Stocks pulled back a little bit last week, nicely in line with what we expected. The recent lunar red period ended with a 25 point gain for the Nasdaq and now we are starting a new green period. Let’s have a look at the current situation for the Nasdaq:
This index topped out at 4835 early in the week, right in the area where stronger overhead resistance is likely. The Earl indicator (blue line) is already back in the bottom zone, which means another push higher is not out of the question at this point. But the slower Earl2 (orange line) is making a major high and about to turn lower, and that is usually a headwind for any rally attempts. The MoM indicator is painting a bearish divergence, and that may keep a lid on the market as well.
All in all this is not a very favorable setup for trades on the long side. The more likely scenario is consolidation, probably sideways with dips as low as 4600 for Nasdaq.
The LT wave for March did a rather mediocre job. Expected weakness in the first week did not materialize, but the predicted strength in the middle two weeks panned out nicely. The highs and lows in LT wave did not match the extremes for the month. Life would be too good if it always worked. For April the LT wave looks like this:
For the first 2 weeks the LT wave is very choppy around the neutral line, without outstanding highs or lows. There is a slightly positive bias until the 9th, followed by a slightly negative bent until the 15th, but it’s basically a toss-up. From the 16th until 22nd there is a stronger period, and the final week is much weaker with a significant LT wave low on the 25th.
For new readers, this LT wave is experimental and doesn’t use any market input. So, don’t bet the bank on it.
LunaticTrader 