LunaticTrader

Investing with the Moon

Breakout imminent

Posted by Danny on May 4, 2015

Stocks weakened last week, but the Nasdaq remains in the rising wedge pattern that started last year. It is still not clear which way the eventual breakout move will go. Here is the current Nasdaq chart (click image to enlarge it):

Nasdaq

Thursday’s drop threatened a breakout to the downside, but Friday’s recovery shows the Nasdaq might try to hang on. We remain in a lunar red period until later this week, and my technical indicators are pointing down with bearish divergences in place. This means the Nasdaq remains at risk of a sudden sharp drop as long as this pattern is not resolved.
This is still not an attractive entry point for investors who are looking to go long. So, I would wait until the sky clears.

The LT wave for April did a good job, indicating the main swings of the month pretty well. Here is the LT wave for May (click image to enlarge it):

LT wave May 2015

The wave projects weakness in the first half of the month followed by a stronger period. The lowest values come on May 6-8 and on May 15. The highest value of the month is on May 21, with smaller peaks on May 3, May 11 and May29-30.
As always, use this LT wave with the necessary care as it is an experimental method.

I have also updated our Dow 32000 scenario, comparing the current market to the great bull run of the 1920s (click image to enlarge it):

Dow vs 1920s

For the first time in more than a year we see the market deviate a bit from the pattern it followed in the 1920s. This had to happen sooner or later. As I pointed out in the most recent review of this scenario, the Dow needed to climb to 20000 this spring to stay on track, and that has clearly not happened. Of course, the Dow could catch up by reaching the 20000 level this summer, and then it would be back in line with the 1920s. But that remains to be seen of course.
Interestingly we are ending the period that was marked by mild recession in the 1920s scenario and closing in on the point where the Fed started raising interest rates. That sparked the final mania stage in 1928-29. Are we setting up for a repeat? Most investors are probably not prepared for anything like that, so it could be interesting.

Good luck,
Danny

6 Responses to “Breakout imminent”

  1. Stephen Maycock said

    Hi Danny,

    Thank you for the useful information. Recently, I downloaded lunatic trader (trial version) is it possible to input data and crest a table of trades, similar to the one you post??

    Or do we require the full version??

    Regards,

    Stephen Maycock

    >

    • Danny said

      The program doesn’t use any market data, as the charts depends purely on the moon cycles. So, there is no way to input data.
      The full version is the same as the trial version, with the only difference that you get the charts until the year 2100 in the full version.

      You can see the charts going back to year 1900, which can be used to test it on other indexes or commodities if you want. But in the current version there is no automated way to do this kind of backtesting. Maybe in a next version.

      Danny

      • Stephen Maycock said

        Thanks

        So in order to create a table with buy and sell signals, is that something you do with the program?? Or not

      • Danny said

        The basic instructions to use the program are in the help files and in the tutorials that are included.
        The forward testing results we keep here: https://lunatictrader.wordpress.com/performance/ are not being generated with the program. We update them manually at the end of each green or red period and send out a tweet to those who follow us.

        Danny

  2. Jim P. said

    Hello Danny,

    How do you view your Lunar Cycle, (which suggest an upwards bias for stocks between the Full Moon 05-03 and New Moon 05-18), …..as compared to your LT Wave for May, (which projects weakness for the first half of May).

    They seem to be opposite forecasts. Which do you prefer? Regards, Jim P.

    • Danny said

      Hi Jim,

      The LT wave uses lunar cycle as a major input, but it’s not he only ingredient. So, sometimes it differs from the standard green and red period pattern.
      There is no preference in such a case. It just means there is a bit more chance to get a lunar cycle inversion in which market goes down in a green period.

      Danny

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