Dollar Update

The dollar formed a bearish reversal on Wednesday. Wednesday was day 33 for the dollar’s daily cycle.  That places the dollar in its timing band for a daily cycle decline. 

The dollar delivered bearish follow through on by forming a swing high on Thursday. A break below the accelerated (dashed) trend line will signal the daily cycle decline. The dollar should go on to break below the rising blue trend line in order to complete its daily cycle decline. The dollar is currently in a strong daily uptrend. The dollar will remain in its daily uptrend unless it closes below the lower daily cycle band.  

Declining Trend Line

Stocks closed lower again on Monday.

Stocks are getting stretched below the 10 day MA and approaching a possible support level at the June DCL. We could see stocks deliver a dead cat bounce, which will help to allow the 10 day MA to catch up to price. With stocks needing another 3 – 4 weeks to be in their timing band for a DCL, any bounce will likely set the declining trend line. Stocks are currently in a daily downtrend. They will remain in their daily downtrend unless they close back above the upper daily cycle band.

Undercut –> Still In Play

Stocks printed a lower low on Tuesday.

Tuesday was day 64 for the daily cycle, placing stocks very deep in their timing band for a DCL. There are bullish divergences developing the oscillators that often proceed the cycle low. A swing low and recovery of the 8886.75 breakdown level will indicate the DCL. A close back above the 10 day MA will provide more assurance that day 64 was the DCL However stocks will not be out of the woods until they can close above the declining trend line.

Undercut –> Recovery

Stocks formed a swing low on Monday.

Stocks undercut the day 54 low on Friday. Monday’s swing low recovered the breakdown level to indicate that day 62 was the DCL. A close back above the 10 day MA will provide more assurance that day 62 was the DCL. But we will really need to see a close above the declining trend line in order to label day 62 as the DCL. 

Undercut In Play

Stocks dropped over 4% on Tuesday to close below both the 50 day MA and the 10 day MA. They went on to print lower low on Thursday.

Stocks closed above the declining trend line on Friday to seemingly confirm the new daily cycle. However, Tuesday’s big sell off saw stocks close below both the 50 day MA and the 10 day MA. Since the rally out go the day 54 low did not manage to turn the 10 day MA higher, along with the bullish divergence in the oscillators, makes it likely that stocks are extending their daily cycle decline. An undercut of the day 54 low followed by a reversal and recovery of the 3886.75 level would signal an undercut DCL.

Conundrum

Stocks dropped over 4% on Tuesday to close below both the 50 day MA and the 10 day MA.

Stocks closed above the declining trend line on Friday to seemingly confirm the new daily cycle. Tuesday’s big selloff presents us with a conundrum. Either the daily cycle topped on day 4 or stocks are still seeking out their DCL, possibly stretching the daily cycle past 58 days.

Over the past 8 years there has been precedence for a stretched daily cycle to get past 58 days to 60 even 61 days. However, there has not been one instance where a daily cycle peaked on day 4. And the fact that the 10 day MA did not turn up makes it likely that Tuesday was day 58 of a very stretched daily cycle. Under this scenario, stocks are likely to undercut the day 54 low before printing their DCL. What is clear is that stocks are still in a daily downtrend. They will remain in their daily downtrend until the can close above the upper daily cycle band.

Happy Days Are Here Again

Stocks formed a swing low on Wednesday.

Stocks printed their lowest point on Tuesday, day 54, placing them very deep in their timing band for a DCL. Stocks formed a swing low on Wednesday. Stocks delivered bullish follow through on Thursday and Friday. Stocks closed above the 10 day MA on Thursday then closed above both the 50 day MA and the declining trend line to confirm day 54 as the DCL so happy days are here again.

Actually, overhead resistance from the 4100 level and the declining 200 day MA are a cause for concern. I have other concerns which I discuss in the Weekend Report.

Waiting On The Dollar

Gold peaked on August 10th, then began its daily cycle decline.

Gold printed its lowest point on day 30, placing it in its timing band for a DCL. While gold has formed a daily swing low, gold still needs to break above the declining trend line to confirm the new daily cycle.

Stocks peaked on August 16th then began its daily cycle decline. Stocks formed a lower low on Tuesday to extend its daily cycle decline. Tuesday was day 54, placing stocks deep in their timing band for a daily cycle low.

Both gold and stocks have been trading inversely with the dollar. The dollar bottomed on August 11th. And since the dollar began to rally, both gold and stocks began their respective daily cycle declines. I suspect that both gold and stocks are not likely to regain their footing until the dollar begins its daily cycle decline.

Another Low Risk Opportunity

Thursday was day 52, pacing stocks deep in their timing band for a DCL. Since August of 2014 close to 80% of the daily cycles bottomed at or before day 52.

Stocks formed a bullish reversal on Thursday, easing the parameters for forming a swing low. Stocks have retraced to the 50 % fib level and breached the daily cycle trend line. So if stocks form a swing low, the odds are good that will mark the DCL. A low risk entry can be taken on a swing low, using Thursday’s low as the stop. 

Stocks Deliver Bearish Follow Through

Stocks closed below the 10 day MA on Friday to signal the daily cycle decline. Stocks went on to deliver more bearish follow through on Monday.

Monday was day 44, placing stocks deep their timing band for a daily cycle low.  Stocks are on day 2 of their bloodbath phase, which could last 5 to 7 days. Stocks will still need to turn the 10 day MA lower before the DCL can form. Stocks should then go on to break below the (blue) daily cycle trend line as they seek out their DCL. However, we could see the 50 day MA provide support for the DCL to form, which happens to be about the 50% Fib level.  Stocks are currently in a daily uptrend.  They will remain in their daly uptrend unless they close back below the lower daily cycle band.