Dollar Low

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The dollar printed it lowest point on Wednesday following an extended daily cycle decline. Then the dollar formed a swing low on Thursday to signal a new daily cycle.

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Even though the past 7 daily cycles have stretched to over 32 days from trough to trough, Wednesday was day 54 making this a very stretched daily cycle. The dollar formed a clear and convincing daily swing low on Thursday to signal a new daily cycle. The dollar still needs to break above the declining trend line to confirm the new daily cycle. Once the new daily cycle is confirmed, I suspect that the dollar will also leave behind an intermediate and a yearly cycle low, which I plan to cover in the Weekend Report.

As the dollar rallies out of its yearly cycle low that should send gold into its yearly cycle decline.

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Gold formed a weekly swing low off the week 21 low. Gold then regained 50 week MA and closed above the upper weekly cycle band on week 3 to indicate that week 21 hosted the ICL. The only thing missing from the week 21 low was a failed daily cycle. Otherwise all indications are the gold is now in its 2nd intermediate cycle for the year. I suspect that the impending dollar rally out of its yearly cycle low will see the dollar form a right translated weekly cycle. That should cause this new intermediate gold cycle to form as a left translated weekly cycle leading into its yearly cycle decline. Which appears to be in progress.

So far this week gold has formed a weekly swing high. If gold manages to close below both the 50 week MA and the 10 week MA that will further indicate that gold has begun its intermediate cycle decline. The peak on week 4 will assure us of a left translated weekly cycle formation. Since a failed weekly cycle is needed to confirm the yearly cycle decline gold will need to break below the previous ICL of 1214.30 to form a failed weekly cycle.

Miner Breakout

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The Miners broke convincingly above the declining trend line on Tuesday.

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I received plenty of emails today asking if the Miner’s breakout on Tuesday signals that day 14 hosted an early daily cycle low. The evidence suggest no. The Miner’s first 10 daily cycles since emerging from the bear market bottom back in December, 2015 averaged 23.7 days. The previous 2 daily cycles ran 49 and 39 days respectively. So 14 days historically is just too early for a DCL, so we will label it as a half cycle low. That makes Tuesday day 22 for the daily Miner cycle. A new high on day 22 shifts the odds towards a right translated daily cycle formation.

The second reason for labeling Tuesday as day 22 for the Miners is the status of the daily gold cycle.

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Gold is the driver to the precious metals market. Gold only had a mid-cycle consolidation which makes Tuesday clearly day 19. The new high on day 19 shifts the odds towards a right translated cycle formation. Which aligns with where the Miners are in their daily cycle.

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The Miners delivered a large Selling on Strength number on Tuesday. Often times these large Selling on Strength numbers appear at or near cycle tops. Which is another reason that supports a day 22 labeling for the Miners.

In Wednesday’s Mid-Week Report I plan to discuss where this places gold and the Miners in their intermediate cycle and tie that in with what the dollar is doing.

The 6/02/17 Morning Update

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Gold closed lower on Thursday.

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The lower close eases the parameters for forming a swing high. A break below 1262.00 forms a swing high. And then a break below the daily cycle trend line confirms that the daily cycle is in decline.

Gold has yet to print a failed daily cycle during this intermediate rally. Since 2 out of the past 4 daily cycles stretched past 40 days it is still possible for gold to form a left translated daily cycle, even with a new high on day 15.

The Miners are being contained by the declining trend line and they have not followed gold higher. This bearish divergence is a signal of an impending intermediate decline for gold. The Miners have already locked in a left translated daily cycle formation.

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Thursday was day 20 for the daily Miner cycle. The Miners need to break below the day 15 low of 22.20 in order to complete their daily cycle decline. And if gold is in the process of forming a failed daily cycle, then the Miners will likely follow. A break below 20.89 will form a failed daily cycle for the Miners.

A rallying dollar will likely send gold into its intermediate cycle decline.

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The dollar printed its lowest point on day 38, following the day 10 peak. That places the dollar deep in its timing band for a daily cycle low. The dollar is also in its timing band for forming an intermediate cycle low. The dollar has already formed a daily swing low and a weekly swing low. A break above the declining trend line will confirm a new daily cycle for the dollar.

The catalyst that could set things in motion is Friday’s jobs report.

Bearish Gold Divergence

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The dollar printed its lowest point last week on Monday, day 38. Which places the dollar in its timing band for a daily cycle low. The dollar formed a swing low and rallied into Friday which makes it look like day 38 hosted the daily cycle low.

Then the dollar closed lower on Monday.

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Even though the dollar closed lower on Monday, it still appears to be rallying out of a daily cycle low. And I think gold’s reaction on Tuesday supports that notion. Lately when the dollar declines, gold has rallied.

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In The Weekend Report we discussed the conflicting messages from gold.

The evidence that gold is in a new intermediate cycle:
* A new high on day 14 shifts the odds towards a right translated daily cycle formation.
* Gold is establishing a new daily uptrend.
* Week 21 places gold in its timing band for an intermediate cycle low.
* A weekly swing low has formed.
* Gold has broke above the declining weekly trend line.
* Gold has closed above the 50 week MA.

Reasons that prevents us from labeling May 9th as the ICL.
1) Gold has yet to deliver a failed daily cycle.
2) The dollar is beginning to rally into a new daily cycle.
3) A weekly swing low has formed on the dollar.
4) The Miners have been diverging bearishly from gold.

So instead of rallying on a day where the dollar closed lower, gold also closed lower — perhaps sensing the dollar has formed a daily cycle low. A close below 1261.80 will form a swing high on gold. Then a close below the 200 day MA will confirm that gold’s daily cycle is in decline. Since the previous 4 daily cycles for gold stretched between 28 days and 48 days, a peak on day 14 could still result in a left translated cycle formation.

Possible Turning Points

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Following the big drop on Wednesday, stocks closed higher on Thursday.

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The daily equity cycle peaked on Tuesday, day 35, then dropped over 1.8% on Wednesday to close below the lower daily cycle band to confirm the daily cycle decline. While stocks printed a lower low, they did close higher on Thursday. At 37 days, stocks are in their timing band for a daily cycle low. The higher close helps to ease the parameters for forming a daily swing low. A break above 2375.74 forms a swing low to signal a new daily cycle. I would like to see a close back above the 50 day MA before we label day 37 as the daily cycle low.

Gold also reversed on Thursday.

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Thursday was day 7 for the daily gold cycle. While gold printed a higher high, gold closed lower on the day, easing the parameters for forming a daily swing high. A break below 1246.20 will form a daily swing high. A close below both the 200 MA and the 50 day MA would signal that the daily cycle decline has begun. Cycles usually print a left translated, failed daily cycle in order to complete its intermediate cycle decline. A peak on day 7 would indicate a left translated cycle formation signaling that gold is continuing with its intermediate cycle decline. Gold would need to break below the previous daily cycle low of 1214.30 to form a failed daily cycle.

Something’s Not Adding Up

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The dollar broke below the previous daily cycle low on Tuesday. This formed a failed daily cycle and continues the dollar’s intermediate cycle decline.

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Tuesday was day 7 for the dollar’s daily cycle. At 7 days, the dollar is not expected to print a daily cycle low for at least another 2 weeks. But since 2 of the previous 3 daily cycles stretched to 36 plus days, the dollar could trend lower for up to 4 plus more weeks.

The normal expectation if the dollar breaks below a previous low would be to see gold soaring, but so far that has not happened …

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Gold printed its lowest point last week on day 41, placing gold deep in its timing band to print a DCL. A swing low has formed and it appears that Tuesday was day 5 for the new daily cycle. The troubling thing is that despite the dollar dropping, gold has struggled to rally out of the day 41 low and has yet to break above the declining trend line to confirm that it is in a new daily cycle.

I think that gravitational pull from gold’s impending intermediate cycle decline is, in part, restraining this rally out of the day 41 low.

gld weekly

Gold printed its lowest point last week, which was week 21. That does place gold in the early part if its timing band for an intermediate cycle low. Since the previous 2 weekly cycles ran 26 and 28 weeks respectively, the weekly gold cycle could easily accommodate one more daily cycle before printing its intermediate cycle low. And since gold has yet to print a failed daily cycle, our expectation is to see this new daily cycle form as a left translated cycle and fail so gold can complete its intermediate cycle decline.

I have to say that the dollar forming a failed daily cycle on day 7 with 2 to 4 weeks before expecting a daily cycle low seems to be at odds with the expectation that the current daily gold cycle forms as a left translated cycle to complete gold’s intermediate cycle decline. My guess is that either the daily cycle count for the dollar is incorrect or gold did print an intermediate low on week 21.

Gold has formed a weekly swing low. If gold breaks above the declining weekly trend line then we will be forced to label week 21 as the ICL. But the other possibility is that the daily cycle count for the dollar may be incorrect.

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I believe that the dollar regaining the 200 MA and closing back above the lower daily cycle band after printing the day 28 low does signal that day 28 hosted the DCL. But we do need to acknowledge that 5 of the previous 7 dollar daily cycles stretched 30 days or more so Tuesday being day 34 would align with that scenario. So if the dollar prints a DCL over the next few days that be the trigger for gold to complete is intermediate cycle decline.

Setting Up a Dead Cat Bounce

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The conditions appear to be in alignment for gold to produce a dead cat bounce.

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Timing Band:
* The previous 12 daily cycles have averaged 27 days.
* At days 36, gold deep in its timing band to print a daily cycle low.

Support:
* Gold printed a reversal candle above support from both the 50 day & the 200 day MA

Intermediate Cycle:
* The intermediate cycle count stands at 20 weeks, which would allow for one more daily to bring gold deep into its intermediate cycle.

Therefore our cyclical expectation is to see the new daily cycle form as a left translated, failed daily cycle to usher in the intermediate cycle decline.

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.

The Status of the Daily Gold Cycle

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Gold formed a swing low and closed above the 200 day MA in a clear and convincing manner. I have received some emails asking if gold has begun a new daily cycle.

gld daily

Even though gold had formed a daily swing low on Tuesday, it has not delivered a recognizable decline into a daily cycle low. Normally a decline into a DCL should be enough to cause the 10 day MA to dip lower, which has not happened here. So that would make Tuesday day 22 for the daily gold cycle.

Of course the swing low allows long positions to be entered with a stop below Monday’s low. But we need to keep in mind that gold is on day 22 for the daily gold cycle that has been averaging 33 days per cycle since emerging from the 12/15 bear market bottom. Which means that over then next week our cyclical expectation is for gold to begin to seek out its daily cycle low. A swing high accompanied by a break of the daily cycle trend line will confirm that gold has begun its daily cycle decline.

Gold Confirms New Daily Cycle

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Gold printed its lowest point last Friday, day 29, following the day 20 peak. While gold formed a swing low on Monday, it did not confirm a new daily cycle until Thursday.

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Gold did break higher on Wednesday, gaining over 2% and breaching the declining trend line. Gold delivered bullish follow through on Thursday by breaking higher to close above both the declining trend line and the 50 day MA to confirm the new daily cycle.

Gold began to close below the lower daily cycle band as it was seeking out its daily cycle low. That ended the daily uptrend and began a daily downtrend. Thursday’s rally fell short of breaking above the upper daily cycle band. If gold is turned lower here and closes back below the lower daily cycle band then gold will have established a daily downtrend. But a close above the upper daily cycle band would end the daily downtrend and signal that gold is re-establishing its daily uptrend.