There was panic selling in the markets before stocks recovered towards the end of the week. We already warned weeks ago that things could turn ugly quickly and that’s exactly what we got. It’s too early to tell whether the lows are in or not, but we can have a look at the new situation in the S&P 500 (click image to enlarge it):
The lunar red period will end this week. The Earl indicator (blue line) has turned up from a significant bottom already. The MoM is turning up as well. The slower Earl2 (orange) line is still going down, but entering deep bottom territory. This means we could easily see a further rebound, and I think the old support levels near 2050 on the S&P will now become strong overhead resistance if the market gets there. Plenty of investors who bought stocks in the recent 6 months, and were shocked by this sudden drop, will be looking for a chance to get out near break even.
So, I wouldn’t look for an easy climb back, like we saw in October last year. I expect some more serious down days and continuing nervousness. How well the market keeps recovering (if at all) in the next lunar green period will give us new clues going forward. The weekly reversal levels are still fully bearish for most stocks and indexes, so patience is probably a good idea.
Here is the LT wave chart for September (click image to enlarge it):
The wave did well again in August. The month started weak as expected, and projected strength into the 17th barely managed to keep the market flat. The ensuing crash bottomed on the 25th, which was the LT wave low value for the month.
For September the LT wave stays close to neutral for the first 8 days, with a possible dip near the 9th. Then a strong period until the 21st followed by weakness in the final week. The highest LT wave value comes on the 15th, with low values coming on the 9th and the 28th.
As always, bear in mind this LT wave is experimental and will not always work as well as it has done in recent months. So, don’t bet the bank on it.
Hi Danny, does the LT wave work for intraday? Also can you please post the iceberg charts for SPY?
Welcome. I wouldn’t use the LT wave for intraday. It works best for timing swing moves that can be one or two weeks in duration.
I will try to add some iceberg charts in my next week’s blog post.
LT wave is great. Thanks for all of your work which I have benefited from a lot. You are the best!
Thanks for the thumbs up, Steve. Good to hear some people benefit from it.
Of course, it will not always work as well as it has done in recent months, we known that. But once the LT wave is “on” it can stay on for many months and that’s a good thing to know.