Our key tables and comments for this week :
* The FTSE100 index has gone into fully bearish mode, the first major market to do so. The DAX is weak as well, but still holding above its weekly key reversal level. Both are testing their Bottom1 targets already. The US markets have been stronger and remain bullish with upward MoM on the weekly level.
* In the daily key levels all major stock indexes are showing downward MoM, which means a pullback is underway. Is it the start of something bigger? That is always possible. Every bear market starts with one down candle and with one down swing. Right now there is no reason for panic, but if the US and Japanese market also drop below their daily key reversal levels, then the outlook for stocks will darken. So I wait and see.
* For the Nasdaq we have a new Top2 target at 4659.
* In other world markets the French CAC 40 has gone into bearish mode. Several other European markets are coming close to do so as well: Italy and Switzerland. New problems brewing in Europe? Hmmm, just old problems resurfacing… Weekly MoM has also turned down for the MSCI World index, marking a possible long term peak.
* Bonds (TLT) have bounced back, but weekly MoM keeps pointing down for the bond market.
* Gold is back to fully bullish. $1415 is the Top1 target if we get another leg upwards. Now it is becoming DO time for gold.
* The Euro is stuck around 1.36. Key levels are bearish for the Euro at the moment, but that doesn’t mean much in a market that has been going sideways for so long. A big move will come, but which way? Plenty of traders are probably looking to go long Euro on a breakout above 1.40, or to go short on drop below 1.34…, and that may or may not work, as fake out moves have become common. In a coiled market like this one I like to take a look at the monthly key levels for direction. Monthly MoM for $EURUSD is going down since May (it had been going up since August 2012) and a monthly close below 1.3264 would confirm the next major move is indeed down.
* Oil has dropped below its weekly key level and is now fully bearish. The Bottom1 target for oil is 94.60
* Our weekly key reversal levels for the 30 Dow stocks are available here. 28 stocks are bullish this week, up from 27 last week. Above 20 is healthy, see : Keeping an eye on the Dow stocks.
* A reader wrote me to tell how boring it is, e.g. my posts keep repeating “healthy bull market” for the Dow Jones week after week.
What to do? It is not as if shorting the Dow Industrials has been profitable in recent months. I can only repeat George Soros on that point: “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
If the key reversal levels are boring it is actually a good sign, it means they are not pointing in a different direction every other week. And that can only mean we are getting good trending moves. E.g. the Nasdaq has been in weekly bullish mode for 79 weeks and counting. It doesn’t get any more boring than that. When we started posting them the weekly key reversal level for the Nasdaq was at 3221, now it stands at 4109, so that is 900 points of Nasdaq profit quietly locked in by our key levels. Meanwhile plenty of other analysts/bloggers have been trying to nail the top since the beginning of last year (if not before). I am sure they have not been bored. But how much have they lost by now (provided they trade their own calls)? 20%, 30%, more? By the time we actually do get a correction it will perhaps give them back half of the money they lost, or back to breakeven if they are lucky (provided they have not given up trading their own calls by then). That’s a big price to pay for being able to say “told you so”.
Some day our key levels will stop saying “healthy bull market”. Maybe next week, next month, next year… It will come.
***
Here are the updated tables.
Key reversal levels for next week:
| Weekly | Current | Mode | Key (W) | MoM (W) | Weeks | % Ch. |
|---|---|---|---|---|---|---|
| Nasdaq | 4,415.49 | 4,109.03 | 6.88 | 79 | 42.93 | |
| S&P 500 | 1,967.57 | 1,861.01 | 7.57 | 84 | 38.92 | |
| Nikkei | 15,164.04 | 14,607.06 | 3.08 | 5 | -0.26 | |
| FTSE 100 | 6,690.20 | 6,834.48 | 1.32 | 0 | 0.00 | |
| DAX | 9,666.34 | 9,409.44 | 4.08 | 15 | 0.46 | |
| Bonds (TLT) | 113.58 | 109.23 | 2.31 | 24 | 6.46 | |
| Gold (spot) | 1,338.12 | 1,279.81 | 0.47 | 3 | 1.76 | |
| $EURUSD | 1.3607 | 1.3729 | -2.19 | 8 | -0.60 | |
| Oil (CL) | 100.83 | 104.15 | 2.36 | 0 | 0.00 |
(Legend: Mode: green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
Latest daily key reversal levels:
| 7/11/2014 | Current | W | Mode | Key (D) | MoM (D) | Days | % Ch. | Str. # |
|---|---|---|---|---|---|---|---|---|
| Nasdaq | 4,415.49 | 4,342.43 | 3.49 | 35 | 6.76 | 2 | ||
| S&P 500 | 1,967.57 | 1,948.25 | 3.24 | 35 | 4.20 | 2 | ||
| Nikkei | 15,164.04 | 15,128.86 | 1.04 | 36 | 5.22 | 2 | ||
| FTSE 100 | 6,690.20 | 6,797.17 | -2.79 | 3 | -0.72 | 11 | ||
| DAX | 9,666.34 | 9,908.46 | -3.60 | 3 | -1.25 | 7 | ||
| Bonds (TLT) | 113.58 | 111.94 | 0.90 | 3 | 0.82 | 5 | ||
| Gold (spot) | 1,338.12 | 1,299.15 | 3.36 | 21 | 5.12 | 17 | ||
| $EURUSD | 1.3607 | 1.3643 | -0.33 | 5 | 0.10 | 15 | ||
| Oil (CL) | 100.83 | 104.71 | -5.52 | 5 | -2.81 | 11 |
(Legend: Mode : green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | W = weekly mode | for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
Our current key target zones (we use a +/-1% zone around these targets):
| Key Targets | Top1 | Top2 | Bottom1 | Bottom2 |
| Nasdaq | 4531 | 4659 * | 3975 | 3742 |
| S&P 500 | 2001 | 2031 | 1755 | 1641 |
| Nikkei | 15976 | 17220 | 13860 | 12940 |
| FTSE 100 | 6800 | 7110 | 6642 | 6230 |
| DAX | 10240 | 10450 | 9682 | 8715 |
| Bonds (TLT) | 114.60 | 115.70 | 108.25 | 102 |
| Gold (spot) | 1415 | 1541 | 1160 | 1075 |
| $EURUSD | 1.3950 | 1.42 | 1.3403 | 1.2870 |
| Crude Oil(CL) | 109.24 | 112.47 | 94.60 | 91.85 |
(* = new or updated target ) (for more details about these key targets, see: https://lunatictrader.wordpress.com/2013/08/20/key-target-levels/ )
Good luck, Danny
Outlook for September
Posted by Danny on September 1, 2014
Stock markets have reached new highs last week. The S&P 500 has climbed above 2000 for the first time and now sits right at our Top target at 2004. Further gains appear likely, but September and October are two months with a rather bad reputation and that may prompt investors to take some profits.
Let’s have a look at the current S&P chart (click for larger image):
The recent price action is very similar to what we got at the start of 2014. After a sell-off the market has swiftly climbed to new highs. Based on the trend channel a further climb to 2050 is feasible. But we have just entered a lunar red period and the Earl and MoM indicators appear to have turned down already. So, I think the market will first try to digest the recent gains.
A similar outlook is seen in the LT wave for September (click for larger image):
The wave did fairly well in August, marking the low early in the month and then climbing into a high on the 29th. Expected weakness in the middle of the month did not materialize.
For September the LT wave projects a period of weakness until the 20th, and a high on the 25th or 26th.
I have also updated the 1920s comparison chart (click for larger image):
The Dow Jones Industrials continues to mimic the price action of the 1920s very closely. We are now approaching the point where the market took off after almost a year of sideways consolidation. So, it will be interesting to see what happens.
Stay tuned,
Danny
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Posted in Market Commentary | Tagged: 1920s, Dow Jones Industrial Average, lunar cycles | 3 Comments »