LunaticTrader

Investing with the Moon

Posts Tagged ‘1987’

LT wave for August

Posted by Danny on August 1, 2017

US markets have reached new record highs. Hurray! Or, last hurray?? S&P 500 and Nasdaq have done exactly what I expected to happen per my recent posts: Ready for 2500 and Show Time. The S&P 500 is stalling just below 2500, and Nasdaq has climbed to 6400 but seems to encounter air pockets up there. A few weeks ago I said that kind of price action would be a sign of weakness. Let’s see how that looks like in the current chart:

^SP500 (Daily) 10_16_2015 - 7_31_2017

The same drawing I posted on July 11, with the S&P now moving nicely into the projected blue target circle. That’s not the product of some magical crystal ball I have, but merely linear interpolation of the recent trends. That obvious trend will stop eventually and the big question is when and where. My Earl indicator has turned down already, and the slower Earl2 has all but negated the recent rally. That’s what I warned for and this is a reason to be very cautious at this point. It looks weak but as long as no trend lines are broken things are holding up. How much longer? I don’t know. All we can do is watch and be ready.

The LT wave did a fair job in July and here is the wave for August:

ltwaveAug2017

Expected weakness until around the 20th proved much more short-lived. The S&P 500 bottomed on the first expected low near the 8th and then climbed steadily into the expected highs around the 26th. Intra-day peak came on the 27th, no perfection in this world…
For August the wave suggests weakness until around the 15th, followed by an unusually strong period until the 25th. The lowest LT wave value comes on the 10th and then goes to a very high LT wave reading on the 23rd. If the S&P gets through the weak period without technical damage then a major high may be seen on 23rd (+/- 1 day). If we get a significant drop first then 23rd is more likely to become a rebound high in an ongoing decline. That are the two major scenarios I would consider at this point. As always, please remember the LT wave is experimental and will not always work perfectly.

I also want to revisit my June post: Get ready for the August eclipse. As expected, news media and astrologers are getting very excited about this event, e.g. this Newsweek article: http://www.newsweek.com/total-solar-eclipse-trump-astrology-prediction-643776. Basically, if anything serious happens to the US or its president in the next two years then astrologers will conveniently blame it on this eclipse and take it as proof that their methods work. Question: and when was the last time nothing significant happened over a two year period?
Don’t get blinded by this eclipse, I would rather keep an eye on the 1987 chart comparison I posted. The recent 6 weeks price action has continued to be exceptionally similar. Here is a more detailed comparison chart updated for July:

spx_vs_1987

History doesn’t repeat, but sometimes it rhymes. As far as direct year to year comparisons go this is as good a rhyme as you will ever see. The rates of change differ, but the important highs and lows keep matching well. At some point the rhyming will stop, but we don’t know when. An S&P surge above 2500 in August, with breakout above the blue line, would make the historic comparison even more compelling. A similar October crash, taking into account the differing rates of change, would then target 2150 (= the 2015 highs).
I never have more than 60% confidence in any scenario, including this one. But I am keeping an eye on it.

Posted in Market Commentary | Tagged: , , , , | 2 Comments »

Get ready for the August eclipse

Posted by Danny on June 14, 2017

Despite some air pockets the US stock indexes keep looking up. The recent lunar red period produced a 35 point loss for the Nasdaq and we have started a new green period. There will be total solar eclipse over the USA in August and it will probably get plenty media attention. So, we will have a good look later on in this article but first I want to share the current S&P chart:

^SP500 (Daily) 8_31_2015 - 6_13_2017

This market stays in a nice channel since the early 2016 corrections. S&P 500 is currently in the middle of the range and trying to decide whether it wants to visit the upper or lower boundary next.
The Earl indicator (blue line) has turned down, but this has only produced a sideways pause so far. The slower Earl2 (orange line) is climbing again after some hesitation. This suggests a continuing rally until we see Earl2 top out again.

Bullish participation had been weak in recent months but is now improving:

spx

369 S&P stocks in bullish mode is the highest since early March. In healthy market advances the number of bullish stocks typically climbs above 400 (80%), like it did in February and December. If the number of bullish stocks falls back below 300 (60%) then the rally will be on hold. But as long as that doesn’t happen we better assume higher highs coming up. I keep monitoring this stat and you can find it in my weekly outlook posts on reversallevels.com every Sunday.

So what’s up with that eclipse? Well, on August 21st there will be a total solar eclipse crossing the US from coast to coast:

path-760
(source: https://www.timeanddate.com/eclipse/solar/2017-august-21)

Before you stash away extra sugar, water and canned tuna and sell all your stocks, remember that this has happened before and you would not be able to pinpoint those events on a long term chart of the markets unless you knew the dates. The most recent occasions were 26 February 1979 and 8 June 1918. Nothing unusual happened.

Historically, stocks markets actually perform slightly better than average in the weeks around a solar eclipse. See my old article: Eclipses and the stock market. So, if come August the market is still setting new records then some commentators may start pointing to this eclipse as the reason for a crash. Sure, there may be a market decline in September or October, but that doesn’t mean it would have anything to do with this eclipse.
I would rather watch this chart from 1987, exactly 30 years ago. Markets climbed in the first months of the year, then paused March to May and climbed to new highs in June to peak out in late August. The price action so far this year happens to be identical:

spx1987

If we reach a major peak in August then I would expect it to come with significant bearish divergences and new investors’ enthusiasm pushing out doomsayers.

Posted in Financial Astrology, Market Commentary | Tagged: , , | Leave a Comment »

 
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