Posted by Danny on April 29, 2013
Markets recovered surprisingly well last week, but despite this recovery the lunar red period ended with a slight loss on the Nasdaq.
We now enter a new green period, what’s in store?
Here is the Nasdaq chart (click for larger image):
This looks like a potential double top.
We cannot rule out a further rise to 3400, especially in an eclipse green period as discussed last week. But my Earl indicator is in peak territory already, which is a warning sign that another leg down can start any moment. The Earl2 is still not showing a buy signal either.
The LT wave has continued to do well, and it is also showing weak for May, especially for the second half of the month.
This means we have mixed signals, and even though a potential rise to 3400 is in the cards, the odds for a serious move into the other directions are not small either.
It is decision time for this market: either the resistance at 3300 gets broken convincingly, or we get a sizable drop to the 3000-3100 range.
Because the picture is so mixed I will just watch from the sidelines this week.
I just don’t see a good risk/reward ratio in either direction at this point.
This market starts reminding me of the 1993-1994 period. Most investors were not overly optimistic even though the market was setting all time highs. And everybody was waiting for a much needed correction. But the stocks just kept grinding higher with only some small pullbacks of 3-5%, and then in 1995 they started going up even faster. Those who were betting on a correction just lost money month after month.
Hopefully we will get more clarity by next week.