LunaticTrader

Investing with the Moon

Key reversal levels for week of November 24, 2014

Posted by Danny on November 23, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available as a premium info on Scutify.com for just a few $. You can follow me there to pick it up as a 13 page PDF with the latest levels and buy or sell signals. Currently covers the 65 Dow Composite stocks, Nasdaq 100 stocks and more than 100 popular ETF. Instructions for use are included. Give it a try.

Happy trading, Danny

 

Posted in Market Commentary | Tagged: | Leave a Comment »

Who is not waiting for a pullback?

Posted by Danny on November 17, 2014

The ebola whipsaw in October has left investors scratching their heads. Many may be waiting for some pullback to get back into the stocks they sold in panic just one month ago. And they were probably hoping that the end of QE would give them a chance to get back in at much lower prices. But no, stocks just continue to grind up without any pullback worth talking about. What’s going on?
Let’s have a look at the Nasdaq (click image to enlarge):

Nasdaq

The Nasdaq is sitting just below overhead resistance near 4700. Could it actually break out to the upside? That appears unlikely given the massive surge we have seen in the recent month. But you never know. All we may get is a few down days with impatient buyers stepping in immediately. I never rule out any scenario, and it is possible that the October sell-off has marked the end of a 10 month sideways correction. If so, then we will see a breakout to the upside in the next month or two. The Nasdaq could climb to ~5000, then briefly pull back to 4700 in January, before going on in 2015.
It will take a drop below the October lows to push us into a bear market. If that doesn’t happen investors will soon start focusing on two round numbers: 5000 for the Nasdaq and 20000 for the Dow Jones.
People may wonder: where will the money come from to push stocks higher. I think the answer is: out of bonds.

On the downside, major support remains near 4500, the July highs. That’s where buyers are likely to show up if we get the eagerly awaited pullback.

Good luck,
Danny

Posted in Market Commentary | 3 Comments »

Key reversal levels for week of November 17, 2014

Posted by Danny on November 16, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available as a premium info on Scutify.com for just a few $. You can follow me there to pick it up as a 13 page PDF with the latest levels and buy or sell signals. Currently covers the 65 Dow Composite stocks, Nasdaq 100 stocks and more than 100 popular ETF. Instructions for use are included. Give it a try.

Happy trading, Danny

 

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Using the Moon for trading. Really?

Posted by Danny on November 10, 2014

A lot of traders scoff at the idea of lunar cycles in the stock market. But I like that, because if too many people start using a given edge in the market it usually leads to its disappearance. When something gets used up to full “capacity” then it fades away. So, as long as enough traders discard lunar cycles as “astrology” without taking a closer look, so long it probably helps to keep our little lunar edge alive. So far this year, the Nasdaq has gained 533 points in our lunar green periods and it has lost 5 points in the lunar red periods. Not bad. More on this below, let’s first take a look at the S&P 500 (click image to enlarge):

S&P500

The S&P has continued to grind up and is now bumping into overhead resistance near 2030. We are starting a new lunar green period, which normally favors further gains. But in this case it doesn’t really look like a favorable setup for going long, because all my indicators are into oversold territory. The Earl has already turned down, and the MoM resides in overoptimistic +8 spheres. The slower Earl2 is still climbing nicely, which keeps the door open for new highs.
Overall, it is a situation where I think the next few weeks are going to be sideways at best, with good odds that we will see a retest of the 2000 level and possibly even 1950. There is no reason to become overly bearish at this point, but the market probably needs to catch some breath.

***

The day to day movements of stock markets are commonly attributed to changes of mood in investors. But that begs the question: where do these mood changes come from? Is it merely a result of getting good or bad “news” about the economy, or is there more to it?
Quite a bit of research has been done in this field. Here are some topics that may interest traders:

1) Sunshine. Do you feel more upbeat on a bright sunny day? So do many other people/traders. There is a correlation between sunshine and stock market returns: Good Day Sunshine:Stock Returns and the Weather
2) Seasons. Do you suffer from seasonal affective disorder (SAD)? In some countries 10% or more of the population does. There is a correlation between the seasonal variation of the length of the day and stock returns, also known as the seasonal tendencies: Winter Blues and Time Variation in the Price of Risk
3) Geomagnetic storms. Geomagnetic disturbances seem to affect a portion of the population. Stock market returns are lower in the six days after a geomagnetic storm. See this Atlanta Fed working paper: Playing the Field: Geomagnetic Storms and the Stock Market

In all those cases a hormone called melatonin is involved. If we have lowered melatonin levels we feel depressed, and then we probably trade accordingly. This brings me to:
4) Lunar phases. Swiss researchers found new evidence suggesting that a portion of the population doesn’t sleep so well in the days around full moons. It also knocked down their melatonin levels. Bad Sleep: Blame the Moon That would be a good explanation for the weaker stock market returns in our lunar red periods, which end 3.5 days after full moon.
5) Days of the week. Stock returns are historically weaker on Mondays. Why? Are melatonin levels also down because some people had some shorter nights over the weekend? Or because some do not really look forward to another week of labor. The Day of the Week Effect

Our mood is clearly a complex animal, with many artificial and natural factors coming together to influence our emotional state. Some natural factors are affecting the entire world population at the same time, and appear to be partially responsible for the day to day moves in financial markets.

Good luck,
Danny

Posted in Financial Astrology, Market Commentary | Tagged: , , , | 5 Comments »

Key reversal levels for week of November 10, 2014

Posted by Danny on November 9, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available every day as a Premium scuttle on scutify.com for just a few $. You can follow me there to pick them up. It comes as a 13 page PDF with instructions for use. Currently covers the 65 Dow Composite stocks, Nasdaq 100 stocks and more than 100 popular ETF. Give it a try.

Good luck, Danny

 

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Dow 32000 remains on track

Posted by Danny on November 3, 2014

Markets continued to surge last week, racing right back to new record highs for some indexes. With the month of October behind us I am updating my Dow 32000 scenario, which just refuses to go away, and we will also look at potential causes for a final mania. But first we take our weekly look at the Nasdaq (click on chart to enlarge):

Nasdaq

The current market situation is quite similar to last February, when the market recovered equally quickly from a sell-off. The current rate of change cannot be sustained for very long, and overhead resistance is now looming near 4650 and 4700. Technically my Earl indicator is just turning down and the MoM is reaching very overbought +8 territory. But just like in February the slower Earl2 still has a lot of room to rise. The market may hold up near current levels for a while, or it may start another leg down like it did in March-April, there is no way to tell at this point.
I don’t think we will get an exact repeat of March-April. I would rather look for a quick drop to ~4500 and then another rally attempt.
The LT wave chart for November looks like this (click chart to enlarge):

LT wave

The LT wave was not perfect in October (it never is), but it signaled some downturns and correctly showed the strength in the second half of the month. For November it shows renewed weakness in the first two weeks, followed by a stronger period with a peak value around the 20th-22nd.

***

I have also updated the Dow comparison with 1920s for October (click chart to enlarge):

Dow vs 1920s

Despite ebola and geopolitical tensions around the world the Dow just keeps mimicking what it did in the roaring 1920s. Amazing? Well, the roaring 20s came on the heals of a deflationary shock that saw the stock markets drop some 50% in two years. The 1920s had historically weak GDP growth per capita. And the 20s had an overactive Fed which kept interest rates very low for a long time. And of course, investors remained very skeptical about the rising equity markets. In other words, pretty much the same as what are having since 2009.
We have now come to the point where the stock market took off again. For the scenario to stay on track the Dow will have to climb to ~20000 by next spring. If the Fed sticks to the 1920s playbook then it will start raising rates in summer 2015 and that will cause the stocks to make a blow-off top over the next 12 to 18 months. Of course, that would be in a perfect universe…
But why would stocks make such a moonshot when interest rates start to go up? Well, that’s why. Who wants to hold long term bonds when interest rates are set to go up? Long term bond prices are artificially inflated by the Fed’s QE programs, which were designed to push long term rates down. What happens when that manipulation stops? Right, the price of bonds will probably go back to a more “normal” level. What could that level be for long term treasuries? Here is a weekly chart (click to enlarge):

Bonds weekly

Before and after QE1 (Nov 2008 – Jun 2010) the long term bonds (ZB) hovered between 115 and 120 (pink oval in the chart), which means a long term rate of about 4.5%. Subsequent QE programs have pushed ZB up above 140, which means a current  very low long term rate of 3%. I think ZB could easily fall back to the 115-120 area without the support of further QE programs. Long term bond holders then face a 20% loss. Once this starts happening investors will realize that it is better to be in cash or stocks until bond yields are more attractive again. We already got a taste of it three times since 2009: every time bonds have declined stocks have been doing very well:
*Jan2009 – Apr2010: bonds down 15% -> nasdaq up 56%
*Sep2010 – Apr2011: bonds down 12% -> nasdaq up 34%
*Jul2012 – Dec2013: bonds down 18% -> nasdaq up 42%

My long term chart now suggests that bonds have peaked out once again. There is a broad bearish divergence in my Earl indicator and the Earl2 has turned down recently. If bonds ZB drop back to 115-120 in 2015-16, then where will stocks be? Higher? Much higher? Dow 32000, after all?
The big risk with QE was probably never that stocks would crash when the program ends. The risk has always been that stocks could surge when QE ends, thus forcing the Fed to raise rates to reign in a runaway equity market. But raising rates could drive even more money out of bonds and into rising stocks, further destabilizing the situation and feeding into a speculative stock mania. The bond market is nearly twice as big as the stock market, so when money starts fleeing bonds it can have an outsized effect on stocks. That’s what we got in the 1920s and that’s what we now risk getting again. QE is a stingray, dear readers, all the poison is in the tail end.

Good luck,
Danny

 

Posted in Financial Astrology, Market Commentary | Tagged: , , , | 3 Comments »

Key reversal levels for week of November 3, 2014

Posted by Danny on November 2, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available every day as Premium scuttles on scutify.com for just a few $. You can follow me there to pick them up. It comes as a 7 page PDF with instructions for use. There is one for the Nasdaq 100 stocks with a second one covering 90 popular ETF. Give it a try.

Good luck, Danny

 

Posted in Market Commentary | Tagged: | Leave a Comment »

Is the correction over ?

Posted by Danny on October 27, 2014

Last week I wrote: “We remain in a lunar green period so I expect this to be a bouncing back week, with upside targets of 4350 and even 4450.” But even that was too pessimistic as the Nasdaq has already climbed to 4484. Does that mean the correction is over? Not necessarily, as I also wrote: ” … What happens next will tell us whether we are in an ongoing correction/bear market or in a continuing bull market.
We will find out soon what happens next. This market is not out of the woods just yet, as can be seen on the following S&P 500 charts (click them for larger images). First a longer term chart:

S&P500

Since the 2011 lows the S&P has moved within a broad channel. The recent decline has not changed that. A pattern of lower lows and lower highs may have started (green channel). Within the next few months we will see whether the long term up trend prevails or not.

A more close-up picture:

S&P 500

The market has bounced back very strongly from major support just above 1800. Overhead support is now around 1980. Technically my slower Earl2 is turning up, which bodes well longer term. But the faster Earl is in overbought territory already, signalling we need a bit of a pullback first. We are starting a lunar red period, so I think the S&P will take a step back before it can take another step forward. A quick retest of the 1800 support area remains possible, but the more likely scenario is a milder “give-back” before marching on again.
A drop below 1800 would probably result into a mini-crash.

Good luck,
Danny

 

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Key reversal levels for week of October 27, 2014

Posted by Danny on October 26, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Good luck, Danny

 

Posted in Market Commentary | Tagged: | Leave a Comment »

Why a trader should experiment and how

Posted by Danny on October 20, 2014

Remember the now defunct TickerSpy.com? I used it a few years ago to conduct some live experiments with random stock portfolios here on this blog. You can still read the results and conclusions here: Random stocks experiment. Just like science improves through experiment, a trader can improve from doing experiments as well. More on how and where a trader can experiment will be discussed further on in this piece, let’s first take our customary look at the market.
Here is the current chart of the Nasdaq (click for larger image):

Nasdaq

The Nasdaq has dropped below some important support levels in recent weeks. It has found a (temporary?) bottom on Wednesday and now appears to be bouncing back. I have been talking caution and standing aside for weeks, mainly because my Earl2 indicator (orange line) keeps dropping. Earl2 still doesn’t show any signs of turning up, but at least it is now in deep bottom territory and the faster Earl and MoM indicators are finally turning up from major lows. So, we can start to become a bit more optimistic at this point, but another quick drop to ~4000 cannot be ruled out yet.

We remain in a lunar green period so I expect this to be a bouncing back week, with upside targets of 4350 and even 4450. What happens next will tell us whether we are in an ongoing correction/bear market or in a continuing bull market. But that will be a topic for the next weeks. This is still not a safe market (as if it ever is), but it is a bit safer to enter than the last weeks.

Another topic that will start coming into play is the seasonal tendencies. Nearly everybody knows that stocks tend to perform very well in the autumn through winter period, and those seasonals have not failed to show up for 5 years in a row now. Buying with your eyes closed in Sep-Oct has been profits in the bank since 2009. Will the winter 2014-15 make it 6 in a row? If stocks start going up after the recent correction then many investors will take that as a signal to buy going into a strong period for the next 4 to 5 months. But could investing continue to be that simple? Or are the seasonal tendencies overdue for a hiccup? More on that next week.

***

As I said in my opening remarks, experimenting can help an investor improve. There are many ideas we can try, we can experiment with different timeframes or with stocks we normally never buy, or we can just test to see what happens if we follow the recommendations of the pundits on CNBC. There is always something left to learn.
How to do it? Well, experimenting within the comfort of our own PC is perfectly possible. But the disadvantage of trading experiments that nobody else sees is that we are doing it in a completely unrealistic “nothing to lose” setup. In a public experiment we put at least a bit of our reputation on the line, so it is more like trading for real money. TickerSPY closed down last year, but Scutify is now opening up very similar portfolio manager functionality in their new Hedge Fund Manager. They are starting today and I will participate with a few public portfolio experiments. It is open to everybody so feel welcome to join in with your own experiments.

Good luck,
Danny

Posted in Financial Astrology, Market Commentary | Tagged: , , | Leave a Comment »

 
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