Posted by Danny on June 22, 2015
The Nasdaq reached new all time highs last week, the S&P 500 and the Dow didn’t. Meanwhile all eyes are on Greece and on how its standoff with the EU gets resolved. More on that at the end of this post. Let’s have a look at the S&P chart first (click image to enlarge it):
The S&P 500 is trying to rally to new highs. Price action remains confined to the very narrow range that started in March. A breakout above 2150 would tell us that the bull market continues. But that remains to be seen because we are just starting a new lunar red period.
Technically it doesn’t look bad. The Earl (blue line) and MoM indicators are going up nicely and the slower Earl2 (orange line) is tentatively turning up from a shallow bottom. But can the market do it? It is still in the balance.
The lunar cycle has correctly pointed the way all year and is now 12 for 12 in 2015. But that streak will not last forever. Sooner or later we will have a red period in which the market climbs strongly, or a green period in which the market drops significantly. And whichever comes first is likely to show us the direction of the next major move in the US markets. Lunar cycles tend to show up most clearly in a sideways market (like we have had this year). When the market is in a strong bull or bear trend the lunar cycles are more easily overcome by the broader trend. That’s why we now look for the first failed lunar period to bring us some important indication.
Will news from Greece push global stock markets one way or the other? Maybe. As chart of the week we will have a look at the Greek stock market. I have commented on the Greek crisis on a few occasions. In February 2012 I pointed out that news of a 130 billion Greek bailout was a contrarian sell signal. That turned out to be a good call, as in the next 6 months there were two significant sell-offs in US markets. Here is what I wrote back then:
The media will try to sell the new bailout of Greece as good news, but is it?
1) This Euro 130 billion bailout amounts to Euro 12000 (~ $16000) for every person in the country. What is it going to be used for? Is it going to be “spent”? Or is it going to be put into some productive investments? If so, which ones?
2) How is it going to be payed back? By whom?
3) And what if Portugal or Spain demand similar “help”?
All questions that are still equally relevant today, now more than 3 years later.
I picked up the Greece theme again in September 2012, pointing out a major buying opportunity based on my Earl indicators. Greek stocks more than doubled in the ensuing 18 months, so that panned out nicely.
And here we are, with Greek stocks once again hitting rock bottom levels. This is a weekly chart for the Athens stock exchange (ASE) (click image to enlarge it):
The index stays well above the lows it reached in mid-2012. All my indicators are showing major bullish divergences. That doesn’t mean lower lows are not possible, but this is the kind of setup that favors a significant rally in the medium to long term.
I would buy with one hand if Greece stays in the euro, and buy with both hands if it leaves the euro. First upside target is near 1500, and if it gets above that resistance then look for 3000+ in the longer term.