Volatility has increased last week, but stocks continue to look on the upside.
With a new lunar green period now underway, the market is set to challenge for new highs again.
Here is the current chart for the Nasdaq (click for larger image):
Notice the similarity with the market setup we had in early 2012 (blue boxes). Last year the market rallied for another two weeks after the Earl index turned up (green arrow), and then went into a significant decline, as the Earl2 continued to point down.
If the Nasdaq rallies to 3250 by mid March, then I would take profits or buy some protection with put options.
I think we will be entering a down to sideways period.
You may have noticed the solar activity widget in the sidebar and the Solar Activity page in the main menu.
These pages can be used to monitor daily sunspot numbers. This is quite important if you are a daytrader. And if you are using our lunar periods then it is good to keep an eye on them as well.
How to use it?
The stock market tends to have down days when the sunspot number suddenly jumps up from low levels. Especially spikes above 150 are generating fear. Typically, the markets will recover the losses when the sunspot count goes back below 100 again.
A typical example was seen a few weeks ago. The sudden market drop on February 20th came with a very fast growing sunspot region that appeared within days (see article link below).
This will change however when we approach the solar cycle peak. When the SSN goes consistently above 120 most of the time, then the sudden spikes above 200 tend to move the market up with new optimism. So, instead of bottoms you then get market peaks on days of very high sunspots.
A smart trader can use sunspot information, but how can you known whether sunspots will go up or down tomorrow? One of the pictures shown on our solar activity page can help you to see whether sunspots will ramp in the next days.
It is the blue “solar dynamics” chart, which looks like this for today:
The bright spots show you the very active regions where sunspots appear.
The key thing to understand is that the sun rotates slowly (27 days) and new sunspot areas come in from the left side, while currently visible sunspot areas will move away on the right side.
You can even watch some of the videos on The Sun Today, and then you will never forget it.
So, whenever you see very bright spots and a large white corona on the left side edge, you can tell that very active solar region (and thus more sunspots) is ready to become visible for us in the next couple of days.
If there are very bright areas on the right side, then we know they will disappear from view within a couple of days (and thus sunspots more likely to go down).
For today you can see that the left side is showing very bright compared to the right side, so it is likely that new active sunspot zones are about to come into view.
Once the market becomes very solar-sensitive, it is good to check the solar activity every day, and be prepared accordingly.