Cycles News

The price action on Friday completed the formation of a daily swing high and two of the three Primary Short-Term Indicators turned down. However, as discussed in the weekend update, a short-term sell signal was not triggered and higher prices followed on Tuesday. We know that equities are pushing into their trading cycle top, which should also prove to mark the intermediate-term and seasonal cycle top as well, but until a daily swing high is formed AND

confirmed by a downturn of the ALL Three of the Primary Short-Term  Indicators, we cannot say that it has been seen and consequently higher prices will remain possible.

 

That said, I discussed last week the evidence of distribution into this now due intermediate-term cycle top and nothing there has changed. In addition to the distribution into the intermediateterm and in this case the seasonal cycle top, I have included a longer-term chart showing the distribution into the seasonal and 4-year cycle tops. This chart shows the relative breadth readings of the seasonal cycle advances as price progresses up into the higher degree 4-year cycle top. Prior to the extended 4-year cycle advance out of the 2002 4-year cycle low there was typically a relatively short lived divergence between two seasonal cycles, as noted by the red lines. Note that this indicator is now showing a divergence within this seasonal cycle advance, per the short red trend line as well as a longer-term divergence with the high seen in conjunction with the last 4-year cycle top. A relative internal weakening into the 4-year cycle top is a natural phenomenon that is seen in conjunction with ALL 4-year cycle tops, per the divergences noted in red. That said, this is not a timing tool in that the duration of each divergence can obviously vary. This indicator simply shows the progressively weaker breadth with each of the seasonal cycle advances, which is a bigger picture warning, but nothing more. It is the triggering of a primary bearish trend change that ultimately carries the most weight with regard to the 4-year cycle top. My point here is simply to that while price has without question continued to push to new highs, we are also seeing a divergence, which at the very least is reflective of the pending

intermediate-term and seasonal cycle top, per our discussions here last week. As price comes out of the next seasonal cycle low, this indicator can be used to help gauge the health of that advance.

 

For now, we have both short and intermediate-term buy signals and until a short-term sell signal is triggered higher prices will remain possible.

 

The Trading Cycle Oscillator in the upper window remains below its trigger line. The Momentum indicator in the upper window also continues rolling over, but remains above its zero line. The 5 3 3 stochastic in the middle window has turned down from overbought levels. The Trend Indicator remains above its trigger line. The first of our Primary Short-Term Indicators is the New High New Low Differential, plotted with price, which has ticked back up.

 

The Three Primary Short-Term Indicators are the Original and the Slow Cycle Turn Indicators, both plotted below, and the NYSE New High/New Low Differential, plotted with price above. Bottom line, the February 3rd short-term buy signal will remain intact until another daily swing high is formed AND confirmed by another downturn of ALL Three of the Primary Short-Term

Indicators. A daily swing high will be completed on Wednesday if 20,757.64 is not bettered and if 20,663.37 is violated.

 

Both the Intermediate Term Breadth Momentum Oscillator and the  Intermediate Term Volume Momentum Oscillator remain marginally above their trigger lines, but the ongoing divergence of the ITVM also continues to be suggestive of the intermediate-term cycle and seasonal cycle top.

 

The McClellan Oscillator and Summation Indexes are also used to measure the intermediateterm internals. The Ratio Adjusted McClellan Oscillator in the upper window is shorter-term in nature and is therefore used to help identify the shorter-term tops and bottoms, but it is also useful in identifying intermediate-term cycle tops and bottoms. Here too, both the McClellan

Summation Index and the McClellan Volume Summation Index remain slightly positive. The Ratio Adjusted McClellan Oscillator, in the upper window, has turned marginally back above the trigger line I’ve added.

 

Next is the new intermediate-term internal strength indicator, which remains marginally above its trigger line and the ongoing divergence continues to be suggestive of the higher degree tops.

 

The Accumulation/Distribution Index turned below its trigger line last Thursday and remains negative.

 

Our short-term Advancing/Declining volume and Advancing/Declining issues chart is next and both of these indicators have ticked back up. The overall divergence remains intact, which is also suggestive of the pending intermediate-term and seasonal cycle tops.

 

The trading cycle last bottomed on January 27th and the timing band for the next trading cycle low runs between February 22nd and March 8th. The price action on February 9th completed the formation of a daily swing high, which was confirmed by a downturn of the daily CTI, plotted with price, which in turn triggered a short-term sell signal, which has in turn been suggestive of the trading cycle top. The price action on February 16th retriggered another

short-term buy signal, which positioned gold to move higher. But, so far, it continues to look as if we have the trading cycle top in place and while price reversed off of its lows on Tuesday gold, nonetheless, completed the formation of a daily swing high that was confirmed by a downturn of

the daily CTI, which retriggered a short-term sell signal. This now leaves gold positioned once again to move lower, which would serve to further confirm the trading cycle top as well as what should prove to be the intermediate-term

cycle top. Per the weekend update, even if the February 8th high is bettered,

this should ultimately prove to be an ending move into the higher degree

intermediate-term cycle top, which we have also been expecting. The structure of the current trading cycle remains key!

 

Dollar

 

The trading cycle low last bottomed on February 2nd and the timing band for the next trading cycle low runs between February 28th and March 14th. The price action on Tuesday completed the formation of a daily swing low that was confirmed by an upturn of the daily CTI, plotted with price, which retriggered another short-term buy signal. As a result of the previous shortterm

sell signal the risk to the dollar has been of a left-translated trading cycle top and I have explained that in order to negate the consequences associated with this risk, the dollar must complete the formation of another daily swing low and the February 14th high must be bettered. Per the parameters given here in the weekend update, we have a daily swing low and this is now the dollar’s chance to correct this possible left-translation. If this should prove to be a lost

opportunity, then we will probably also prove to have a left-translated intermediate-term cycle top as well.

 

Bonds

End of Week Weekly Indicator                   Summary Daily Indicator Summary

Intermediate-Term                                    Buy Short-Term Buy

Primary Indicators                                     Primary Indicators

 

Formation of a Weekly Swing High Bearish Formation of a Daily Swing Low Bullish

 

Cycle Turn Indicator (CTI)            Bullish   Cycle Turn Indicator (CTI)         Bullish

 

Confirming Indicators                                 Confirming Indicators

 

Trend Indicator (TI)                      Bearish  Trend Indicator (TI)                   Bullish

 

Cycle Momentum Indicator           Bullish   Cycle Momentum Indicator        Bullish

 

Secondary Indicators                                 Secondary Short Term Indicators

 

5 3 3 Stochastic                           Bullish   5 3 3 Stochastic                        Bullish

 

 

The timing band for the current trading cycle low runs between February 16th and March 9th. Tuesday was an inside day, so there has been no change here. The price action on February 16th completed the formation of a daily swing low and the additional advance on February 17th turned the daily CTI, plotted with price, up. In doing so, a short-term buy signal was triggered. With the February 15th daily swing low occurring one day prior to price having moved into the timing band for the trading cycle low, there should have ideally been another push down into the trading cycle low. We will continue to give the February 17th short-term buy signal the benefit of the doubt, but with the February 15th daily swing low having occurred on the early side of the

timing band and with price still operating on the early side of this timing band,

we cannot yet rule out an additional push down. So, if that occurs, understand

that it should be the final probe into the trading cycle low. Bottom line, in the

event we haven’t seen the trading cycle low, it should be close at hand.

 

Crude Oil

The price action on Tuesday completed the formation of a daily swing low that was reconfirmed by another upturn of the daily CTI, which retriggered another short-term buy signal. Crude oil backed off on the close and so far continues to operate within its 2 month range. Thus, there have been no structural changes. Since the January 6th weekly swing high and the context of what should be the anticipated higher degree tops, we have seen 4 short-term advances with the latest following in the wake of the February 8th daily swing low. On February 13th crude oil completed the formation of a daily swing high, which was suggestive that the latest advance had run its course, but we needed to see a downturn of the daily CTI in order to trigger a short-term

sell signal, which never happened and on Tuesday the advance out of the February 8th low resumed. However, the Trend Indicator remains negative and so far the ongoing intermediateterm sell signal remains intact. As a result of the overall cyclical phasing and the intermediateterm sell signal, we have been operating under the assumption that the higher degree intermediate-term and seasonal cycle tops are likely in place. Because of Tuesday’s short-term

buy signal crude oil is now positioned to move higher. And, because of the higher degree cyclical phasing of not just crude oil but the entire commodity complex, any further advance will be a continued probe for these higher degree cycle tops. Any further weakness from here that completes the formation of another daily swing high will be yet another failure, which will be

suggestive of the anticipated higher degree tops. Either way, crude oil and the entire commodity complex should be at or near tops of at least intermediate-term and seasonal cycle degree. As I said all last week, once another short-term sell signal is triggered, the short-term will be realigned with the intermediateterm and the opportunity will again be at hand for lower prices in

association with the decline out of these higher degree tops and into the

anticipated intermediateterm and seasonal cycle lows. For now, the topping

process drags on and we have another shortterm buy signal.

 

I have also included a current monthly chart of natural gas. As with equities and everything else, lows were seen in early 2016. In this case that was a seasonal cycle low as well as the 3-year cycle low. I think I mentioned here last week that natural gas was leading and it continues to do so. In this case the decline out of the seasonal cycle top has become obvious. Crude oil, the

entire commodity complex and equities have been moving to the same cyclical rhythm and as I have been saying, everything is at intermediate-term and seasonal cycle tops with natural gas leading the way.

 

A current monthly chart of the CRB Index is included below. Again, the evidence suggests that the entire commodity complex should, at minimum, be at or near an intermediate-term and seasonal cycle top.