LunaticTrader

Investing with the Moon

LT wave for May

Posted by Danny on May 2, 2016

Stock markets have finally entered something more than a 2 day pullback. Last week’s advice to step aside works out fine so far. Now the next challenge is to watch for signs of a bottom. Let’s have a look at the Nasdaq chart:

^COMP (Daily)  8_8_2014 - 4_29_2016

All my indicators keep pointing down, with bearish divergences still in place. So, I wouldn’t rush back in just yet. This pullback or correction may continue for several weeks or months, but there will also be strong up days. A correction target in the 4600-4700 area would be fairly normal given the 800 point rally from the February lows. A deeper drop would indicate that a retest of the February lows is likely. It is too early to tell which scenario will unfold.

As for a possible path forward the LT wave for May could offer some clues. Here it is:

ltwaveMay2016

The LT wave for April did a fairly good job. Expected choppy neutral trading in the first weeks panned out perfectly. The high of the month came on the 20th, exactly on the day with the highest LT wave value,  and was followed by the predicted weakness in the final week.

For May the LT wave suggests continued weakness in the first week, followed by a strong period from the 7th until around the 18th. The final 10 days of the month show significant weakness again. The lowest LT wave value comes on the 3rd and the highest value is on the 17th.

As always, please remember that this LT wave is experimental, so don’t expect it to work perfectly every month.

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

Outlook for Week of May 2

Posted by Danny on May 1, 2016

Outlook for world markets with our comments for next week.

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

Click the “Expand” button (bottom right) to watch in full screen mode.

* The latest weekly reversal levels for over 2500 stocks and ETF can be found every weekend at http://www.reversallevels.com/.

* For shorter term trading and more optimal entries there are daily reversal levels, which are available as a monthly subscription. It comes as a daily html file covering over 2500 stocks from Dow Composite, Nasdaq 100, S&P 500, S&P 400 mid caps, S&P 600 small caps, and more than 100 popular ETF. Instructions for use are included. Give it a try.

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A time to stand aside

Posted by Danny on April 25, 2016

Stock markets keep marching higher as if pullbacks and corrections are a thing of the past. Can it keep going like this? Yes, it happened in 1995. Of course, that doesn’t mean it *will* keep going, but it is a viable outlier scenario. A reader was so good to pull up this old tweet I posted on February 18, with a buy signal for S&P 500 just a week after the bottom:

The market never looked back and S&P is now almost 10% higher and within a few % of new all time highs. Will it pull back here? Or just keep climbing like in 1994-95? I don’t know. Let’s have a look at the S&P chart:

^SP500 (Daily)  7_22_2014 - 4_22_2016

At the current rate of change the S&P is set to make new highs within the two weeks. A failure to do so would be a clear loss of momentum and show a break of the steep up trend that has been in place since the February lows. For many traders that would be a sign to take profits and that would give us a long awaited pullback. Within two weeks we will find out.
Technically there is a bearish divergence in the Earl indicator (blue line), which is just turning back down. The Earl2 (orange line) continues to head down and is nowhere near bottom territory. The MoM is still headed higher. A lunar green period will start on Tuesday, but this is not a favorable setup to enter new longs, so I will just stand aside and watch.
This is a point where the risk for a significant pullback is high while the upside potential is limited unless the market breaks out to new highs. Hence, we can stand aside and let the market prove us that it can go to new highs. Just letting other traders do the heavy lifting. If we get a pullback then a retest of the 2000 level is my base scenario.

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Outlook for Week of April 25

Posted by Danny on April 24, 2016

Outlook for world markets with our comments for next week.

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

Click the “Expand” button (bottom right) to watch in full screen mode.

* The latest weekly reversal levels for over 2500 stocks and ETF can be found every weekend at http://www.reversallevels.com/.

* For shorter term trading and more optimal entries there are daily reversal levels, which are available as a monthly subscription. It comes as a daily html file covering over 2500 stocks from Dow Composite, Nasdaq 100, S&P 500, S&P 400 mid caps, S&P 600 small caps, and more than 100 popular ETF. Instructions for use are included. Give it a try.

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Overhead resistance

Posted by Danny on April 18, 2016

US markets have climbed to new highs for the year, in line with our analysis of two weeks ago. The Nasdaq and S&P 500 are now bumping into the overhead resistance area formed by last year’s highs. Of course, most traders see that and most traders expect some kind of pullback soon. Will we get it? Let’s have a look at the Nasdaq chart:

^COMP (Daily)  8_6_2014 - 4_15_2016.png

We may see a test of the 5000 level in the coming days. But bearish divergences have been shaping up in both the Earl and MoM indicators, while the slower Earl2 (orange line) is clearly headed down from a major peak. So, the chances for a sudden pullback are high and this is not an attractive setup to enter the market for those who are still looking to get in on the long side. In the best case we may get a sideways chop until the indicators are back in the bottom zone. Equally likely is a drop to 4700 or so.

My reversal levels are still positive for most stocks and stock indexes, but that doesn’t mean everything will keep going up in a straight line. In fact it could be a good strategy to get out at this point and buy back after a pullback, or on a breakout above the 2015 highs. In the latter case you would be buying the stocks more expensive than you sold them, but then you would know the market is continuing upwards and the overhead resistance is out of the way.

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Outlook for Week of April 18

Posted by Danny on April 17, 2016

Outlook for world markets with our comments for next week.

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

Click the “Expand” button (bottom right) to watch in full screen mode.

* The latest weekly reversal levels for over 2500 stocks and ETF can be found every weekend at http://www.reversallevels.com/.

* For shorter term trading and more optimal entries there are daily reversal levels, which are available as a monthly subscription. It comes as a daily html file covering over 2500 stocks from Dow Composite, Nasdaq 100, S&P 500, S&P 400 mid caps, S&P 600 small caps, and more than 100 popular ETF. Instructions for use are included. Give it a try.

Posted in Market Commentary | Tagged: , , | 4 Comments »

Outlook for Week of April 11

Posted by Danny on April 10, 2016

Outlook for world markets with our comments for next week.

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

Click the “Expand” button (bottom right) to watch in full screen mode.

* The latest weekly reversal levels for over 2500 stocks and ETF can be found every weekend at http://www.reversallevels.com/.

* For shorter term trading and more optimal entries there are daily reversal levels, which are available as a monthly subscription. It comes as a daily html file covering over 2500 stocks from Dow Composite, Nasdaq 100, S&P 500, S&P 400 mid caps, S&P 600 small caps, and more than 100 popular ETF. Instructions for use are included. Give it a try.

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

Remembering 1994

Posted by Danny on April 4, 2016

Stocks made another push higher last week and the S&P 500 has now recovered all its losses since the start of the year. Can it go higher? Why not? Can it go much higher? More on that further on in this post, let’s first have a look at the chart:

^SP500 (Daily)  6_25_2014 - 4_1_2016

The S&P is back to levels last seen in late December. And it is also back to the obvious overhead resistance zone 2050-2130, which has kept the market in check throughout 2015. Will it stop the market again? My Earl2 indicator (orange line) has finally turned down, suggesting a pullback or correction is in the pipeline indeed. But the faster Earl (blue line) has just made a shallow bottom and is turning up. This suggests the market wants to go higher first. When there are mixed signals it is usually the faster Earl that pans out first. We are in a lunar green period, so a test of the November high is possible this week. I will keep an eye on my daily reversal levels for clues when a top may be in.

Most investors probably expect at least a good pullback at this point and that’s a reasonable scenario. But what if the market just forges ahead and climbs above 2150 without looking back? That would be shocking for many. Yet, it has happened before.
I started investing in 1986 and within one year I got caught in the ’87 crash. The media was full of comparisons with the 1929 crash and that made me very cautious, which helped me to miss out on most of the subsequent recovery. This stock investing sure didn’t look like an easy road to riches anymore. The first Gulf war in 1990 introduced another bout of caution in the stock markets, but not for long. By 1994 stocks were more than 30% above the levels from which they had just crashed 7 years before. All the newsletters I was reading were very bearish, so I bought put options, convinced that another crash was coming. And things went my way very soon, as there was a significant pullback in March. I didn’t want to sell too early, and the financial media had become even more bearish, so I held on hoping for much bigger gains when the inevitable crash came. But, of course, by summer stocks had gradually recovered for no good reason at all. I sold my put options in disgust, taking a loss on them, and was lucky to do so because the stock market was to double in the next 18 months.
The recent price action in the market as well as the current mood are reminding me of that time. Once again the market crashed and recovered. Once again the market has climbed 30% above the pre-crash highs, convincing many investors that another crash must be due. Once again investors’ mood has become depressed, even though the market is not far from new all time highs. And the price action has been very similar:

1994-2016

Does that mean it will continue the same? No, it doesn’t. Similar price patterns always break down sooner or later, we just don’t know when. In late 1994 stocks broke out to the upside and there would be no pullback worth talking about for more than a year. Innovation drove the market higher and it would take another 5 years to reach a major peak.
Innovation is still accelerating, so could we be in for a repeat performance? I don’t know, but I can’t rule it out because it has happened before.

Posted in Financial Astrology, Market Commentary | Tagged: , | 10 Comments »

Outlook for Week of April 4

Posted by Danny on April 3, 2016

Outlook for world markets with our comments for next week.

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

Click the “Expand” button (bottom right) to watch in full screen mode.

* The latest weekly reversal levels for over 2500 stocks and ETF can be found every weekend at http://www.reversallevels.com/.

* For shorter term trading and more optimal entries there are daily reversal levels, which are available as a monthly subscription. It comes as a daily html file covering over 2500 stocks from Dow Composite, Nasdaq 100, S&P 500, S&P 400 mid caps, S&P 600 small caps, and more than 100 popular ETF. Instructions for use are included. Give it a try.

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

LT wave for April

Posted by Danny on March 29, 2016

Stocks pulled back a little bit last week, nicely in line with what we expected. The recent lunar red period ended with a 25 point gain for the Nasdaq and now we are starting a new green period. Let’s have a look at the current situation for the Nasdaq:

^COMP (Daily)  6_16_2014 - 3_28_2016

This index topped out at 4835 early in the week, right in the area where stronger overhead resistance is likely. The Earl indicator (blue line) is already back in the bottom zone, which means another push higher is not out of the question at this point. But the slower Earl2 (orange line) is making a major high and about to turn lower, and that is usually a headwind for any rally attempts. The MoM indicator is painting a bearish divergence, and that may keep a lid on the market as well.
All in all this is not a very favorable setup for trades on the long side. The more likely scenario is consolidation, probably sideways with dips as low as 4600 for Nasdaq.

The LT wave for March did a rather mediocre job. Expected weakness in the first week did not materialize, but the predicted strength in the middle two weeks panned out nicely. The highs and lows in LT wave did not match the extremes for the month. Life would be too good if it always worked. For April the LT wave looks like this:

ltwaveApril2016

For the first 2 weeks the LT wave is very choppy around the neutral line, without outstanding highs or lows. There is a slightly positive bias until the 9th, followed by a slightly negative bent until the 15th, but it’s basically a toss-up. From the 16th until 22nd there is a stronger period, and the final week is much weaker with a significant LT wave low on the 25th.
For new readers, this LT wave is experimental and doesn’t use any market input. So, don’t bet the bank on it.

Posted in Market Commentary | Leave a Comment »

 
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