Ready for a dip

The markets have stagnated near major resistance levels, right in line with our comments last week.
We are now entering a new lunar Red Period again, so let’s see if we get any downturn.

Here is the current chart for the S&P 500 Index (click for larger image):

This index has now reached back up to last year’s high. Our lunar cycles suggest a likely correction within the next two weeks. Important support should come just above 1300 and then at 1260. I would do some buying if these levels are reached.
Many investors have missed out on the rally that started last year, and are waiting for a chance to get in. So, I think we will see another swing upwards before the market enters a bit longer pause.

Good luck, Danny

Sell the Greek bailout

Markets have continued upwards, and some major stock indices are coming close to psychological barriers (13000 for the Dow Jones, and 3000 for the Nasdaq Composite).
With another week of lunar Green period coming up I am looking for a short term top, and thus an opportunity to take some profits. The market has had a very nice run since mid-December, but markets never continue to go up in a straight line for very long.

Let’s have a look at the current chart for the Nasdaq index (click for larger image):

Like most world markets, the Nasdaq has been in a steep up trend since mid-December. It could go on to touch 3000 this week, but I wouldn’t bet on it. My Earl momentum indicator is showing a massive bearish divergence, so a correction can start any moment.
I can only repeat last week’s advice: take some profits on “good news days”.

Some random thoughts to finish this week:
The media will try to sell the new bailout of Greece as good news, but is it?
1) This Euro 130 billion bailout amounts to Euro 12000 (~ $16000) for every person in the country. What is it going to be used for? Is it going to be “spent”? Or is it going to be put into some productive investments? If so, which ones?
2) How is it going to be payed back? By whom?
3) And what if Portugal or Spain demand similar “help”?

Be well,
Danny

Short term peak

Markets stagnated last week, but still ended the lunar Red Period with handsome gains.
This indicates the path of least resistance is still up.
We are now entering a lunar Green Period again, favoring further gains, but how much can we expect after the recent rally?

Let’s have a look at the current chart for S&P 500 Index (click for larger image):

The S&P is coming close to last year’s highs @1370, so that may be reached in the next couple of weeks. But my Earl indicator is signalling weakness ahead, so I think we are going to make a short term top here.
We are then likely to fall back to the support trend line, currently around 1310, before making a new push higher.
So, I would use the Green Period to take some profits on ‘good news days’.

Be well,
Danny

Too far too fast?

The market doesn’t seem to stop for anything and just goes higher, with some indices even reaching 11 year highs.
We have been warning for this break to the upside since mid December, and now we have to wonder how far it will carry.
So far our lunar Red Period has not produced any downside action, but I don’t think some pause can be far away. Of course a lot of investors may have been taken by surprise by this move, and looking for a chance to get in on the upside action. Holding bonds yielding two percent suddenly feels rather stupid when you see the market going up 10-20% in a matter of weeks.

Let’s have a look at the current Nasdaq chart (click for larger image):

This market has broken above 2900, exceeding last year’s high. That’s a positive development, but it can still turn into a failed breakout.
If some pause starts here, then I would expect the market to move sideways between 2900 and 2800, before continuing upwards.

Stay tuned.
Danny