LT Wave reviewed
Posted by Danny on April 11, 2013
In mid February I posted an experimental chart, which I called the LT Wave.
It showed expected ups and downs in the market until the end of March.
How has it panned out?
Well, not so bad as can be seen in this comparison with the S&P 500 (click for larger image):
As I pointed out, the blue and yellow smoothed lines are most important. Actually, the orange line is too distracting and I will omit it in future versions of the chart.
As we can see, extended periods of yellow line above 1 has correlated nicely with the upward swings in the S&P, and has continued to do so in February and March. The main pullbacks have come when the yellow line was below average, especially when the blue line was also weak.
This is quite promising, but a few months of correlation can also be a product of luck. It needs to work well over longer periods of time, before we can get any confident about it.
So how does the LT Wave continue going forward? Here it is for April and May (click for larger image):
Notice how April started with some weakness in the LT Wave (even though we were in lunar Green period), and we did get weakness in the stock markets indeed. One of the peaks for April is on the 10th (yesterday), and we got new highs in many markets.
So far so good.
Weakness is seen for next week, and around April 25th we get another strong period for the LT Wave (even though we will be in lunar Red period by then). May looks significantly weaker with an extended bottom period in the last weeks of the month.
So, one of the interesting things is that from time to time this LT Wave deviates from what we expect based on our lunar Red and Green periods. That will again be the case in the last week of April, so we will see what happens.
Good luck,
Danny
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bob collett said
Hi Danny,
Your LT Wave looks good
How do I apply it to my market, the South African Top 40 index or the all share index which you used in your 2013 forcast
Almost every cyle aid on the internet is used on the S& P, which I cant trade..So I am always looking for help.
As an aside, you said my market was looking toppy
Well since NM, it has fallen 9%, and its now a green period.Thats a total inversion.
PAIN. PAIN
Regards
bob
Danny said
Hi Bob,
I can’t cover every market in my weekly comments.
One thing you can do is check out the historic correlation between different market. See: http://www.macroaxis.com/invest/worldMarketCorrelation
Countries that have a high and positive correlation with the USA will generally move in line with the forecasts for the S&P or Nasdaq.
You can also read this article, which explains how to check the correlation for any stocks or indices: http://stockcharts.com/help/doku.php?id=chart_school:technical_indicators:correlation_coeffici
South Africa is rather sensitive to gold and commodity prices and does typically not have a strong correlation with USA markets.
I think it should be no problem to trade S&P (SPY) from South-Africa.
You can open an account with http://interactivebrokers.co.uk/ , which allows to trade on many different markets and has very low commissions. For smaller accounts, you can also trade S&P with various spread-betting, CFD or forex brokers. E.g. http://www.avafx.com/ (Ireland) where you can even fund an account with Paypal.
Danny
Economic Truths said
I just woke up and saw red on the S&P am I dreaming LOL. This market cannot go down.
There is a UPWARDS channel on the daily S&P that is quite strong => http://bit.ly/12OOs6A
I think there are 3 things at play.
1) Too many people go bearish.
2) Funds being pumped into asian markets needed to go somewhere? SO dumped into our US markets, instead of the emerging markets.
3) many people are saying “do not fight the fed” as ben bernanke now has a hobby of PRINT….PRINT….PRINT LOL.
We be interesting to see what happens next week and when the big bank report on FRIDAY.
Danny said
Thanks for your comment.
It is a known fact in accounting that one sector’s deficit must be some other sector’s surplus. The high government deficits (supported by QE) have to come out as a surplus somewhere, and they do so as artificially high earnings in corporations around the world. So, we hear that p/e are low and profits very healthy, but that picture will change rather dramatically once the government starts spending within its means, as it eventually must. Somewhere down the road these earnings are going to suck, and even more so when taxes are raised.
Anyway, there was a big solar flare yesterday (see my recent post: https://lunatictrader.wordpress.com/2013/04/01/solar-flares/) with a CME in our direction, so we will get hit by serious solar storm over the weekend. The solar activity plot (https://lunatictrader.wordpress.com/solar-activity/) has printed a red bar, and that’s the first one in a long long time. Not rarely that knocks 20 points off the S&P in the ensuing week, so maybe my LT wave gets some timely help from that corner ;-)
Danny
Danny said
Looks like we are already down 10 points on S&P, and the solar storm has not arrived yet.
hiei said
Gold is down quite a lot. Maybe e solar storm have a greater effect on gold than equity?
Danny said
I don’t know about any effects on gold.
But the 20 point drop in the S&P 500 is already a done deal.
I am taking profit on half of my put options, keeping the rest for a free ride.
hiei said
Yep. That’s a very nice call.
bob collett said
Hi Hi…..ei,
Food for thought
Regards
bob collett said
Hi Danny,
SN levels back to 111 from 150
BUY?????
Regards
Bob
Danny said
Hi Bob,
As I explain in my post about eclipses today, this is a most dangerous lunar Red period that has started.
So, I prefer to be mostly on the sidelines, just playing with some put options I bought at the end of last week.
The buy the dips crowd has been making money for weeks. But once it starts looking too easy to be true, then along comes a big move that lasts more than one or two days, and takes away most if not all their profits.
The market is an ever changing animal.
I think the easy part of the year is behind us. From now on it will become more difficult to call the moves.
Danny
john said
hello danny – are you going to keep posting the LTWave? Very impressive
Danny said
Hi John,
If the results remain good then I will add it into my LT program, which will give users the LT Wave for the next 100 years.
I plan to keep posting about it on the blog as well.
As I said in the post, a few months of good results can just be a lucky streak. I want it to work reasonably well over a longer time. I expect there will be times when it doesn’t pan out so well, but in the end it is the batting average that counts.
john said
Hello Danny. Per your LTWave for today April 19th am i correct that today is supposed to be a down day? Or is today supposed to be a move up from previous day? I see that today, April 19th, the line on the chart is moving upwards but wondering if today a down day or is today a move up.
Thank you,
john
Danny said
Hi John. Several market indices reached lows on Friday (e.g Dow Jones), while others did so on Thursday (Nasdaq). That’s how it usually goes, so it will never be possible to generate one simple chart that forecasts lows to the day. The LTWave should not be used on a day to day basis, but rather as a tool that tries to predicts periods of weakness vs periods of strength. Even in periods of weakness there are typically some up days, sometimes even strong up days like we got on Tuesday. That will generally not show up in the LT Wave.
Occasionally I send out trade alerts through my Twitter account. This is the pic I sent out yesterday hours before the market opened: http://t.co/RQOtnNo3Ex
It’s easy to see that 3150 was a support trendline from which a bounce back was likely.
If the LTWave stays on track then I would look for some more upside next week, before the market weakens again in May.
Danny
Rick said
Danny,
Any clues about how you generate the LT Wave?
Rick
Danny said
Hi Rick,
See my earlier introductory article for some details and question that were answered:
https://lunatictrader.wordpress.com/2013/02/19/lt-wave-chart/
Danny