LT wave for February

Stock markets are trying to stabilize near some important support levels. The most recent lunar green period recorded a 94 points loss for the Nasdaq, so that’s as weak as it gets in terms of our lunar cycles. With a lunar red period now getting underway we shouldn’t be surprised to get more downside action in the coming weeks. Here is the current Nasdaq chart (click for larger image):

Earl indicator (blue line) is turning up from a very oversold level. That’s a first positive sign and suggests we will get more of a rebound this week. But the slower Earl2 (orange line) is still going down, so too early to call for a bottom at this point. And, this week we have only 14 bullish stocks left in the Dow Jones Industrials, which is also a bearish sign : http://t.co/m7sJiCKdwo (see also last week post for explanation).
I would look for an attempt to climb to 4200 again, followed by another leg down that should test the bottom of the long term trend channel near 4000. If the support just below 4000 doesn’t hold, then the next downside target will be around 3600.

The LT wave chart for February is suggesting a similar scenario (click for larger image):

The LT wave did well in January as it correctly indicated a weak month. Actually, the S&P 500 reached its high for the month on January 15th, while the Nasdaq reached a high on the 22nd. These two dates showed up as peaks in our LT wave chart (marked with “1” and “2” here). Obviously, it doesn’t always work that well, but it’s nice when it does.

For February we see the month start with some strong days, until the 5th. That could give us a rebound high after last week’s sell-off. Then another period of weakness until approximately February 22nd. This can come in the form of a double bottom or as a push to lower lows. The last week of the month looks more positive again.

Good luck,
Danny

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