LunaticTrader

Investing with the Moon

When everybody expects the same thing…

Posted by Danny on May 20, 2013

…, then something else has to happen.

Many investors were waiting for an overdue correction in May. Media outlets were reminding us to “Sell in May..”, since that had worked so well in each of the past three years. And what did we get? A melt-up.
And now that bears have thrown in the towel, while funds managers are seen scrambling to climb into a runaway train, I think we will get a few good down days in the final week of May.
That’s the market’s way of saying: “most of you were right, but few of you were patient..”

Let’s have a look at the S&P 500 chart (click for larger image):

S&P

Who said that markets never go up in a straight line? Since the middle of April the S&P 500 has climbed almost 10% with hardly any down days. The Nasdaq has done even better in emulating a straight line. Can it continue like that? Yes, but not for very long.
Our lunar red period has not triggered any downside action so far. This is a typical example of a strong market continuing to climb into the yellow period (see Lunatic Trader program). Quite frequently these gains are then given back in the next week or two. That’s also what I expect to happen now. My Earl indicator continues to weaken, and has already peaked last week. That’s not unusual, as this indicator was designed to give early warnings.
The Earl2 is not showing any signs of topping yet, which means that after a pullback we are likely to see the market climb even further this summer.
So, I am looking for a drop to 1600-1625, then another rally.

Good luck,
Danny

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2 Responses to “When everybody expects the same thing…”

  1. chris martha said

    In the chart of SPY above ….the two indicators at the bottom “Earl” they say ….how can I find out what they are?
    If there is a better place to ask questions, can someone tell me?

    • Danny said

      Hi Chris,
      This is the right place for questions.
      The Earl indicators are proprietary formulas I have developed over the years.
      So, you won’t find them anywhere else.
      The idea was to have indicators that lead rather than lag. So, typically they peak (and bottom) before the market does so.
      I have been explaining them in my blog posts over the years, but intend to make a permanent page them, so that new readers can look it up more easily.
      Stay tuned.

      Danny

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