LunaticTrader

Investing with the Moon

Market on the edge

Posted by Danny on February 8, 2016

Stocks turned down again last week, nicely in line with the LT wave chart for February. The reversal levels stay “double red” for most world markets, and the general mood is becoming really depressed. The Nasdaq chart shows that we are reaching a critical point:

^COMP (Daily)  5_28_2014 - 2_5_2016

The Earl2 indicator (orange line) keeps pointing up. But the faster Earl (blue line) has peaked out and turned down again. This means a drop to lower lows is a very realistic possibility for this index. If so, then the 4200-4250 area should offer major support and be the first target in that scenario. If that level doesn’t hold then the odds that we are in an extended bear market will jump up significantly. A pattern of lower highs and lower lows would then clearly stand out from the chart.

We will also enter a new lunar red period later this week, which may further contribute to downside pressures. So, I would be very careful until the Earl and MoM indicators turn back up again. Keep an eye on my reversal levels, which are shared on Twitter every day.

 

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Outlook for Week of February 8

Posted by Danny on February 7, 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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LT wave for February

Posted by Danny on February 1, 2016

Stocks have continued their rebound and suddenly it looks as if the world is not falling apart after all. Last week we have warned that the bottom may be in and so far that call doesn’t look bad. We are in a new lunar green period again, and in the previous period the lunar cycle finally got back on its feet after a string of failed periods. If this is the start of some cyclical normalcy then we can look forward to further gains. Here is the current S&P 500 chart:

^SP500 (Daily)  5_16_2014 - 1_29_2016

Major support levels were seriously tested, and they bent but didn’t break. The slower Earl2 (orange line) has finally turned up from a major low. All three my indicators are now pointing in the same direction: up. We may get a few more air pockets, but it looks pretty good. I think this market can continue towards 1980, where I would expect first major overhead resistance. Then we will see what happens next.
The obvious line in sand is now given by the January 20 lows. If that gets broken to the downside the chart would look really ugly and then another wave of panic selling would become hard to avoid. But that’s not the base scenario for now. I think there is a good chance that January 20th will stand as the low for the year.

The LT wave for January did an almost perfect job. Weakness until the 21st, followed by strength in the final week. The market bottomed on the 20th, just one day after the lowest LT wave value for the month. Highest value of the month was the 29th, which gave us the strongest up day. It doesn’t get much better than that. Here is the LT wave pattern for February:

ltwaveFebruary2016

The wave suggests some weakness early in the month, with the lowest value coming on the 5th. After that it improves steadily with the second half of the month being mostly positive. Highest LT wave values are on the 8th, 18th and 26th. Let’s see how it goes. Bear in mind that this LT wave is experimental, so don’t be too confident that it will always work as well as it did last month. There is no perfection in this world, only perfect imperfection.

Posted in Financial Astrology, Market Commentary | Tagged: , | 2 Comments »

Outlook for Week of February 1

Posted by Danny on January 31, 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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May have bottomed

Posted by Danny on January 25, 2016

Not unexpectedly, stock markets rebounded in the second half of the week. It wouldn’t surprise me if this rebound continues well into February, and then the next question will become whether the January lows will be revisited or not. That’s just the market taking the path of max confusion, as it likes to do. Taking a look at the current Nasdaq chart:

^COMP (Daily)  5_21_2014 - 1_22_2016

The August lows have held in this index. That’s a plus. The Earl and MoM indicators have bottomed out and are headed higher. The slower Earl2 (orange line) is still going down. An extreme low is going to be set in the Earl2. This may mark a major bottom in the market, but a second lower low remains possible, potentially painting a bullish divergence in the Earl2 some time this spring. So, this is not a time to become aggressively bullish already. As can be noticed in the weekly reversal levels, it will take more healing until we can become sufficiently confident that the correction is over.

On a longer term chart this market is in a large sideways since late 2014. And it could very well be that we have to wait until summer to see which way it goes next. Given the widespread pessimism at the start of the year I think the next major move will be up, surprising many. That’s why we may have bottomed last week.

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Outlook for Week of January 25

Posted by Danny on January 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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Regime change or not?

Posted by Danny on January 18, 2016

Stocks continued to sell off last week and last year’s lows are being tested. Is this the start of a major bear market? Or is the correction all but over? To find an answer to this question we will take a look at the “adverse move ratio”, but let’s check out the current chart for S&P 500 first:

^SP500 (Daily)  5_14_2014 - 1_15_2016

The market is testing major support. The MoM indicator has dropped to levels that are generally consistent with major lows. This means that even if we are in an ongoing bear market we would probably get a bounce here before dropping lower. The Earl indicator (blue line) is turning up already, suggesting we are near a tradeable bottom. The slower Earl2 is still going down, telling us it is still not safe (as if it ever is?).

Where do we go from here? The indicators start pointing to a rebound rally. Could we get more panic first, before that rebound starts? Yes, that’s possible. Once the Earl2 turns up as well we can become more confident that the market is indeed rebounding.

For a longer term perspective I am choosing this monthly S&P 500 chart, showing the adverse move ratio (AMR):

SP500

The AMR is an indicator I shared almost two years ago in this article , showing its history going all the way back to the 1940s. Even though it is a simple formula it has done a good job in detecting bear markets and major corrections. The AMR fell below 1 again last November, the first time this happens since 2011. Whether this becomes a long downturn like in 2001-03 and 2008-09, or just a brief hiccup like in 2011, remains to be seen. Long term investors have good reason to be very cautious, at least until the AMR climbs back above 1 again.

 

 

 

Posted in Market Commentary | Tagged: | 2 Comments »

Outlook for Week of January 18

Posted by Danny on January 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: , , | Leave a Comment »

Why last week’s drop didn’t change anything

Posted by Danny on January 11, 2016

Stock markets went into a steep slide last week, producing one of the worst starts to a new year ever. I wrote last week that the shorter term indications tend to pan out first, and that’s what we are getting. This gives us a new situation in the Nasdaq chart (click image to enlarge it):

Nasdaq

The drop has cut through several support levels in the Nasdaq, and the next one is just below 4600, the late September lows, as well as the support zone that held the market in early 2015. Whether stocks will go that low remains to be seen. A failure to test the 4550-4600 zone would actually be a bullish sign.
Technically all my indicators are now heading for major lows, but showing no signs of bottoming out just yet. It may take another week before they start turning up again, so there is good reason to remain patient and wait for signs of stabilization. Sometimes selling begets more selling and creates a chain reaction. That possibility is definitely on the table at this point.
It looks like the market is going with the LT wave for January, which points to ongoing weakness until around the 19th. We will also start a new lunar red period later this week. So, I would stay patient and wait for clearer signs of a bottom. Even though we are likely to get some strong up days this week, they always come after a slide like this, another dip or a retest for a double bottom is a strong possibility in the third of week of this month.

The terrible start of the year revives talk about a market crash or a recession in 2016. But this drop didn’t really change anything for people who keep a birds eye view on the market. The most simple approach to investing doesn’t use any indicators and just goes along with what can be seen on a long term chart. If a stock or index keeps setting new highs regularly and just shows an ongoing pattern of higher highs and higher lows on a weekly chart then it is a bull market. Conversely if it keeps dropping to lower lows followed by lower highs it is a bear market (see Oil for a perfect example). Simple enough. There is a third “in between” state when we can question the state of the market. E.g. when we have a lower high and a higher low, then we don’t know if the market is bullish or bearish.
If we look at a weekly chart for S&P 500, the “regime changes” are easy to spot (click image to enlarge it):

S&P 500 weekly

From 2012 until well into 2014 it was a classic bull market, just higher highs and higher lows persistently. To be considered a lower low I always look for a low that is below the most recent visible low that came at least two to three months before. I want the low to stand out from the chart. So, just being down for three or four weeks does not make for a good lower low on this time scale.
The ebola panic in Sep-Oct 2014 gave us a clear lower low for the first time in years, but it wasn’t followed up by a lower high, so the bull market just continued with the market climbing to new highs.
Then we got the recent drop in August 2015. It was the biggest pullback in years, but it was not a lower low because it kept well above the previous significant low. We did get a nice lower high in November and that means we are now in “in between” state. If the market goes on to drop below the Aug 2015 lows, then we will have the regime change to a bear market. But if the market goes on to climb above the Nov 2015 high, then it is just an ongoing bull market. And that’s why last week’s drop didn’t really change anything. We have been in “in between” state for a while already and that situation remains unresolved until we get a breakout either way. A lot of people are of course forecasting that the market will crash. Trying to forecast what will happen can be fun, but it also can be costly. Some market “gurus” have never stopped forecasting the next crash since 2010. The followers who listened to them probably have no money left to trade by the time one of their forecasts inevitably comes true.
A 30% or more bear market historically happens about once every 10 years. But as my uncle used to say: “the best way to protect yourself against a crash is by participating in the bull market that comes before it.” If the market falls below last August lows, then it becomes a different ball game. Until then we just don’t know.

Posted in Financial Astrology, Market Commentary | 10 Comments »

Outlook for Week of January 11

Posted by Danny on January 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 »

 
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