Our key tables and comments for this week :
* The FTSE100 index has gone into fully bearish mode, the first major market to do so. The DAX is weak as well, but still holding above its weekly key reversal level. Both are testing their Bottom1 targets already. The US markets have been stronger and remain bullish with upward MoM on the weekly level.
* In the daily key levels all major stock indexes are showing downward MoM, which means a pullback is underway. Is it the start of something bigger? That is always possible. Every bear market starts with one down candle and with one down swing. Right now there is no reason for panic, but if the US and Japanese market also drop below their daily key reversal levels, then the outlook for stocks will darken. So I wait and see.
* For the Nasdaq we have a new Top2 target at 4659.
* In other world markets the French CAC 40 has gone into bearish mode. Several other European markets are coming close to do so as well: Italy and Switzerland. New problems brewing in Europe? Hmmm, just old problems resurfacing… Weekly MoM has also turned down for the MSCI World index, marking a possible long term peak.
* Bonds (TLT) have bounced back, but weekly MoM keeps pointing down for the bond market.
* Gold is back to fully bullish. $1415 is the Top1 target if we get another leg upwards. Now it is becoming DO time for gold.
* The Euro is stuck around 1.36. Key levels are bearish for the Euro at the moment, but that doesn’t mean much in a market that has been going sideways for so long. A big move will come, but which way? Plenty of traders are probably looking to go long Euro on a breakout above 1.40, or to go short on drop below 1.34…, and that may or may not work, as fake out moves have become common. In a coiled market like this one I like to take a look at the monthly key levels for direction. Monthly MoM for $EURUSD is going down since May (it had been going up since August 2012) and a monthly close below 1.3264 would confirm the next major move is indeed down.
* Oil has dropped below its weekly key level and is now fully bearish. The Bottom1 target for oil is 94.60
* Our weekly key reversal levels for the 30 Dow stocks are available here. 28 stocks are bullish this week, up from 27 last week. Above 20 is healthy, see : Keeping an eye on the Dow stocks.
* A reader wrote me to tell how boring it is, e.g. my posts keep repeating “healthy bull market” for the Dow Jones week after week.
What to do? It is not as if shorting the Dow Industrials has been profitable in recent months. I can only repeat George Soros on that point: “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
If the key reversal levels are boring it is actually a good sign, it means they are not pointing in a different direction every other week. And that can only mean we are getting good trending moves. E.g. the Nasdaq has been in weekly bullish mode for 79 weeks and counting. It doesn’t get any more boring than that. When we started posting them the weekly key reversal level for the Nasdaq was at 3221, now it stands at 4109, so that is 900 points of Nasdaq profit quietly locked in by our key levels. Meanwhile plenty of other analysts/bloggers have been trying to nail the top since the beginning of last year (if not before). I am sure they have not been bored. But how much have they lost by now (provided they trade their own calls)? 20%, 30%, more? By the time we actually do get a correction it will perhaps give them back half of the money they lost, or back to breakeven if they are lucky (provided they have not given up trading their own calls by then). That’s a big price to pay for being able to say “told you so”.
Some day our key levels will stop saying “healthy bull market”. Maybe next week, next month, next year… It will come.
***
Here are the updated tables.
Key reversal levels for next week:
| Weekly | Current | Mode | Key (W) | MoM (W) | Weeks | % Ch. |
|---|---|---|---|---|---|---|
| Nasdaq | 4,415.49 | 4,109.03 | 6.88 | 79 | 42.93 | |
| S&P 500 | 1,967.57 | 1,861.01 | 7.57 | 84 | 38.92 | |
| Nikkei | 15,164.04 | 14,607.06 | 3.08 | 5 | -0.26 | |
| FTSE 100 | 6,690.20 | 6,834.48 | 1.32 | 0 | 0.00 | |
| DAX | 9,666.34 | 9,409.44 | 4.08 | 15 | 0.46 | |
| Bonds (TLT) | 113.58 | 109.23 | 2.31 | 24 | 6.46 | |
| Gold (spot) | 1,338.12 | 1,279.81 | 0.47 | 3 | 1.76 | |
| $EURUSD | 1.3607 | 1.3729 | -2.19 | 8 | -0.60 | |
| Oil (CL) | 100.83 | 104.15 | 2.36 | 0 | 0.00 |
(Legend: Mode: green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
Latest daily key reversal levels:
| 7/11/2014 | Current | W | Mode | Key (D) | MoM (D) | Days | % Ch. | Str. # |
|---|---|---|---|---|---|---|---|---|
| Nasdaq | 4,415.49 | 4,342.43 | 3.49 | 35 | 6.76 | 2 | ||
| S&P 500 | 1,967.57 | 1,948.25 | 3.24 | 35 | 4.20 | 2 | ||
| Nikkei | 15,164.04 | 15,128.86 | 1.04 | 36 | 5.22 | 2 | ||
| FTSE 100 | 6,690.20 | 6,797.17 | -2.79 | 3 | -0.72 | 11 | ||
| DAX | 9,666.34 | 9,908.46 | -3.60 | 3 | -1.25 | 7 | ||
| Bonds (TLT) | 113.58 | 111.94 | 0.90 | 3 | 0.82 | 5 | ||
| Gold (spot) | 1,338.12 | 1,299.15 | 3.36 | 21 | 5.12 | 17 | ||
| $EURUSD | 1.3607 | 1.3643 | -0.33 | 5 | 0.10 | 15 | ||
| Oil (CL) | 100.83 | 104.71 | -5.52 | 5 | -2.81 | 11 |
(Legend: Mode : green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | W = weekly mode | for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
Our current key target zones (we use a +/-1% zone around these targets):
| Key Targets | Top1 | Top2 | Bottom1 | Bottom2 |
| Nasdaq | 4531 | 4659 * | 3975 | 3742 |
| S&P 500 | 2001 | 2031 | 1755 | 1641 |
| Nikkei | 15976 | 17220 | 13860 | 12940 |
| FTSE 100 | 6800 | 7110 | 6642 | 6230 |
| DAX | 10240 | 10450 | 9682 | 8715 |
| Bonds (TLT) | 114.60 | 115.70 | 108.25 | 102 |
| Gold (spot) | 1415 | 1541 | 1160 | 1075 |
| $EURUSD | 1.3950 | 1.42 | 1.3403 | 1.2870 |
| Crude Oil(CL) | 109.24 | 112.47 | 94.60 | 91.85 |
(* = new or updated target ) (for more details about these key targets, see: https://lunatictrader.wordpress.com/2013/08/20/key-target-levels/ )
Good luck, Danny
LunaticTrader 
I mean good wine, kind of wine people were drinking in the past centuries. Today, the best wines: Croatian, Georgian, Italian, contains nasty additives and chemicals used for mass production. The producers cannot risk to lose a few tonnes of fruit, so they have to use potentially harmfull ingredients. Good wine means getting proper yeast and having fun composing fruit and herbs, making small 5l ‘limited editions’, storing them in the basement for one’s own comnsumption. ‘Modern era’ is here, helas.
Good wine I can make on my own is nowhere for sell.
Same for tobacco, plant it in your garden, then smoke. Don’t breath in ‘chemistry’.
…as a hobby wine maker I can attest to that. I even make “not-so-limited” 50 l editions ;-)
Totally agree! Trading/investing is boredom, while looking for opportunities (for various reasons : frustration, seeking revenge, adrenaline addiction, boredom) while there aren’t any, will be the traders’ undoing. So it’s better to look for distractions than trade out of boredom. Movies, gardening, shopping, travelling. For many traders the real challenge though would be to stay objective. Am I tired? Does it really look good? Isn’t my position rose-tinting the chart? Frustration – after a loss – will always mess up with our risk assessment. A good win may alter our risk perception, too. So basically I tend to believe that trading has more to do with our mental state than trading rules. I decide, I judge, I pull the trigger, I see, I feel…what if ‘I’ is corrupt?
Curiously, I make less ‘psychological mistakes’ after a glass of wine, as if all ‘evil’ stemmed from fear. Yeah, fear…of being down for a day, for a week, of doing worse that projected, than last month -which was good anyway. Fear that I had 3 losses in a row so maybe the market is evolving to the point that it is going out of reach. Plenty of fears out there lurking and ready to take over and outmanoeuvre our sound judgment. A glass of wine, fears go to sleep. But one glass too much, and wine will start to mess up with our logical thinking capabilities, so there is balance ;)
Personally, it’s not convenient for me navigate your bullish/bearish modes. For me, there are a lot of neutral markets out there and I treat them as such. For example, Nikkei has been in a range for a year. Of course, within that range there were moves down and up, and sure one of those moves will be eventually the beginning of a true bullish/bearish trend. For me, a trend move is a move outside the shadows of a range. Or EUR/USD : no mode whatsoever for me. At the weekly chart, I see many years’ contracting range, lower highs and higher lows. As long as the price fluctuates within that triangle, no mode for me. It of course depends on one’s view, but I prefer to classify the markets my way. When I look at daily or hourly EUR/USD, I still have this higher time frame range contraction before my eyes. And I don’t trade that market, however bearish or bullish it might look on smaller time frame.
Anyway, your own trend modes – in terms of seeing the market – are light-years away from looking for signs of topping every week, you know what I mean.
Keep up the good ‘boring’ work.
Good observations.
Some artists/writers are more creative and “free-flowing” after a bit of wine. I can imagine some ppl have a more free-flowing look on the market after a few drinks. The question should always be: “what works for me?”
The challenge is to stay objective. And that’s where a form of key levels can come in. E.g. if a market is in bullish mode both on daily and weekly level and I am short that market, then I better ask myself why I am still short that market.
I agree that there is something like a neutral/sideways mode. The problem is that there is no objective straightforward way to determine whether a market is in sideways mode (of course, with the benefit of hindsight we can tell). The key levels usually reflect a sideways mode by giving mixed signals. A sideways market mode is also typically indicated by the MoM starting to be more profitable than the bullish/bearish mode based on the key reversals. When the market goes sideways the trending moves are too small for the key levels to be profitable, they then take small losses while switching between bullish and bearish until a good trending move comes along. But when in sideways mode the MoM usually does well. So, it is a double system.
For me , posting these key levels is about putting out a proof of concept. It also helps me to stay focused and get feedback that helps to improve them. And if it also inspires some readers to discover a way to stay objective, then that’s good. Of course, many traders already have some kind of “key level” system in their head, or in their trading software. e.g. Darvas boxes or various types of moving average used for that purpose. When a trader has years of experience with a certain approach, it becomes engrained in his overall trading approach. Then it would not be wise to throw that away by shifting over to my method of key levels. A good car can become a very bad car if we exchange certain parts with spare parts from a different model/brand. It is no different with trading methods. My key levels may very well be incompatible with the trading method that you or other readers have inside their head. To change a certain part of your “trading engine” should always be done with the greatest care and consideration.
Danny