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.
Gold is down quite a lot. Maybe e solar storm have a greater effect on gold than equity?
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.
Yep. That’s a very nice call.
Food for thought
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.
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 ;-)
Looks like we are already down 10 points on S&P, and the solar storm has not arrived yet.
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.
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.