Potential Oil Reversal

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Oil printed a bullish reversal on Thursday.

The daily oil cycle peaked on day 15. It printed its lowest point on Thursday, day 25. That places oil in the early part of its timing band for a daily cycle low. A swing low and a close above the declining 10 day MA will signal a new daily cycle.

oil daily 2

Oil’s daily cycle has averaged 38 days since the February, 2016 low. So it is early to be looking for a DCL. But there are a few signals on the daily and weekly charts that point to a possible 25 day, DCL. First off, the aforementioned bullish reversal has eased the parameters for forming a swing low. A break above 49.22 forms a daily swing low to signal a new daily cycle. Also the oscillators are beginning to develop bullish divergences, which often accompany cycle lows.

oil weekly

The 50 week MA has acted as support since oil emerged from from is 3 year cycle low. So there is a possibility that oil is back testing the 50 week MA. A close below the 50 week MA indicates that oil is continuing its yearly cycle decline. But if Thursday’s bullish reversal marked the daily cycle low, that would allow oil to close above the 50 week MA for the week, which would allow us to construct a weekly cycle trend line. Oil is in a weekly uptrend. It will continue in its weekly uptrend until it closes below the lower weekly cycle band.

Look Test

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Stocks broke above the declining daily cycle trend line on Monday and then delivered more bullish follow through on Tuesday.

spx daily

Tuesday was day 20 for the daily equity cycle. The new high on Tuesday shifts the odds towards a right translated daily cycle formation. Stocks are also beginning to close back again above the upper daily cycle band to reestablish its daily uptrend. All of this suggests that stocks are not just in a new daily cycle, but a new intermediate cycle as well.

However, many will be skeptical of such a labeling due to the fact that stocks did not form a failed daily cycle during the recent sell-off.

It is possible for an intermediate low to form absent of a failed daily cycle. While this is rare, one did occur back in 2013.

spx daily 2013

Back in 2013 stocks had a daily cycle decline that ran 23 days before printing its daily cycle low. Usually a daily cycle decline lasts 7 – 15 days.

spx weekly 2013

And the weekly chart back in 2013 passed the ‘look test’ for an intermediate decline. Stocks clearly broke below the weekly trend line and formed a weekly swing low to indicate a new intermediate cycle.

spx weeekly

And the current weekly chart also passes the look test. Stocks clearly broke below the weekly trend line as it declined into its week 21 low. Now stocks have delivered a clear and convincing break above the declining weekly trend line to signal that this is week 4 of the new intermediate cycle. And if I am correct that this is a new intermediate cycle then that should push the yearly cycle low out to late summer.

Steel Bottom

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Steel is beginning to look interesting so I thought that we should take a look.

5 slx daily swing

Steel formed a daily swing low on Thursday.

6 slx daily

Steel printed its lowest point on Wednesday following the day 5 peak. Wednesday was day 28, placing steel in its timing band to print a daily cycle low. The swing low formed above the support of the 200 day MA. So there are good odds that the day 28 hosted the daily cycle low. A break above the declining accelerated (red dashed) trend line will provide our first confirmation of a new daily cycle. Then a break above the declining (blue) trend line will provide final confirmation that day 28 hosted the DCL.

In my Special Report: Steel Bottom I take a closer look at steel. In my report I break down steel’s daily, weekly and yearly cycles and discuss where steel is in these various cycles. I am offering the Special Report: Steel Bottom along with a 6 week trial subscription to the Weekend Report for $15 which will give you full access to the premium site. It includes:

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Its About Time …

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Stocks formed a daily swing low on Monday.

spx 1

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.

spx

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 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.

Oil Breaks Higher

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Last Tuesday we looked at oil.

oil 4:04

Last week oil delivered bullish follow through to the weekly swing low. We discussed that oil needed to break above the declining weekly trend line to confirm a new intermediate cycle.

Oil broke above the weekly trend line on Monday.

oil 4:10

Oil delivered a clear and convincing break above the declining weekly trend line on Monday. Barring a complete reversal, this confirms that this is week 3 for the new intermediate oil cycle.

Oil had established a weekly uptrend prior declining into the week 18 low. Oil remained above the lower weekly cycle band as it printed the week 18 intermediate cycle low which indicates that oil remained in its weekly uptrend. Oil broke back above the upper weekly cycle band on Monday, continuing its weekly uptrend. Oil will remain in its weekly uptrend unless it closes back below the lower weekly cycle band.

Looking for Evidence

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Stocks have formed a weekly swing low this week.

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Last week stocks printed their lowest point following the week 17 peak. At 21 weeks, that places stocks in their timing band for an intermediate cycle low. So while a swing low can signal a new intermediate cycle, I do not believe that the evidence supports that week 21 hosted an ICL.

spx

Stocks broke above the declining trend line on Wednesday to signal that day 58 was a daily cycle low. One of the reasons that I doubt that day 58 hosted an ICL is that the rally so far has been timid. Normally out of an ICL stocks can rally anywhere for 5 – 8% over the first week or so, which has not happened here. Stocks also have formed a bearish TSI zero line crossover. That is a signal that we typically see as stocks start to roll over into a daily cycle decline.

spx weekly

So I suspect that the weekly swing low that has formed is only setting the declining trend line. Rejection by the declining trend line should send stocks into their final decline into their intermediate cycle low. Stocks would need to break below the week 21 ow of 2322.25 in order to complete their intermediate cycle decline.

Oil Bounce or Oil Bull?

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Oil printed its lowest point on week 18, following the week 7 peak. While 18 weeks is a bit early to expect to see an intermediate cycle low, the weekly swing low and bullish follow through indicate otherwise …

oil weekly

Oil consolidated in a narrow trading range over 11 weeks before declining into the week 18 low. Normally a break out of a narrow range yields a trending move. But the move lower was halted by the 50 week MA, which has also stopped the previous 2 intermediate cycle declines. This has me suspicious that the move lower was a fake out move. And now we see that the the weekly TSI has formed a bullish crossover after emerging from a level that has marked the previous yearly cycle low.

oil weekly 2

If oil is still declining into its intermediate cycle low then it should be turned back at the declining weekly trend line. However a bullish break above the declining weekly trend line will signal that week 18 did host an early intermediate cycle low. We also need to recognize that oil established a weekly uptrend by closing above the upper weekly cycle band before it began its intermediate cycle decline. And oil remains in its weekly uptrend since it not close below the lower weekly cycle band as it declined into the week 18 low.

Setting Course

Last Monday, March 27th, stocks printed their lowest point following the day 40 peak. They have since formed a daily swing low and regained the 10 day MA to signal that stocks have begun a new daily cycle.

Monday was day 5 for the new daily cycle. And because this is the third daily cycle for the current intermediate cycle we need to be suspicious off a possible left translated cycle formation that will lead to a failed daily cycle and an intermediate cycle decline.

spx tline

We are still waiting on a break of the declining (blue) trend line to provide final confirmation that day 58 hosted the DCL. If stocks can form a swing low forms off of Monday’s candle that will allow us to construct the (dashed) daily cycle trend line. At this early stage of the daily cycle stocks should not break below the dashed daily cycle trend line. A break below the dashed trend line will be the warning signal to wait on the sidelines

The 4/01/17 Weekend Report Preview

The Dollar
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The dollar printed its lowest point on Monday, following the peak on day 19. Wednesday’s close above the declining 10 day MA signaled a new daily cycle.

While the previous daily cycle peaked on day 19 for a right translated cycle formation, it printed a lower high. And Monday’s break below the previous DCL establishes a pattern of lower lows. That signals a continuation of the intermediate cycle decline.

Stocks
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Stocks formed a swing low on Tuesday. A break above the declining trend line will confirm a new daily cycle.

Stocks are beginning their 3rd daily cycle for the current intermediate cycle. And stocks are in their timing band to seek out an intermediate cycle low. A failed daily cycle confirms the intermediate cycle decline. What we need to watch is the translation of the new daily cycle. A left translated cycle formation would signal that stocks are declining into its intermediate cycle low.

Stocks remained above the lower daily cycle band is it declined into the day 58 low. Therefore stocks remain in a daily uptrend and will continue in their daily uptrend until it closes below the lower daily cycle band.

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