LunaticTrader

Investing with the Moon

Outlook for week of February 12

Posted by Danny on February 11, 2018

Outlook for world markets with brief comments for next week.

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

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

For shorter term trading and more optimal entries there are daily reversal levels, which are available by monthly subscription. Comes as a daily html file covering over 2700 stocks and ETF. To see what you get you can pick up recent free samples on this page. Instructions for use are included. Give it a try.

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LT wave for February

Posted by Danny on February 5, 2018

Markets have finally started a pullback. We did get a 1% down day for first time since August and we also got a 2% down week for the first time since Sep 2016. This means we are starting to see more volatility, but that doesn’t mean this bull market is over already. See my recent article.

Here is the current S&P 500 chart:

^SP500 (Daily) 4_27_2016 - 2_2_2018

No major trend lines have been broken so far, but all my indicators are pointing down now. The Earl (blue line) peaked out a week ago and is dropping fast. The slower Earl2 painted a major peak a few days ago and is nowhere near bottom territory. The MoM indicator has also turned down after reaching the maximum euphoria +10 for a few days. This is not how a good buying opportunity looks like, but we are entering a lunar green period and I do expect some strong rebound days, but probably not new highs any time soon.
I would just wait for the dust to settle and once my 3 indicators start bottoming out we can look for new buying entries.

The LT wave did poorly in January. Expected strength in the first weeks panned out ok, but that strength continued well into the projected weak period. Those gains were given back in the last week, so it wasn’t too bad after all. But the timing of peaks and bottoms didn’t match.
Here is the LT wave for February:

ltwaveFeb2018

It looks very volatile with alternating stronger and weaker weeks. Peak LT wave values come on the 5th and 17th. And the bottom values are projected around the 11th and the 23rd. I have no idea how this will pan out. The market may just dance around within the wide range that is set by the recent January high and the possible low that we get in early February.

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The bitcoin crash

Posted by Danny on February 5, 2018

All eyes have been on Bitcoin BTC and other crypto currencies recently. After reaching a peak near $20000 BTC is now down to $8000. So what’s next?

Here is what I wrote about bitcoin last August:

A sustained breakout above $4000 that quickly heads for $5000+ would start a parabolic move like in 2013. And then it can go above $10k. A failure to do so would probably give us a peak near my $4246 target and be followed by a significant decline when traders notice that the steep rally has ended.
Both scenarios have 50/50 chance at the moment, so if you hold bitcoin from a much lower cost base then I would sell some and hold the rest at zero cost base. A tulip mania type move is possible here and then bitcoin could reach $10k or $20k before a big panic.

Here we are. BTC reached $20k and is dropping quickly, but investors are not really panicking (yet) and that’s a reason for concern. So, let’s have a good look. Here is an update of the long term chart I posted in August:

bitc_m

The rate of change is slowing down, which is normal after a move of this magnitude. The best case scenario is now a continued climb within the more sustainable pale green trend channel. But that would mean a drop to $2000 if the lower bound of this channel is to be tested. A failure to hold this channel would probably tell us that BTC is going to near zero. That’s the big picture.

Of course, Bitcoin has come back from similar drops on several occasions. But that’s the problem here. Too many investors/speculators seem to believe that will happen again and that’s why there is little or no panic, even after a 60% crash. Many traders are just doubling down on their losses, encouraged by “expert” predictions that keep talking about $50k, $100k BTC in the near future (e.g. https://www.buzzfeed.com/rabbiyitziweiner/21-bitcoin-experts-share-their-predictions-about-t-37p3h)

Small investors’ enthusiasm and confidence has become too high and that never ends well. As I pointed out on Twitter near the highs in December, Bitcoin has become more popular than SP&P 500 ($SPY) on sites like Stocktwits:

10 Days later BTC printed its current peak. But traders’ appetite for BTC has not cooled down on Stocktwits. The 7 day average message volume is now regularly above 30,000 and there are 85,700 people who are watching BTC. That’s more than the 73,500 investors who watch SPY (S&P 500 etf) on the site. By the time BTC finds a real bottom I would expect those numbers to be a lot lower.

Ongoing popularity in the face of a significant drop is usually a sign that there is more pain to come. This has happened before in other popular manias and it typically ends in a similar fashion. A first 50% crash is met with denial and after a few months of stabilizing prices (which many traders interpret as a last chance to buy before the next explosive rally) the so-called “waterfall declines” start, often ending 70-90% below the peak prices.

Classic example include the Dow in 1929:

dji_w

Gold in 1980:

gold_w

Nikkei in 1990:

nikkei_w

Nasdaq in 2000:

nasd_w

And even individual stocks or sectors. Remember 3D printing in 2014:

ddd_w

We always see the same thing. A huge run-up that triggers traders’ imagination of easy riches followed by a 50% crash that is seen as the next great buying opportunity. A few months of stabilizing and rebounding prices convince the remaining skeptics that the bull market is continuing. And that’s how the stage is set for the second phase of the crash.

If Bitcoin follows the same pattern by bottoming in the coming weeks followed by what looks like a healthy rebound then remember those charts and be careful. I will keep posting my observations on Twitter until I do another post on crypto here on the blog.

Good luck to all.

PS: Good question by a reader: Could it be that BTC moves quicker and that we are already in the waterfall declines? A: Yes, that’s possible. Here is a daily chart, 50% drop and a one month rebound:

bitc

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Outlook for week of February 5

Posted by Danny on February 4, 2018

Outlook for world markets with brief comments for next week.

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

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

For shorter term trading and more optimal entries there are daily reversal levels, which are available by monthly subscription. Comes as a daily html file covering over 2700 stocks and ETF. To see what you get you can pick up recent free samples on this page. Instructions for use are included. Give it a try.

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Outlook for week of January 29

Posted by Danny on January 28, 2018

Outlook for world markets with brief comments for next week.

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

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

For shorter term trading and more optimal entries there are daily reversal levels, which are available by monthly subscription. Comes as a daily html file covering over 2700 stocks and ETF. To see what you get you can pick up recent free samples on this page. Instructions for use are included. Give it a try.

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Updated long term scenarios and charts.

Posted by Danny on January 23, 2018

Time constraints have kept me from blogging frequently in recent months. Today I will do some catching up by reviewing the long term scenarios and indications we have been covering.

Long term readers will remember my Dow 32000 series, which I started sharing in 2013: The case for Dow 32000. Many people declared me crazy, because the Dow was still below 15k and the internet was full with bubble and crash warnings. The Dow is now above 26k and the forecast doesn’t look all that crazy anymore. Meanwhile some of my colleagues are still peddling bubble and crash warnings. I am sure they will be right some day, just like you will inevitable be right eventually if you keep calling for rain on blue sky days. But investing is about making money, not about being right eventually.

So first off, here is the updated version of my long term monthly chart from December 2016 ( see: Dow 32000 revisited):

^SP500 (Monthly) 3_1999 - 1_2018

No need to change anything here. The market has kept rising along the dashed grey line as expected and ended 2017 right into the first pink target ellipse. The move may be near its end, but the odds for an extension into the second pink target ellipse (around autumn 2018) are going up. The reason is that real volatility has stayed so low, and normally you get higher volatility in the final stages of a big move (more on that below). If the S$P 500 goes on for another 8 months and gets in the 3000+ zone then the Dow will also be near to our 32000 mark. A drop below the grey dashed line would tell us the bull market since 2009 is probably over.

Some readers have been pointing out that my 88.4y cycle is due for its peak. That’s true, but a cycle that has been observed only a few times is hardly a hypothesis, not a very reliable indication. We will need a few thousand years of stock market history before we can tell if that cycle shows up with any regularity. Also a cycle of that length should not be expected to work perfect to the month. If the bull market peaks next September it would still be a good match for this 88.4y cycle.

The solar Saros 127 will revisit us in 2019. This Saros has marked both the 1929 crash and 2001 crash (and 9/11). See: The Saros cycle and the stock market. So, it is quite possible this bull market will stretch into 2019 under increasing volatility.

There are two reasons why the odds for another year of bull market are pretty good. As I wrote in February and March 2017, a dearth of 1% down days in the S&P 500 has historically been a bullish omen for the next 12 months. Very low volatility tends to mark the middle of big moves, not the end of them. See: We got a 1% down day, what next? A 109 day period without 1% down days had just ended, but we are already in a new one, now at 107 days and counting. So here is the updated list:

down1d

Once the current series without 1% down days ends we can expect the market to climb an average 14.8% over the ensuing year (if historic tendency keeps up). That would mean S&P 500 well above 3000 in early 2019.

We are also on an extremely long streak without 2% down week, as explained in this article from last July: Why the VIX is so low and why you shouldn’t worry about it yet. We still haven’t seen a 2% down week since I wrote that article and the current streak is up to 71 weeks. We have to go back to the roaring and 50s and 60s to find longer periods of “painless investing”. Here is the updated list:

downweeks

Twenty more weeks and we would break the record from 1959. More important is what happens after the first 2% down weeks that comes. It will panic investors for sure. But again the historic average shows us that the market tends to rise another 10% in the 12 months after that first 2% down week that ends a long period of “painless investing”.

So, that’s where we stand right now. Could it be that historic tendencies will fail here and the market will suddenly crash without giving any advance warning in the form of increasing volatility? Of course, that could happen. Nothing can be ruled out. Just know that the odds are not in favor of it, if history is any indication. That’s also why VIX stays so low. Once we start getting more 1% down days and more 2% down weeks we will know that volatility is increasing and then I would expect the VIX to go up even though the S&P 500 may still be setting new all time highs. That would be a clear indication that the bull market is on its last legs. Until then I would just go along with the flow, with normal levels of caution.

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Outlook of week of January 22

Posted by Danny on January 21, 2018

Outlook for world markets with brief comments for next week.

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

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

For shorter term trading and more optimal entries there are daily reversal levels, which are available by monthly subscription. Comes as a daily html file covering over 2700 stocks and ETF. To see what you get you can pick up recent free samples on this page. Instructions for use are included. Give it a try.

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Outlook for week of January 15

Posted by Danny on January 14, 2018

Outlook for world markets with brief comments for next week.

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

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

For shorter term trading and more optimal entries there are daily reversal levels, which are available by monthly subscription. Comes as a daily html file covering over 2700 stocks and ETF. To see what you get you can pick up recent free samples on this page. Instructions for use are included. Give it a try.

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Outlook for week of January 8

Posted by Danny on January 7, 2018

Outlook for world markets with brief comments for next week.

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

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

For shorter term trading and more optimal entries there are daily reversal levels, which are available by monthly subscription. Comes as a daily html file covering over 2700 stocks and ETF. To see what you get you can pick up recent free samples on this page. Instructions for use are included. Give it a try.

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

Outlook for week of January 1

Posted by Danny on January 2, 2018

Outlook for world markets with brief comments for next week.

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

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

For shorter term trading and more optimal entries there are daily reversal levels, which are available by monthly subscription. Comes as a daily html file covering over 2700 stocks and ETF. To see what you get you can pick up recent free samples on this page. Instructions for use are included. Give it a try.

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

 
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