August is slowly coming to an end.
Today we take a look at the LT wave for September (click for larger image):
The LT wave did fairly well again in August. US stocks reached a new high on August 5th, but the market failed to build on those gains as was expected on the basis of the LT wave.
The subsequent drop into August 16th was followed by a rebound until August 24th, nicely in line with the wave chart. And the weakness we see this week is also coming right on the mark.
Looking at September, our LT wave shows some strength in the first week of the month. This could become a rebound after the current sell-off. Then around September 11th we see the start of a rather prolonged period of weakness. Around September 16th we could get a few stronger days, but the generally the last three weeks of September show a negative bias.
So, if we get a rebound high on September 6th or 9th, then I would use it as an opportunity to sell.
One reader asked whether seasonal tendencies, sunspot cycle or geomagnetic storms are used as an ingredient to calculate this LT wave. The answer is no. Lunar cycles are the main ingredient, and together with some other factors and filters this LT wave chart is generated. I can calculate this LT wave for the next centuries already, and it will be included in the next version of the LunaticTrader program, which will give them up to the year 2100.
This means that methods like seasonal tendencies or technical considerations can be used in addition to what this LT wave suggests. When more different methods are lining up in the same direction, it is usually more significant.
Good luck,
Danny
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It appears we are heading for a bottom 1590 on the S&P in the first week of October. We are long over due a test of the 200 dma and it would be a healthy retracement before a further uptrend. Do your models project this?
Hi Vincent.
The LT wave chart for October shows a low period around the middle of the month. I will post it next week. So, that’s where I would expect a bottom if we get a pullback from the current highs. Clearly, the market has been doing a lot better than our LT wave for September suggested. Basically this suggests that the path of least resistance remains firmly up. Of course, that may change.
As you can see in my weekly key reversals post, my MoM indicator is currently going a very optimistic +8 for the S&P 500. That doesn’t mean it has to start dropping right away, but if it does then my models would call for a test of the daily key reversal level at 1671 first, and then the weekly key reversal level at 1611.60. If those levels do not hold, then I would start looking for 1576, the first bottom target zone for S&P
So, it is being taken in steps.
There will be a test of 200 dma eventually, but it wouldn’t surprise me if we get it in early 2014 rather than next October. I think too many investors are looking for a pullback or crash in October, and usually that means we get something else.
Danny