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.