LunaticTrader

Investing with the Moon

Iceberg chart for gold

Posted by Danny on September 8, 2015

Stock markets had another rough week. We got the serious down days and the nervousness I warned for in last week’s post. Now the question becomes whether the August lows will be revisited or not. Let’s have a look at the Nasdaq chart (click image to enlarge it):

Nasdaq

We are in a new lunar green period, but that has not resulted in a sustained upward move so far. Meanwhile the Earl and MoM indicators keep going up, while the slower Earl2 (orange line) is about to bottom out at a deep low, on a par with the major lows it reached in April and October 2014. Three weeks ago I recommended to stay very cautious until we see a clear bottom in the Earl2 indicator. The Earl2 is now flattening out and will probably turn up in the next few days, so now is the time to start looking for some bargains.
Major upward resistance is near 4800, the late 2014 highs. And support is probably just below 4600, the January lows.

I would also like to point out that the Skew index hit a very high 142 last Friday. This means that a lot of crash insurance was being bought and unusually high premiums were being paid. Fear is very high in the market. From March until a few weeks ago the Skew rarely went above 130 and mostly traded near 120. This means investors weren’t all that worried and didn’t buy much crash insurance (if any). But now that we have seen a market drop the Skew is suddenly jumping to its highest level in almost a year. This is an example of buying boots after the flood. See the article on Skew index that I posted earlier this year: Forget the VIX, watch the SKEW. This suggests we are in a short term correction, not at the start of a long bear market. Throughout the bear markets of 2000-2003 and 2007-2009 the Skew consistently stayed low and didn’t even get above 130, much less 140. A low Skew means complacency, a high skew means fear. So, right now we have fear. And as the saying goes, it is time to buy when others are fearful.

Some people have been asking for more Iceberg charts. I will try to do one very week. We will start with gold (click image to enlarge it):

Gold icebergs

Gold had a nice bout of bullish energy (green) in the beginning of 2015. “Lava” marked the peak in January. “Floating ice” appeared at a bottom in March. Some erratic bullishness showed up in May and June, but that hardly managed to keep the market flat. “Floating ice” marked the next bottom in July. And now we have had another rally attempt, but bullish energy is even weaker than on the previous occasion. It has only painted a few “small islands”. In a healthy bullish market the amount of green climbs above 4, and that’s what I would wait for if you are looking to buy gold for long term.
If you missed out on my earlier article introducing the Iceberg charts, you can find it here.

Danny

12 Responses to “Iceberg chart for gold”

  1. AlanSW said

    Thanks very much Danny. Excellent as always.

    I think gold will probably re-test the July/August lows. I’m watching NUGT (a gold miners 3x leveraged ETF) and plan to start dripping money in at $2 and below. Anyone reading this – don’t take this as advice – DYOR.

  2. AlanSW said

    (forgot to tick the box for new comments via email so making another post – sorry for clogging up the comments)

  3. Ege said

    19 sep 2014 skew(146,08) SP 2010 then the largest decline begins to 1810s.Fear high and others are fearful you’re saying it is time to buy.You explain that I did not understand .

  4. Smit said

    Hey Danny,

    A quick question, I know its too early to ask! Looking rite now asian markets…like Nikkei up 5.35%, China up 2%. Do you think 9th September will have the lowest value or should we wait till 10th or 11th to enter market (I trade spxl i.e. 3 times leveraged Bull S&P) so that we can exit near 15th september which has the highest value. Please let us know. Thank you Sir !

    • Danny said

      Hi Smit,

      It sounds like you have too much confidence in the LT wave getting it right to the day, month after month. That’s not going to happen. See my post explaining why you shouldn’t have more than 60% confidence in any of my methods: https://lunatictrader.wordpress.com/2014/02/10/the-60-rule/
      I cannot predict what will happen Sep 9th or Sep 15th. I can also not giving personalized advise when you should buy or sell. Just bear in mind that using 3x leveraged etf is a risky way of playing the market.

      Danny

      • Smit said

        Haha! Hey Danny, I have more faith in ur LT wave theory than you do! just kidding…to me ur a mentor! And i respect and appreciate ur work from my bottom of my heart! Btw today, it did had a dip! And i am little bit in and might jump in tomorrow also for a long ride “hopefully” ;) And yes i do know about the “decaying” thing of 3x leveraged ETF’s. I know u won’t comment on this…but i personally feel…1920 and 1954 are very important levels !
        Thank you so much Sir :)

      • Danny said

        Generally the broad tendency over multiple days is more reliable than the day to day peak values. If some upward trend between now and Sep 15th fails to materialize then it would be an indication that the market remains very weak and it is better to get out. So, I look for the patterns to show up, but if they don’t it is important information that can help us “read” the market.

        Danny

      • Smit said

        Exactly! Thank you Sir!

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