Posted by Danny on May 28, 2013
Just back from Greece, so only a quick note today. I will post some extra updates later this week.
We got some swift move downwards last week, especially in the Nikkei index. But our lunar red period is now ending, which opens the door for another rally.
This is the current chart for the Nasdaq (click for larger image):
The Nasdaq has fallen back to its resistance/support line, which is quite typical after a breakout to the upside, but so far we did not get any follow through to the downside. The short term Earl indicator is into bottom territory, which means we are getting ready for a bounce to the upside. The Earl2 is starting to look toppy however, so the bounce may not carry very far.
This being the case, I would take any close below 3410 as a sign to sell. There is no need to panic, just move your stop-loss closer to the market. We can reach 3600 on the Nasdaq and 1700 on the S&P 500. Eventually, more investors will get fear of height and that’s when we will enter a more prolonged period of profit taking.