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Storms pass

Posted by Dan on October 30, 2012

The markets we cover have reached our downside targets but are not breaking below them.
The superstorm in North-America is closing the exchanges for at least another day, so it will be an unusual week. But normally we should see trading resume before our current lunar Red period ends later this week.
Let’s have a quick look at the Nasdaq (click for larger image):

Nasdaq

The market has tested support from the long term trendline and is holding on so far. We have to watch carefully as the markets reopen, but if last week’s lows are not taken out then we are getting a buying opportunity going into the next upcoming lunar Green period. The market is likely to rally in November, regardless of the US election outcome.

The weekly chart shows us the bigger picture (click for larger image):

Nasdaq

Two likely long term scenarios here:
#1) The Nasdaq holds above 2950. In that case we will probably get a rally that takes us above 3200 by early 2013.
#2) Nasdaq falls below 2950. In that case I would look for a further drop to 2800, before we get another rally.
Stick to scenario #1 until proven otherwise.

Some readers may wonder how the stock market can go up when there is going to be so much storm damage.
Well, we may see a downside reaction right at the open, but that could be short lived. While storms do not create wealth, they generate economic activity as things are getting repaired and rebuilt. Of course that doesn’t bring back the victims of the catastrophe.

We hope all our readers are safe and healthy.

Danny

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