LT wave for February
Posted by Danny on February 1, 2016
Stocks have continued their rebound and suddenly it looks as if the world is not falling apart after all. Last week we have warned that the bottom may be in and so far that call doesn’t look bad. We are in a new lunar green period again, and in the previous period the lunar cycle finally got back on its feet after a string of failed periods. If this is the start of some cyclical normalcy then we can look forward to further gains. Here is the current S&P 500 chart:
Major support levels were seriously tested, and they bent but didn’t break. The slower Earl2 (orange line) has finally turned up from a major low. All three my indicators are now pointing in the same direction: up. We may get a few more air pockets, but it looks pretty good. I think this market can continue towards 1980, where I would expect first major overhead resistance. Then we will see what happens next.
The obvious line in sand is now given by the January 20 lows. If that gets broken to the downside the chart would look really ugly and then another wave of panic selling would become hard to avoid. But that’s not the base scenario for now. I think there is a good chance that January 20th will stand as the low for the year.
The LT wave for January did an almost perfect job. Weakness until the 21st, followed by strength in the final week. The market bottomed on the 20th, just one day after the lowest LT wave value for the month. Highest value of the month was the 29th, which gave us the strongest up day. It doesn’t get much better than that. Here is the LT wave pattern for February:
The wave suggests some weakness early in the month, with the lowest LT wave value coming on the 5th. After that it improves steadily with the second half of the month being mostly positive. Highest LT wave values are on the 8th, 18th and 26th. Let’s see how it goes. Bear in mind that this LT wave is experimental, so don’t be too confident that it will always work as well as it did last month. There is no perfection in this world, only perfect imperfection.