US stock markets have been fairly flat in July, neither breaking down nor breaking out to the upside. The current lunar green period will end Wednesday. So far it looks like a rather weak green period, but we have a few more days to go.
The upcoming red period will contain a supermoon. Over the last 60 years supermoon red periods have on average been rather positive for stocks, unlike normal red periods. See my article: https://lunatictrader.wordpress.com/2013/06/24/trading-the-super-moon/.
Does that mean the market will climb even higher? We cannot rule it out. Sometimes the market does go down in supermoon periods, but more often it goes up. Note: in the media you may read that we are having three supermoons in a row (July – September). Technically that’s true, but for my research I consider the one that comes closest to Earth and for this year that is the August supermoon.
Let’s have a look at the Nasdaq to see what could be in store (click for larger image):
Nasdaq is clearly hesitating near overhead resistance lines. Even though it feels like a bull market, we can see that this could be an ongoing sideways pattern that started last December, trading above and below 4200 alternatingly. If so, then a drop back to 3950 could come next.
Technically, my slower Earl2 indicator continues to point down, but the shorter term Earl is more positive and also MoM has turned back up after touching the zero line. This means we could first reach the 4530 level that my price target algorithm has been pointing out since the middle of March.
Taking a closer look for further clues (click for larger image):
Prices have been contained within a nice channel that started in late April. With both Earl and MoM in rather neutral territory and the market in indecisive mode, we will continue to grind sideways inside the pink triangle until there is a clear breakout, up or down. That could give us a 4530 high print, as that’s where the overhead resistance (grey dashed line) lies for the coming weeks.
On the downside I watch the July lows ~4350. A break below that level would tell many traders that the trend has turned down, and would probably trigger significant selling with the 3900-4000 area as the first downside target.
Good luck and stay tuned,