The market was about flat last week and the lunar red period ended with a solid 167 point gain on the Nasdaq. It is the first time this year that stocks gain during a red period, which suggests underlying strength in the market. Can the market go even higher in the new green period? Let’s have a look at the Nasdaq (click image to enlarge it):
The Nasdaq has come a long way since the late September lows. A 12% climb in 4 weeks has made most indicators look very overbought. The fast Earl (blue line) is turning down again while the slower Earl2 (orange line) is getting very high. The MoM indicator is going into the very optimistic +8 zone, which has usually been consistent with short term peaks (see green arrows). The situation asks for some consolidation period, but will we get it? The market may just stretch itself for another couple of weeks and try to get back to its summer highs without looking back. I don’t know at this point, neither a further climb nor a pullback would surprise me.
The LT wave chart for November doesn’t rule out further gains either (click image to enlarge it):
For October the LT wave correctly indicated strength in the first half of the month, but expected weakness in the second half did not pan out. The drops in the LT wave coincided with very mild pullbacks, but the overall up trend remained intact. It will be interesting to see whether this continues into November. The LT wave projects some weakness in the first days followed by a positive bias until the 13th. The rest of the months is rather neutral. Lowest values of the month come on the 4th, the 19th and the 26th, the highest LT wave reading is on the 11th.