LunaticTrader

Investing with the Moon

Posts Tagged ‘Dow Jones Industrial Average’

Markets around the world

Posted by Danny on October 20, 2013

Some readers have been asking for my key reversal levels for other markets and indexes.
Here they are for a selection of countries.
Read my earlier posts to understand how to use these tables, see here.

Here are the weekly keys:

Weekly Current BB Key (W) MoM (W) Weeks % Ch
Australia (AORD) 5,321.01 5,047.11 5.78 14 7.33
Brazil (BOVESPA) 55,378.46 51,216.26 3.78 6 3.03
Canada (TSX) 13,136.09 12,596.37 3.68 13 3.56
China (SSEC) 2,193.78 2,117.32 3.37 5 -2.26
Dow Jones Industrials 15,399.65 14,793.38 0.67 41 14.61
France (CAC40) 4,286.03 3,963.17 5.94 14 10.89
Gold stocks (XAU) 92.17 109.64 -2.99 48 -44.80
Hong Kong (HANG SENG) 23,340.10 22,286.57 5.31 11 4.79
India (SENSEX) 20,882.89 19,230.85 2.81 5 4.53
Indonesia (JCI) 4,546.57 4,666.06 -2.01 17 0.49
Italy (MIB) 19,271.02 17,145.81 6.70 11 14.80
Malaysia (KLCI) 1,799.59 1,746.11 1.07 5 1.76
Mexico (IPC) 40,412.69 41,805.91 -0.40 7 0.70
Russell 2000 1,114.77 993.81 6.35 43 31.72
Singapore (STI) 3,192.90 3,223.63 -0.85 2 1.49
South Korea (KOSPI) 2,052.40 1,943.21 6.16 6 4.50
Spain (IBEX35) 10,001.80 8,753.06 8.08 12 19.43
Switzerland (SMI) 8,084.65 7,663.05 1.93 67 30.72

(Legend: BB: green = bullish, red = bearish | Key: key reversal level | MoM: MoM indicator | Weeks: weeks since start of current bullish or bearish trend | % Ch: percent change since start of current trend)
(for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
(for information about the MoM indicator, see: https://lunatictrader.wordpress.com/2013/09/14/mom-indicator/ )

 

And this is the daily table for next Monday:

Daily Current BB Key (D) MoM (D) Days % Ch
Australia (AORD) 5,321.01 5,191.99 3.25 5 1.76
Brazil (BOVESPA) 55,378.46 53,267.09 5.54 4 2.22
Canada (TSX) 13,136.09 12,822.71 4.60 5 1.87
China (SSEC) 2,193.78 2,177.65 1.41 8 0.11
Dow Jones Industrials 15,399.65 15,110.26 3.02 5 1.11
France (CAC40) 4,286.03 4,146.86 5.64 30 5.96
Gold stocks (XAU) 92.17 93.97 -2.72 20 -3.80
Hong Kong (HANG SENG) 23,340.10 22,962.40 1.83 30 5.27
India (SENSEX) 20,882.89 19,816.47 6.35 27 7.38
Indonesia (JCI) 4,546.57 4,399.94 3.51 9 3.13
Italy (MIB) 19,271.02 18,172.99 8.98 30 13.04
Malaysia (KLCI) 1,799.59 1,772.42 4.70 28 2.65
Mexico (IPC) 40,412.69 40,957.48 -1.73 9 -0.11
Russell 2000 1,114.77 1,064.06 3.43 4 4.57
Singapore (STI) 3,192.90 3,155.55 0.73 3 0.38
South Korea (KOSPI) 2,052.40 1,995.03 6.54 29 6.96
Spain (IBEX35) 10,001.80 9,252.88 9.83 30 15.91
Switzerland (SMI) 8,084.65 7,927.07 1.22 3 1.74

(Legend: BB : green = bullish, red = bearish | Key: key reversal level | MoM: MoM indicator | Days: days since start of current rally or decline | % Ch: percent change since start of current move)
(for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
(for information about the MoM indicator, see: https://lunatictrader.wordpress.com/2013/09/14/mom-indicator/ )

 

Good luck,
Danny

 

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The case for Dow 32000

Posted by Danny on August 30, 2013

If you look at a long term chart of the Dow Jones Industrials it is interesting to see how symmetrical the advance since the 1932 depression lows has been.
You could turn the chart upside down around a point in late 1974, and it would look almost exactly the same.
This chart lines out some of these symmetries (click for much larger image);

Dow symmetry

If this symmetry is to run its full course, then it asks for a major high in late 2016 or early 2017. Feasible?

If the symmetry continues then the price action since the year 2000 peak should resemble the price action of the first 17 years since 1932, but mirrored. In the next chart I have done that exercise (click for larger image):

mirror

Lining up the 1949 bottom (becomes a peak in the mirror image) with the early year 2000 high gives a good match. While there are obvious differences, we can see that most tops and bottoms line up well.
Overlaying it directly we can get this (click for larger image);

mirror 2

Here I have matched the 1949 mirror high to the 8000 level for the Dow, which puts the correction low at 6470, which was the actual low in 2009. That sets out an upside target of 31130 by the end of 2016.
By the way, I have always thought that 8000 would have been the natural high for the Dow in 2000, if it hadn’t been for easy Al’s monetary policies.

Long term trend lines that have been in play for decades are also showing a convergence around 32000 by late 2016 (click for larger image):

Dow targets

Zooming in on the potential price targets:

targets

The most optimistic target is just above 50000, not one I consider very realistic, unless we get hyperinflation.

The trend channel that started in 2009 is targeting 30000 by late 2016. This advance happens to be climbing at exactly the same rate as the 1994-2000 bull market. Can this be kept up for three more years?
A few conditions will need to be met for this very bullish scenario to remain in play:
1) The current correction has to be shallow and cannot venture too far below 14000 before recovering.
2) The green overhead resistance line, connecting the 2000 and 2007 highs, will have to be overcome and left behind. That’s not going to be an easy feat. But with all the ongoing QE, who knows?
3) This breakout above 17000 would have to come by summer 2014.

If we get a deeper correction to 12000 or something, or if the market fails to break above the green resistance line, then 19410 becomes a viable lower target to be reached in 2016.

In all these cases, a 2016 top would mean the end of this symmetric pattern, and may be followed by a 1930s style crash and depression. That would take the Dow all the way back down to 4000-5000 by 2020.

Let’s just see what happens.

Danny

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Dow Jones: high correlation with 1920s continues

Posted by Danny on August 21, 2013

This is a follow up article on a topic I addressed in early June, see: What parabolic peak?

The Dow Jones has kept climbing to new record highs, and this is how the comparison with the post-depression bull market in the 1920s has evolved (click for larger image):

2010 vs 1920s

The correlation has actually increased to 0.84 (it was 0.81 until last June), so it remains very high.
We are now right at the point where the market made a peak and then declined over 12% in just two months.
If the same scenario unfolds again, then the Dow should drop below 14000 by the end of September.

Back in the 1920s, that drop marked the start of a period of sideways movement that lasted for about a year.

Let’s see if history continues to repeat.

 

Danny

 

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Quick mid-week update

Posted by Danny on August 7, 2013

Yesterday gold closed below its daily key reversal level, which puts it in decline mode again. This means gold could now go on to retest the June lows.
The daily key reversal for gold is now at $1315.30, so it takes a close back above that level to switch into rally mode again.

Stock markets have started the week fairly poorly and seem to struggle to add to recent gains. The time window where we could see further new highs is slowly closing. There is still room for another spike to the upside, but it has to come before the upside momentum wanes too much.
Several market indices have already seen their daily momentum turn down yesterday. This includes the DAX, the Dow Jones Industrials and the FTSE100. For these indices you can start using my trailing stop method, using a stop-sell order below yesterday’s low. See: Trailing stops when you think a peak is near.
Meanwhile, the Nikkei has switched into decline mode already.
So, we see clouds starting to gather above world stock markets.

For those indices that still have upward daily momentum we keep a close eye on the daily key reversal levels. For the S&P 500 the daily key is now at 1676.60, for the Nasdaq it stands at 3583.
Daily closes below these levels would signal the start of the correction we are expecting this autumn. In that case we will have to forget about new highs for a while.

Crude oil is also acting weak again, failing to build on last week’s rebound. If it closes below its daily key at $103.75, then the recent rally in oil prices is probably over. A drop back to $95 or even $85 will then be in the cards.

A couple months from now, I think we will be looking at higher bond prices, lower stocks, lower oil and lower gold. But the transition will probably not happen overnight, unless triggered by an external shock. We will be getting mixed signals for a few weeks, and then clear moves will emerge.

Good luck,
Danny

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Why Dow 16000 will be sold

Posted by Danny on July 27, 2013

Investors are wondering why the US stock markets keep going up, no matter which news hits the wire. Every sell-off seems to be bought, and traders who tried to bet against this market are probably getting very frustrated by now.
I think this market will not go down before the Dow Jones Industrials has crested 16000, but once it does we are likely to see some serious selling. Here is why.

The Dow Jones is still one of the most widely watched market benchmarks. Long term Dow charts are now starting to show a very big triple top, it is hard not to notice (click for larger image):

Dow monthly

Three major lines to watch in this chart.
The thick blue line connects the 2000 and 2007 peaks. If the Dow climbs to 16400 then it will bump into this line again. Some investors and fund managers who watch long term charts will probably do some selling at that point.
The thick magenta line has offered support and resistance since 1998, with multiple touches throughout the years. When the market climbed above 14000 in early January it also broke out above this major resistance line for the first time since 2008. That’s why sights are now set on the upper resistance around 16400.
The thick green line is likely to become major support in the next years. More on it below.

The magenta line has also been interesting from a timing point of view. When it reached 11750, the year 2000 Dow record high, it corresponded with the stock market low in early 2009. Right now the magenta line is reaching 14200, which was the year 2007 record high. It looks like it could mark another extreme, a major high this time. If the Dow reaches 16400 (+/- 200) in August then I would hold on to my hat.

Assuming the market goes that high, what would the downside targets become? First would be the magenta line, now offering support at 14200. If that doesn’t hold, then look for support at the thick green line. This green line is using a same slope as the 2002-2007 up trend. A quick crash could take us down to 10600 this autumn, a more orderly decline would target 11750 by mid 2014.

There are also a bunch of other mathematical relationships pointing to the 16400 area as an important target:
1) 2011 high – 2009 low = 12876 – 6470 = 6406 points advance
Late 2011 low + 6406 points = 10404 + 6406 = 16810

2) 2009 low -> 2011 high = 6406 / 6470 = 99% advance
A Fibonacci 0.618 * 99% = 61.19%
Late 2011 low + 61.19% = 10404 + 6366 = 16770

3) 2007 high – 2000 high = 14198 – 11750 = 2448 points
2007 high + 2448 points = 14198 + 2448 = 16646

4) 2000 high * 1.382 (Fibonacci) = 11750 * 1.382 = 16239

5) 2009 low + 10000 points = 16470

6) 2009 low * 2.618 (Fibonacci) = 6470 * 2.618 = 16938

7) 2011 low * 1.618 (Fibonacci) = 10404 * 1.618 = 16834

8) 2000 high – 2002 low = 11750 – 7197 = 4553 points decline
2000 high + 4553 = 11750 + 4553 = 16303

9) 2012 low * 1.382 (Fibonacci) = 12035 * 1.382 = 16632

10) 1997 high * 2 = 8299 * 2 = 16598

That’s a lot of reasons to become careful if the Dow reaches 16400.

Possible ways to play this scenario. If the Dow is to peak in that price area, then it will probably get there fast rather than slowly. I would say August peak. So, I have bought some August calls last week, and if this scenario unfolds then they will go up nicely by mid August. If that’s the case, then I will sell my calls and put the money in October puts.

The chance that it will work out? Maybe some 20% chance. So, don’t bet the bank on it.

Be well,

Danny

 

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Hanging on

Posted by Danny on April 8, 2013

The Nasdaq briefly touched a new high for the year last week, but then sold off and fell through important support levels. The S&P 500 and the Dow Jones Industrials are showing a bit stronger, and are still within their up trends that started last November. What to make of this?

Here is the current chart for the S&P (click for larger image):

S&P 500

Notice how the S&P is still within the uptrend and has held its support around 1540.
This means we cannot rule out another push towards its all-time high @1576, especially since we remain in a lunar Green period this week. But it will have to happen fairly quick, otherwise the S&P is likely to follow the Nasdaq down by also breaking below its support levels in the next lunar Red period. My Earl indicators also remain negative.

So, for this week I think the market will try to hang on at least for a few more days, keeping hopes alive for putting in a new all-time high, but will then weaken towards the end of the week.
A few weeks ago we put a stop-loss for the S&P at 1540.
Now my stop is moved to 1544, so on a break below that level I would get out and wait for upcoming signs of a bottom.
The first downside target would become 1490 and then 1425.

Later this week I will have some new material on commodity cycles.
So, stay tuned.

Danny

 

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Sunspots high – sell or buy?

Posted by Danny on March 9, 2013

This is a follow up chart to our article about the solar cycle we posted back in January: New highs

One reader pointed out that the actual sunspot peak can come anywhere between 3 and 5 years after the start of the cycle, and is thus not very visible in the charts that we presented.
That’s a fair criticism, and I have now generated another chart that makes the market activity before and after and solar peak much easier to see.
I have used the Dow Jones Industrials average and the months of maximum SSN (smoothed sunspot number) have been derived from http://sidc.oma.be/sunspot-data/.

This chart shows you how the Dow Jones has moved from 1 year before sunspot max until 1 year after, for all solar cycles since 1798 (=SC5) (click for larger image):

solar cycle peak vs DJIA

Nineteen solar cycles were considered in this study.

By normalizing all sunspot peak months to 1, it becomes very easy to see whether the market went up into the solar peak, and we also see what happened in the 12 months after each solar peak.
We can see it is very much a mixed bag.
In 8 cases the market went down in to the solar max, in 9 cases the market rose into the solar peak, and in 2 cases the market was breakeven. This is comparing the Dow Jones at sunspot peak versus the Dow Jones 1 year before it.
If we look what the market did in the 12 months after the sunspot max, we see 8 cases where the market went up, 8 cases where it went down, and 3 cases that were breakeven.

Is there perhaps some connection between what happens in the 12 months before and the 12 months after?
If we look at the eight solar cycles where the market declined into the solar peak, then we find that the market subsequently turned up on 4 occasions, it continued to go down in 3 cases, and was flat in 1 case.
If we look at the 9 cycles where the market went up in the year prior to a solar peak, then we find that the Dow Jones turned down in 4 cases, it continued to go up in 4 cases, and it went flat in 1 case.

The bottom line is that in these 19 solar cycles:
* the sunspot peak was near a peak in the Dow Jones on 4 occasions
* the sunspot peak came near a bottom in the Dow Jones on 4 occasions
* the Dow Jones just continued in its pre-solar peak direction on 7 occasions

Basically, the solar cycle peak does not help us to decide whether we should sell or buy, regardless of what happened in the 12 months prior to the sunspot peak. Half of the time the market reverses direction, half of the time it doesn’t reverse direction.
There is also no obvious recurring pattern from cycle to cycle.
This is the table of monthly values for each cycle (click for larger image):

sunspot peak table

Danny

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Not done yet

Posted by Danny on February 25, 2013

That was an interesting week, with most markets giving us a rather sharp pullback from fresh multi-year highs.
We have a couple more days of lunar Red period to go, but basically we are now setting up for the next Green period, which is likely to bring another push upwards.

Here is the chart for the S&P 500 index (click for larger image):

S&P 500

We see a nice touch of the upper ceiling at 1530, the target level we mentioned two weeks ago. And this was promptly followed by a drop to just below 1500, which was our downside target for this lunar Red period. It’s always nice when things work out that well, but the world isn’t perfect so one better enjoys it while it lasts..

Technically, the Earl2 is continuing to weaken, but the shorter Earl is bottoming and ready to turn upwards (green arrow in the chart). This suggests we are likely to get the final push upwards in early March, and then we will probably be ready for some more serious downside action.
I think the Dow Jones Industrials will print a new all time high, but the S&P 500 probably not.
The market has a habit of frustrating and confusing as many investors as it can.

The LT wave chart we posted last week did quite well, correctly indicating the drop on Wednesday and Thursday, followed by a rise on Friday. Thanks to all the readers who took the time to comment on it. It’s always nice to get some interaction.
Just want to remind you again, that the LT wave chart is a beta version of a model I am still working on. So don’t bet the bank on it working all the time. It takes more than one good week to conclude on the batting average…

Be well,
Danny

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The road to 1600

Posted by Danny on January 28, 2013

Markets have continued to drift upwards, and the S&P 500 has now reached the 1500 level, reaching the target we set a while back.
How much is left in the tank here?
We may find out soon. A lunar Green period is about to start this week, and I think the market will use that to test how high it can go (for now).

Let’s have a look at the S&P 500 chart (click for larger image):

S&P500

We can see that there is more room to rise, but resistance from the overhead trendline can be expected around 1520. My Earl2 momentum indicator is still rising nicely, but starting to look rather extended. Meanwhile the shorter term Earl is showing some weakness already by not confirming the market top. I think the market will continue to push into the 1520 level, at least into February and maybe even into a March double top, but then we are going to get an inevitable pullback. If we do push above 1520, then I would look for a peak in March where the all time high in the S&P 500 and in the Dow Jones Industrials gets tested.
By the time my Earl2 indicator starts topping out, we should be reducing bullish positions.
You will hear about it on this blog.

I am almost ready with my Four Pillars Finance forecasts for 2013. Last year’s forecasts have panned out quite well.
So stay tuned for that.

Danny

 

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