severe stretching over two yearly cycle lows. I expect that once this new yearly cycle is confirmed, this intermediate cycle will peak between the 1800 – 1900 level. An intermediate decline into a to around the 1600 level before a launch to new all time highs.

So we are waiting patiently for gold to get it in gear …

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Mirror Image …

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The dollar delivered an upside surprise today.

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So after a bearish reversal on Monday, the dollar surprised us by reversing again.

Tuesday was day 5 for the daily dollar cycle. Recall that the previous dollar daily cycle was a left translated daily cycle that failed. A failed daily cycle signals that the intermediate cycle is in decline creating the expectation of lower highs and lower lows with the remaining daily cycles to be left translated cycles.

So the dollar will need to peak by day 8 and really should not break above 83.30. Breaking above 83.30 makes a new daily high. And rallying past day 8 increases the possibility of this becoming a right translated daily cycle.

So while the dollar gave an upside surprise, bonds broke lower.

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Tuesday was day 8 for the daily bond cycle. Following a right translated daily cycle the task for bonds was to print a higher daily cycle high, which was accomplished today. The bearish engulfing candle may signal that the daily cycle has peaked.

What I find interesting was that Stocks were up today while the dollar was up, but maybe stocks were up because bonds were down …

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Over the past couple of months it seems as though equities and bonds are mirror images of each other. For instance, 2/26 was the equity daily cycle low and the same day it was also the daily cycle high for bonds.

Stocks rallied as bonds printed their cycle low. Then when bonds peaked on 2/05 stocks printed a low that looks like a daily cycle low in real time.
As bonds declined into their daily cycle low stocks rallied into their daily cycle peak.

As bonds rallied out of thier daily cycle low, stocks declined into their DCL. Then today as bonds reversed, stocks had a big day up. If this continues we will likely see a swing high on bonds as stocks continue to rally out of their DCL. And if the dollar does rollover by day 8,
that will likely add fuel to the fire …

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Bullish Rumblings …

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Bonds last printed a daily cycle low on 02/01/13.
It has been almost three weeks and Bonds refused to form a swing low, until yesterday. Bonds had a big day on Monday, as stocks dropped.

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Today was day 16 for the daily bond cycle. It was a narrow range day that printed a higher high before printing a bearish reversal on pretty significant volume easing the parameters to from a swing high. Today just may have marked the daily cycle top for bonds.

At 16 days, bonds are approaching there timing band to seek out a daily cycle low. Bonds have virtually locked in a right translated nature to this daily cycle. Right translated daily cycles are followed by another daily cycle printing a higher daily cycle high. Which means that this could have been the first daily cycle of a new intermediate cycle.

Now bonds have been locked in a yearly cycle decline since July.

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A new daily cycle forming as right translated signals a new intermediate cycle.
With bonds at 11 months, they are in the timing band for a yearly cycle low.
Bonds would have to break above 119.67 to form a monthly swing low.
A break above the declining yearly cycle trend line confirms a new yearly cycle.

The Yellow Metal
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Gold had a solid gain today being up by 20 points.
However, gold ran into a resistance level at 1620.

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It took gold 6 tries to finally rally above this level last summer.
We can probably expect some resistance at this level again.
On the other hand, it would be a really bullish sign if gold slices through this level …

So, besides the obvious follow through to the daily swing low, gold has also formed a weekly swing low. Now we shouldn’t get excited until gold closes above the declining (red) cycle trend line. Still a journey of a thousand miles begins with one step and forming and a weekly swing low is an important step.

Commodities
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The CCI seems to be following gold’s lead.

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Tuesday was day 20 for the CCI Index daily cycle.
A bullish reversal printed today.
A break above 550.34 forms a swing low.
And at day 20, holds the promise of marking a daily cycle low.

That would be a bullish turn …

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