Close to the breaking point
Posted by Danny on June 8, 2015
Stocks declined last week, and the lunar red period ended with a 23 point loss. The lunar cycle has been working like a Swiss clock so far this year. All green periods have been profitable with a total gain of 562 points on Nasdaq, and all red periods have generated declines for a total loss of 257 points. It doesn’t get any better. But this winning streak will end eventually, maybe as soon as the new green period that has now started.
Let’s have a look at the S&P 500 (click image to enlarge it):
Stocks have pulled back, but remain within the very narrow range that started in March. There is no decisive breakout yet. This is also reflected in the Earl2 indicator (orange line), which has been converging towards neutral for 6 months, not giving us much of a clue about the next major move. The faster Earl (blue line) is in bottom territory, but not turning up yet.
With a new lunar green period underway, a rally attempt may be up next, but it is possible that the S&P will drop to major support at 2050 first. So, if you are looking for a chance to buy I would wait for the Earl and MoM indicators to turn up.
The market is close to a breaking point, and the reversal levels are also flashing warning signs for several markets (see my weekend outlook). But, coming close to a breaking point doesn’t mean the market has to break. It is fairly common for markets to go the edge before rebounding. All we can do is keep our eyes open.