Beware Bonds

Bonds finally appear to have confirmed a new daily cycle.

Bonds printed their lowest point last Friday. That was day 12, which is usually too early for a daily cycle low. However bonds have now:
* Broke above the declining trend line
* Delivered a bullish zero line crossover on the TSI
* Closed above the lower daily cycle band
* Closed above the 10 day MA
* Managed to turn the 10 day MA higher.

All of which convinces me that day 12 hosted the DCL.

The bigger picture is that bonds are in their timing band for a yearly cycle low and are in an interemdiate cycle decline.

Bonds have formed a monthly swing high in October. A monthly swing high is required for the yearly cycle decline. Bonds will need to deliver some bearish follow through to confirm that the yearly cycle is in decline.

Bonds are already in a daily downtrend. If the yearly cycle decline has begun then I suspect that we will see bonds backtest the 50 day MA and then rollover into another left translated daily failed cycle in order to complete the yearly cycle decline.

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Bonds Bear Witness to Bearish Cycle

On September 19 we discussed that bonds were beginning to become bearish. On Wednesday, bonds confirmed a bearish cycle.

Bonds printed an extended daily cycle low last Wednesday. Bonds formed a swing low the next day and then closed above the declining 10 day MA on Monday to confirm that day 38 hosted the DCL. Bonds closed lower on Tuesday and then broke below the previous daily cycle low on Wed to form a failed daily cycle. Since Wed was only day 5 bonds could potentially go lower for the next 2 – 4 weeks before printing a daily cycle low.

Bonds have begun to close below the lower daily cycle band to establish a daily downtrend. Bonds will continue in their daily downtrend until they close above the upper daily cycle band.
weekly

Bonds are delivering bearish follow through to last week’s break of the weekly trend line. This confirms that bonds are in an intermediate cycle decline. At 12 weeks bonds could trend lower for another 6 – 8 weeks before printing their ICL

Bonds Beginning to Become Bearish

The daily bond cycle peaked on day 29. A swing high formed two days later. Then bonds broke below the daily cycle trend line on day 32 to confirm the daily cycle decline.

Bonds formed a swing low last Thursday off the day 33 candle. Since 33 days places bonds deep in their timing band for a daily cycle low that swing low had good odds of marking the daily cycle low.

However, bonds broke lower.

Bonds delivered a bearish signal last week when they failed to follow through on a swing low deep in the timing band for a daily cycle low. Bonds delivered another bearish signal on Tuesday by closing below the lower daily cycle band. That ends the daily uptrend and indicates that bonds have begun their intermediate cycle decline.

Looking at the weekly chart we can see that bonds formed a weekly swing high last week. Bonds are delivering bearish follow through this week. Bonds also broke below the weekly trend line which is another signal that the intermediate cycle decline has begun.

A failed daily cycle normally ushers in the intermediate cycle low. Since the current daily cycle peaked on day 29, that locks in a right translated daily cycle formation. Bonds should begin a new daily cycle any day. Bonds will need for the new daily cycle to form as a left translated, failed daily cycle in order to complete the intermediate bond decline.

Possible Left Translated Bond Cycle

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The intermediate bond cycle peaked on week 15 and then formed a weekly swing high that saw bonds break below the weekly trend line to confirm that bonds began their intermediate cycle decline.

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The rally over the past 2 weeks has been enough for bonds to form a weekly swing low. A weekly swing low could indicate a new intermediate cycle but that would mean that bonds printed a 16 week intermediate cycle. Since the intermediate bond cycle normally runs 18 – 26 weeks, I am suspicious that this 2 week rally in bonds may only be a counter trend rally that will set up the declining weekly trend line.

In order for that to happen then the current daily cycle will need to form as a left translated daily cycle.

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Thursday was day 9 for the daily bond cycle. The new high on day 9 does begin to shift the odds towards a right translated cycle formation. Bonds would need to have to roll over immediately in order to maintain the possibility of a left translated cycle formation.

Bonds did print an exhaustion candle on Thursday. A swing high here would signal that bonds were beginning their daily cycle decline. Bonds did not close above the upper daily cycle band on Thursday. Since bonds began to close below the lower daily cycle band prior to printing the day 19 low means that bonds had begun a daily downtrend. So if bonds were to form a swing high then they will remain in their daily downtrend which would likely result in a left translated cycle formation.

Daily Uptrends

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Bonds began to close above their upper daily cycle band in March to establish a daily uptrend.

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While bonds are in an uptrend, they are currently seeking out their daily cycle low. Bonds printed their lowest point on Tuesday, day 34. That places bonds deep in their timing band for a DCL. At this point we are looking for a swing low and a break above the declining trend line to confirm a new daily cycle. A break above 122.14 will form a daily swing low. As long as bonds do not close below their lower daily cycle band they will remain in their daily uptrend.

Stocks are also in a daily uptrend.

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Monday was daily 24 for the daily equity cycle. That places stocks 6 days shy of their timing band for a daily cycle low. Gaps are beginning to develop that will likely get filled during the impending daily cycle decline. A swing high has already formed off the day 21 peak. A break below 2382.66 would send stocks into their daily cycle decline. A close below the 10 day MA will confirm the daily cycle decline. Stocks will remain in their daily uptrend unless they close below the lower daily cycle band.

Trend Line Breaks

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The market delivered some trend line breaks on Monday.

Let’s begin with gold.

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The daily gold cycle peaked on day 25. While a daily swing high formed the next day, gold essentially traded sideways until Monday when gold broke below the daily cycle trend line to confirm the daily cycle is in decline. Gold has averaged about 33 days for its last 10 daily cycles. So with Monday being day 30 that places gold right in its timing band to print a daily cycle low. One possible scenario would be for gold to form a daily cycle low at the convergence of the 200 day and 50 day MA.

Bonds have a similar set up.

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The daily bond cycle peaked on day 25 and formed a swing high two days later. Like gold, bonds did not break below the daily cycle trend line to confirm its daily cycle decline until Monday. The last 7 daily cycles have averaged 27 days so with Monday being day 9 that places bonds in their timing band to print a daily cycle low. Once a swing low forms it would have good odds of marking a daily cycle low. Then a break above the declining trend line would confirm the new daily cycle.

So while both gold and bonds broke below their daily cycle trend lines, stocks broke convincingly above its daily cycle trend line.

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Stocks printed an extended 58 day, daily cycle low on March 27th. Emerging from the extended DCL, stocks breached the daily cycle trend line on day 7. However stocks did not deliver a clear and convincing trend line break until Monday. Monday was day 19 for the daily equity cycle. A break above the day 7 high of 2378.36 will shift the odds towards a right translated daily cycle formation. And if a right translated daily cycle forms, then we would need to reevaluate if 3/27 actually hosted an ICL.

Its About Time …

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Stocks formed a daily swing low on Monday.

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Typically the daily equity cycle runs about 30 – 45 days from trough to trough. However, the previous daily cycle was stretched at 58 days. Since cycles tend to balance a stretched cycle with a shortened cycle, we could see a shortened daily cycle here.

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Even though we are expecting a shortened daily cycle, 13 days would be really short. I would have more confidence of the possibility that Friday hosted an early DCL if stocks broke below the previous daily cycle low of 2333.25 on Friday. The reason is that stocks have been declining into an intermediate cycle low for the past 6 plus weeks. A failed daily cycle normally forms during the intermediate cycle decline. A break below 2322.25 will form a failed daily cycle. However, with stocks being in their timing band for an intermediate cycle low, if stocks deliver a clear and convincing break of the declining trend line then we would be forced to recognize that a new intermediate cycle has begun.

Bonds have entered their timing band to seek out a DCL

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The daily bond cycle peaked on Friday, day 23. A swing high formed on Monday. There is a bearish TSI divergence developing that we often see at cycle tops. A break below the daily cycle trend line will confirm the daily cycle decline.

Bonds have been closing above the upper daily cycle band, establishing a daily uptrend. We will watch for a DCL to form above the lower daily cycle band. If that happens then that will confirm that bonds are in a daily uptrend. They will continue in their daily uptrend until they close below the lower daily cycle band.

The 3/03/17 Weekend Report

There is a lot going on this week.

* Did the dollar begin its daily cycle decline?
* Stocks are getting late in their daily cycle timing band.
* Are the Miners & gold ready to rally?
* Oil confirms its daily cycle decline this week.
* Bonds delivered a bullish print on Friday.

All of which is discussed in the Weekend Report.
This week I have decided to replace the Weekend Report Preview with a one-time posting of the complete Weekend Report.

My goal is to develop an on-going framework of expectations using cycle analysis.

The ideal time to buy is at a cycle low. 
* There are 4 cycle lows that I cover in the Weekend Report:
– The daily cycle low
– The intermediate (weekly) cycle low
– The yearly cycle low
– the multi-year cycle low

This week I am offering a special 6 week trial membership for $15. You will receive 6 weeks of Likesmoney Subscription Service.

The 6 week trial subscription includes:
* The Weekend Report
* The Mid-Week Update
and I also post what I call my Weekend Updates.
The Weekend Updates cover:
* The FAS Buy/Sell Indicator
* NATGAS
* XLE
* Copper
* GYX
* The Bullish Percentage BINGO

On to the Weekend Report

Summary:

Dollar:
The dollar formed a swing high on Friday. The dollar will need to close below both the 10 day MA and the 50 day MA to confirm the daily cycle decline.

Stocks:
Stocks formed a daily swing high on Friday and are due to decline into a daily cycle low.

Gold:
Gold closed convincingly below the daily cycle trend line on Thursday to confirm the daily cycle decline. The peak on day 20 assures us of a right translated daily cycle formation.

Miners:
Friday’s bullish candle eases the parameters for forming a daily swing low.

Oil:
Thursday’s close below the 50 day MA confirmed that oil entered in its daily cycle decline.

Bonds:
Bonds continue in its months long triangle consolidation.

The Dollar
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The dollar closed above the upper daily cycle band on Wednesday, ending the daily downtrend. The new high on day 19 indicates a right translated daily cycle formation and that February hosted an intermediate cycle low.

The dollar formed a swing high on Friday. The dollar will need to close below both the 10 day MA and the 50 day MA to confirm the daily cycle decline.

A right translated daily cycle formation and breaking above the declining weekly trend line indicate that week 24 hosted the intermediate cycle low for the dollar. The dollar is in a weekly uptrend and will remain in its weekly uptrend until it closes below the lower weekly cycle band.

The dollar formed a monthly swing high in February to signal the start of the yearly cycle decline. The dollar has already formed a monthly swing low in March. Since there has been no failed intermediate cycle, that makes March month 10 for the yearly dollar cycle. The dollar will now need to break below the February low of 99.19 in order to complete its yearly cycle decline.

The dollar printed a failed yearly cycle in May to confirm the 3 year cycle decline for the dollar. The dollar has since printed new monthly highs. Since a cycle cannot fail and then print a higher high, this confirms that May was an early 3 year cycle low. That makes March month 10 for the new 3 year cycle.

The dollar cycles through a 15 year super cycle. Each 15 year super cycle is embedded with five 3 year cycles. The dollar’s last 15 year super cycle peaked in 2001 on month 106, then declined into its third 3 year cycle low. There are some similarities developing to the current set up. Currently, the dollar has printed a new high in January, which is month 105 for the 15 year super cycle. Which is about when the previous super cycle rolled over into its 15 year super cycle decline. At the previous super cycle peak the dollar was quite stretched above the 200 month MA as well as the 50 month MA — as it is right now. There are bearish divergences developing on the momentum indicators that also appeared at the previous 15 year super cycle peak.

May hosted the 3 year cycle low, which was a shortened 3 year cycle of only 24 months. Since most times cycle balances themselves out, we could be poised for the next 3 year cycle to be a stretched 3 year cycle just as the dollar is ready to begin its 15 year super cycle decline. And a stretched 3 year dollar cycle decline would align with gold beginning a new multi year bull cycle.

Stocks
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Stocks formed a daily swing high on Friday.

The new high on day 40 locks in a right translated daily cycle formation. The accelerated daily cycle trend line has aligned with the 10 day MA. A close below the 10 day MA will confirm the daily cycle decline. Stocks are in a daily uptrend. Stocks will continue its daily uptrend until it closes below the lower daily cycle band.

Since a failed daily cycle is needed to confirm the intermediate cycle decline, the right translated daily cycle formation makes it likely that stocks will need at least one more daily cycle to decline into an intermediate cycle low. That should take the intermediate cycle out to late April or into May. Stocks continue to close above the upper weekly cycle band remaining in its daily uptrend. Stocks will continue its weekly uptrend until it closes below the lower weekly cycle band.

March is month 13 for the yearly equity cycle. The new high locks in a right translated yearly cycle formation. Stocks are now in their timing band for seeking out their yearly cycle low. A monthly swing high accompanied by a break of the monthly trend line will confirm the yearly cycle decline. Once stocks begin their intermediate cycle decline that should also trigger the yearly cycle decline.

Gold
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Gold closed convincingly below the daily cycle trend line on Thursday to confirm the daily cycle decline. The peak on day 20 assures us of a right translated daily cycle formation.

Friday was day 23, placing gold in the early portion of its timing band to print a daily cycle low. Gold’s daily cycles have averaged 27 days since emerging from its 2015 bear market low. So it is quite likely that gold needs a few more days before printing its daily cycle low. Gold is currently in a daily uptrend. Gold will need to form its daily cycle low above the lower daily cycle band to avoid signaling an end to the daily uptrend. However, a bullish reversal off the rising 50 day MA would still allow gold to maintain a bullish posture.

This was week 11 for the intermediate gold cycle & gold continues to print higher weekly highs. Gold now faces resistance at the 50 week MA as it appears to be declining into a daily cycle low. Once a daily cycle low forms, gold should break through the 50 week MA and challenge the declining (blue) weekly trend line. However a close below the rising 10 week MA would be a clear signal that the intermediate cycle decline has begun.

Gold formed a monthly swing low in January to signal the new yearly cycle and went on to deliver bullish follow through in February. Gold appears is being squeezed by the convergence of the declining 50 week MA and the rising 200 month MA. Resolution of this squeeze play will send gold in a trending move. Gold is in a monthly uptrend. Gold will continue in its monthly uptrend unless it closes below the lower monthly cycle band.

The Miners
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Regardless if Friday is day 49 or day 25, the bullish print has eased the parameters for forming a swing low. A break above 22.47 will signal a new daily cycle.

There are conflicting signals to sort through. The Miners have closed below the lower daily cycle band for 5 consecutive days. Closing below the lower daily cycle band is a reliable indicator that the intermediate cycle is in decline. That aligns with the day 24 low in January marking a daily cycle low which would make Friday day 25 of a failed daily cycle.

Gold, on the other hand, is clearly forming a right translated daily cycle. Since gold is the driver of precious metals, gold’s right translated daily cycle formation aligns with Friday being day 49 of an extended daily cycle for the Miners. Gold has entered its timing band to print a daily cycle low. If gold prints a daily cycle low and begins to rally, the Miners will surely follow. The Miners will need to break above the declining trend line to confirm the new daily cycle.

Friday’s bullish candle sets up the possibility that a daily cycle low has formed. Therefore if a daily swing low forms, then a stop could be placed below the 200 week MA. This is week 10 for the Miners intermediate cycle. The Miners will need to remain above the 200 Week to maintain a bullish posture. If the Miners can form a weekly swing low off of the week 10 candle then we will be able to construct a weekly trend line.

The Miners have been essentially crawling along the 50 month MA since breaking above the 50 month MA in June, 2016. The Miners printed a bullish monthly reversal in December then formed a monthly swing low and breached the declining monthly trend line in January to signal the new yearly cycle. The Miners are in a monthly uptrend. The Miners will continue in their monthly uptrend unless they close below the lower monthly cycle band.

Oil

The day 27 peak assures us of a right translated daily cycle formation. Oil closed below the 50 day MA on Thursday to confirm the daily cycle decline.

Friday was day 35 for the daily oil cycle, which places oil in the early part of its timing band to print a daily cycle low. Oil managed to recover on Friday, regaining the 50 day MA. Since oil needs to break below the rising daily cycle trend line in order to complete its daily cycle decline, Friday’s rally will likely be a counter trend rally. But a break above the declining trend line would force us to recognize that a new daily cycle has begun.

Oil has been coiling above the October pivot for the past 12 weeks. With oil in its daily cycle timing band, a decline into a daily cycle low should cause oil to break below the October pivot and break below the weekly trend line to signal the intermediate cycle decline. Often times the first move out of a coil is a false move. With oil in a weekly uptrend, a potential scenario would be to see a brief intermediate cycle decline that finds support at the rising 50 week MA. Then a break to new highs.

But with the current right translated daily cycle formation, that sets up the possibility that oil will need one more daily cycle in order to complete its intermediate cycle decline.

Oil is in its timing band complete its daily cycle decline. It is also in its timing band to seek out a yearly cycle low. But so far oil has resisted the gravitational pull of these impending cycle lows. So there is the possibility of a brief intermediate cycle decline followed by a breakout to new highs, which would certainly extend the yearly cycle out by another 4 to 6 months. Currently the yearly high printed in month 11. Barring a break to new highs, a monthly swing high and a break below the monthly trend line will confirm that oil has begun its yearly cycle decline. A break below 50.71 will form a monthly swing high.

Bonds

Bonds continue in its months long triangle consolidation.

Bonds did print a bullish reversal on Friday. A swing low here would make Friday a half cycle low. But a close below the rising trend line will have bonds at risk of printing a failed daily cycle.

This was week 11 for the intermediate bond cycle. Bonds need to break above the week 4 high of 122.87 to avoid a left translated weekly cycle formation. However bonds did close below the 10 week MA, which is a signal that the intermediate cycle is rolling over. A clear and convincing close below the rising trend line will confirm the intermediate cycle decline.

Bonds formed a monthly swing low in January and has remained bullish in February. The monthly swing low signals a new yearly cycle. During the yearly cycle decline bonds managed to close above the lower monthly cycle band to remain in their monthly uptrend. They will continue in their monthly uptrend unless they close below the lower monthly cycle band.

As previously stated, bonds formed a monthly swing low to signal a new yearly cycle. Approximately every 32 – 36 months bonds form a 3 year low. The current monthly swing low is in the timing band for a 3 year cycle low. So confirmation of the new yearly cycle will also signal that bonds are in a new 3 year cycle. So far bonds have not gained much traction as it tries to rally out of the 3 year low. This is beginning to appear similar to the 2014 three year low where bonds consolidated for 6 months before getting traction.

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Potential Inflection Points

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The dollar has been in a daily downtrend that has been characterized by peaks printing below the upper daily cycle band and lows forming below the lower daily cycle band. The dollar reached a potential inflection point on Tuesday.

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Tuesday was day 8 for the dollar’s daily cycle. Left translated daily cycles typically roll over by day 8. The dollar is also up against resistance from the 50 day MA. A swing high here should send the dollar into its daily cycle decline.

Bonds also appear to be at an inflection point.

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Bonds closed above the upper daily cycle band on day 9 trying to re-establish its daily uptrend. It has since formed a swing high and trended lower. Bonds did print a reversal off of the daily cycle trend line on Tuesday. Closing below the 10 day MA and forming a bearish zero line crossover on the TSI are signals that the daily cycle is in decline. Bonds will need to form a swing low here to avoid breaking below the daily cycle trend line, which would confirm the daily cycle decline.

The Dollar Breaks Lower

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On Monday we discussed that dollar has not confirmed a new daily cycle …

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and that Thursday could possibly be the daily cycle low.

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The dollar broke lower on Tuesday, extending the dollar’s daily cycle out to day 33. The dollar is deep in its timing band to print a daily cycle low and just 31 cents away from printing a failed daily cycle. With Wednesday being a Fed day and the jobs report on Friday it is likely that the dollar will print its daily cycle low this week.

Bonds appear to have printed their daily cycle low already …

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Bonds printed their lowest point on Thursday, following the day 19 peak. Thursday was day 28 placing bonds late in their timing band for a daily cycle low. Bonds have since formed a daily swing low and closed above the 10 day MA on Tuesday. A clear and convincing break above the declining trend line will confirm that bonds are in a new daily cycle.