The Nasdaq has reached our 2900 downside target last week.
Many stock indices have reached 3 month lows on the charts, and we are reaching important support levels.
Here is the Nasdaq chart (click for larger image):
The Nasdaq has come very close to the bottom of its uptrend channel since last summer. A dip to 2870 remains possible, as this would close the gap left in early February.
But normally the market should bounce back from here, especially since we are now in lunar Green period, which generally favors rising prices.
A failure to do so would be a bad omen going forward, and a drop below 2850 would mean that we in a larger correction with 2750 as its next target.
If the market drops below 2900 this week, then I would use it as a low risk buy entry, with 2850 as a stop-loss and 3000 or 3050 as my profit target.
Looks like the last lunar cycle “inverted” — instead of going up, the market went down. Now that we’re moving into the time of the cycle where the market should head lower, will the “inversion” continue? Do you expect the rally of the past couple of days to top out here and the market to turn lower for the next two weeks??
That happens from time to time, but usually it quickly reverts to normal cycle.
So having a red (or green) period that goes against the normal expectation is not an indication that the next period will also do so.
Usually it is an indication that the trend is so strong that it overcomes the normal cycle.
So if the cycle is so weak that market goes down when we would expect it to go up, then it usually keeps going down to form a bottom in the next cycle when we would expect the market to be down (thus into the next red period).
Please explain how your Earl indicator works and what each of the colored lines mean.
The Earl indicator is based on a proprietary formula and is designed to be “early”. It often bottoms (or peaks) right when the market does so, and sometimes even a couple of days/weeks before the market does so. So whenever the Earl turns upwards from a bottom, I get ready to buy. It is also useful to confirm the trend we expect from our lunar cycles, and that’s how we use it here on the weekly blog.
I will write more about it when time permits.