A Weekly Look -- Week Ending 2/17

[aoyoubuquusu]

One more daily cycle lasting 18 – 24 days would take the intermediate cycle right into the heart of its timing band where 80% of the weekly cycles find a low.
The last daily cycle of an intermediate cycle is left translated and fails (breaks below the previous cycle low).

This week the dollar peaked on day 5 and formed a daily swing high on day 6.
A break of the dollar’s daily cycle trend line is needed to confirm that the dollar has begun a 10 – 18 day journey to its daily cycle low.

As the dollar dives into its daily cycle low, which should also be an intermediate cycle low, which should power both stocks and commodities in bullish cycles.

[aqaqayi]

Hey, LM. Quite a lengthy report over on your website. I hope you didn't need take time off work to draft that one. Thanks again for the analysis.

I too concur that oil will be the X-factor in the recovery in the economy and equities. The recovery is simply too weak to continue unabated in the face of expensive oil. I also agree that $115-120 is the target and I strongly believe that it will get there by the Summer (perhaps Memorial Day). This will put the brakes on any further recovery without the aid of further articifical resuscitation in the form of QE3... which brings me to my next question:

How do you foresee QE3 influencing the cycles that you follow? Do the cycles still apply but just with shallower peaks and troughs (straighter paths)? Or, are all bets off with QE3?

For what it's worth, note that WTI is the laggard in the oil space. It's 15 bucks behind other oil delivery depots in the USA. It's not a stretch to assume convergence is likely in the future which would put WTI at the $115 price objective with really nothing more than simple arbitrage which requires no additional growth in the economy or artificial stimulus from the Fed.

[apifxonm85]

We saw shades of that with QE's 1 & 2.

With the excess liquidity, cycles got a little stretched. Once QE was over, cycles reverted to their more traditional timing bands.

It looks to me we may have already witnessed this again.

The 1/30 low was shallow and difficult to read in "real time".

In retrospect, I believe it was a shallow daily cycle low.

The good news that it printed within the normal timing band.

The next daily cycle low for stocks should also coincide with an intermediate cycle correction. There should be no mistaking this impending sell off.

[aqiqieoirz]

Thanks for the reply. Two questions, well more accurately one question and one request.

If the cycles are stretched during active QE 'manipulation', for lack of a better word, does this elongation of the daily and intermediate cycle affect your data going forward? Allow me to phrase it a different way: Do you make adjustments to the the respective daily and intermediate cycle mean lengths now that we've experienced 3 years of QE in some form or another (QE1, QE2, and Op Twist)? For example, if your typical daily cycle is 21 days but under the influence of QE it runs let's just say 30 days and that elongation persists at what point does your mean daily cycle length move outside the historical range of 18-24 and do you correct for this by putting a larger weight on data pre-2009?

[aqueiluk]

Observations
5 Intermediate cycles completed since the 2009 bottom with 17 Daily cycles embedded in the IC cycles.

All concluding daily cycles of Intermediate cycles failed – broke below the previous daily cycle low.

Not all concluding daily cycles were left translated (which was a bit of a surprise)

Only 1 daily cycle out of 17 was stretched – 54 days and 3 were short – below 30 days.
13 of the cycles (76%) maintained normal timing bands.
Only one daily cycle out of the 17 had a shallow daily cycle low.

(Sorry that I am not posting all of the Daily cycles, it is a lot of work)

An unintended consequence of this was throwing on the chart the dates for QE's 1 & 2 and Operation Twist.

That also yielded some interesting observations:

There have been 5 complete intermediate cycles and we are currently 19 weeks in the 6th intermediate cycle.

QE was expanded in early March 2009 during intermediate cycle (IC) 1.

The first three IC’s leading from the 2009 bottom were fueled by QE.
The first two intermediate cycle declines were characterized by 4 week sell off into the IC low.
QE ended during IC 3 and that IC decline was a really nasty affair lasting 10 weeks.
Hmmmm…