LunaticTrader

Investing with the Moon

Key reversal levels for week of August 26, 2013

Posted by Danny on August 25, 2013

Our key reversal levels going into next week:

Current Status Key (W) Mom (W) Mode Key (D) Mom (D)
Nasdaq 3657.8 BULL S: 3395 7.47 (7.67) RALLY * S: 3609 -1.97 (-2.48)
S&P 500 1663.5 BULL S: 1592.60 4.96 (5.67) DECLINE R: 1676.30 -6.47 (-6.77)
Nikkei 13660 BULL S: 12602 2.12 (2.90) DECLINE R: 13981 -3.54 (-3.84)
FTSE 100 6492 BULL S: 6307 2.12 (2.33) DECLINE R: 6568 -3.72 (-3.85)
DAX 8417 BULL S: 7987 2.73 (2.42) RALLY S: 8274 0.54 (0.44)
Bonds (TLT) 104.29 BEAR R: 113.00 -7.0 (-6.9) DECLINE R: 105.40 -6.7 (-7.54)
Gold (spot) 1397.5 BEAR R: 1430 -2.39 (-3.79) RALLY S: 1321 5.13 (5.01)
Euro/US$ 1.3375 BULL S: 1.3048 2.65 (2.1) RALLY S: 1.3229 2.43 (2.37)
Oil (CL) 106.42 BULL S: 97.22 5.76 (5.98) RALLY * S: 104.29 -0.24 (0.05)

(Legend: W = weekly, D = daily, R = resistance, S = support, Mom = momentum, * = changed from previous week/day)
(for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )

Some change in the table presentation from this week onwards. The weekly and daily momentum is now shown in a numeric format rather than just “up” or “down”. The value can vary between +10 and -10, and between parentheses you can see the previous value, so you can still see whether momentum is going up or down.  I will have more info on this in another article later this week. For now it is sufficient to know that values above +8 or below -8 are extreme and usually followed by a significant reversal in the other direction.

Important developments last week:

* Most stock markets posted declines, nicely in  line with the declining mode and downward momentum we had on for them. But we see first signs of stabilization. The Nasdaq looks stronger than most other indices and has climbed back into rally mode last Friday, if only barely so. The German DAX index has remained in rally mode throughout the recent weakness.

* Weekly momentum keeps going down for the covered stock indices, except DAX. The daily momentum has turned upwards for all stock indices. This means we are in a rebound move from recent losses. Whether it will be strong enough to turn all markets back into rally mode remains to be seen.

* Bonds (TLT) remains in bear status and in declining mode, but the daily momentum has once again turned up, and bonds are now close to switching into rally mode for the first time since early May. With both the weekly and daily mom at very low levels (near -7) there is potential to go up quite a bit, despite the ongoing Fed tapering noise.

* Gold is getting close to its weekly key reversal level, so could go into bull mode soon. But the daily momentum is starting to stall around 5, so I think gold will first take a step back before it can make another step forward.

* The Euro/US$ remains in rally mode, but also here we see daily momentum stall, so could fall into declining mode very quickly.

* Oil has been switching between rally and decline mode several times in recent weeks. But both the weekly and daily momentum are now going down, which puts question marks behind Friday’s rise in oil prices. Oil is going to make up its mind sooner or later: either break above the $110 hurdle, or fall back below $100. In either case, we probably have a significant trending move coming up in oil.

 

And here are our key target levels:

 Key Targets Top Top2 Bottom Bottom2
Nasdaq 3730 3830 3530 *  3210
S&P 500 1738 1799 1576 * 1522
Nikkei 16580 17980 12710 *  10450
FTSE 100 6750 7100 6205 * 6110
DAX 8550 8920 7210 7030
Bonds (TLT) 128.50 134 102 96.25 *
Gold (spot) 1448 1650 1078 1001
Euro/US$ 1.36 1.3950 1.2350 1.17
Crude Oil(CL) 109.40 * 121 89.50 77

(* = new target, Bold = closely matches a major weekly key target )
(for more details about these key targets, see: https://lunatictrader.wordpress.com/2013/08/20/key-target-levels/ )

The key targets from weekly calculations do not change very often, so I have simplified the table by showing the key targets derived from daily calculations and showing them in bold print whenever they match closely with a weekly key target price. When a certain key target price pops up in both calculations then it usually means a hurdle that is more difficult to overcome for the market.

Important developments last week:

* Last week’s decline in stock markets has generated some new bottom targets (always marked with an “*” in the table) for most indices.

* There is also a new bottom target for TLT at 96.25, and a new top target for oil at 109.40.

* The 102 bottom target for TLT was reached last week and produced a nice rebound. That’s what these target top or bottom levels are supposed to do: they tend to reject prices and send the market in the other direction for a while. When these targets get tested for a second or third time, that’s when they typically get broken and then the next target comes into play.

 

If all these numbers look a bit confusing to you, don’t worry. Just keep an eye on a few markets that interest you and watch what happens as the key reversal or key target levels are reached. The pieces of the puzzle will then start falling into place. It just takes a bit time to get used to.

When all the materials are presented and I am satisfied with the format, then I will summarize everything in the fixed article page about these key levels.

So, stay tuned.

Danny

 

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