LunaticTrader

Investing with the Moon

Fear of height

Posted by Danny on July 22, 2013

Markets have kept up very well, despite being in a lunar red period.
This increases the odds that we are going towards August highs for the US markets, but we have to see how we finish the red period later this week.

Let’s have a look at the Nasdaq chart (click for larger image):

Nasdaq

The Nasdaq has climbed above 3600 and is still sitting near that level. Another push higher is likely in the next lunar green period, but it will have to come fairly quick as the Earl indicator has turned down already. The slower Earl2 is still positive for the moment, favoring such a final push upwards but not guaranteeing it.

Why final push?
Well, I think fear of height is going to kick in when the market stalls at or near these all time highs (for many indices). In recent months there has been plenty talk about how money is flowing from bonds into stocks. But I think we will get an opposite move at some point. Long term bonds yielding 3 or 4% may start looking favorable compared to stocks that are already up 20% or more this year.
When dividend yields for many stocks were higher than bond yields it was almost a no-brainer to buy stocks. But that situation has changed after the recent drop in bonds (which has pushed their yields up). I think that sets us up for a sideways period in stocks that will take us well into 2014.

Good luck,
Danny

 

Enhanced by Zemanta

Post a comment (disagreement also welcome):

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: