LunaticTrader

Investing with the Moon

Key target levels

Posted by Danny on August 20, 2013

As mentioned in my weekend post giving our key reversal levels, my method also spins off key target levels along the way.

Here they are in table format, and from now on I will include them in my weekly key reversals post:

 Key Targets Up(W) Up2(W) Down(W) Down2(W) Up(D) Up2(D) Down(D) Down2(D)
Nasdaq 3690 3920 2710 2550 3830 3930 3210  2625
S&P 500 1840 1350 1215 1738 1799 1522 1267
Nikkei 15650 20070 12550 6900 16580 17980 12850  10450
FTSE 100 6640 7220 4670 4110 6750 7100  6110  5590
DAX 8700 9270 5260 2820 8550 8920  7210 7030
Bonds (TLT) 129 145 104 79 128.50 134  102  100
Gold (spot) 2060 2420 925 1448 1650 1078 1001
Euro/US$ 1.43 1.61 1.25 1.12 1.36 1.3950  1.2350  1.17
Crude Oil(CL) 110.50 124 76 53 121 89.50 77

(Legend: W = weekly, D = daily, * = new target)

Some background info to help you understand and use them.
In the table you see the up and downside targets based on my weekly (W) and daily (D) key reversals calculations.
The two most recent and relevant upside and downside targets are listed. The 2nd target comes into play when the first one is exceeded significantly ( I generally give them 1 or 2% leeway).

Where do these target prices come from?
Every major high or low in the market generates a future target price in my system, and that price tends to be reached later on. So these target prices are not based on classic trendlines or fibonacci ratios, they come from a currently unused technique as far as I know.

How often do these target levels appear?
On the weekly time frame I get about 3 new target prices per year (can be up or down targets). So, they can remain in play for a long time. For example, the 6640 weekly target for the FTSE 100 dates back to April 2010 already.
On the daily basis I get up to 10 new target prices per year. So, they are generally more recent. For example the $1448 daily upside target for gold appeared in July, while the $1078 daily downside target appeared in April.

Are all these targets going to be reached?
Of course not. Especially some downside targets will never be reached because of long term inflation and thus generally rising prices.

Do these targets indicate where the market is going next?
No, they don’t. There are always up and down targets in play. The system is completely agnostic as to whether the market will rise or decline.

How to use them?
As these prices are a kind of extreme level from where a move in the other direction tends to start, they can be used as take profits target or for market entry if you want to speculate on a counter trend move.
But I have hesitated to publish these target prices, because there is also a potential disadvantage to price targets. A lot of traders can become too focused on certain price targets to be reached, to the point where they stop seeing what the market is actually doing right now (which is given by the key reversals table). For example, somebody may see the $2060 weekly upside target we have for gold and get very excited about that.
The key reversal levels always tend to look a lot more boring than the target levels. But the key reversals are most important. Is the given market in bull or bear status? Is it in rally or decline mode? That’s the primary consideration and tells us on what side of the market we want to be.
Price targets are always secondary, and it’s important not to get married with a certain price target.

If you have any other question, just ask in the comments section.

Danny

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