Comments for this week :
* US markets have continued to push higher, while the UK and Germany are more cautious and continue to sit near major resistance levels. Weekly key levels remain bullish for stocks.
* In the daily key levels all major stock indexes have followed the lead of the Nasdaq and are back in rally mode with upward MoM. People who are looking for a chance to go short would do well to wait at least until daily MoM turns down again, which is the earliest sign of a possible top. But remember, going short in a strong bull market usually means you end up paying for somebody else’s Ferrari. It is much easier to make money with the trend. Price is the only indicator that WILL tell us when the market has turned down, by first falling below the daily key level and then falling below the weekly key level. Once that has happened, then we can start looking to go short. No major bear market can start without the S&P 500 going below 1852.69, which is our current weekly key reversal level. Trading is waiting: first let the market prove to you that it has turned direction, and then act… and then wait again for the market to prove to you that the move has run its course. This is: don’t shoot before you actually see duck. It sounds easy but it is hard to do. Many traders just can’t wait until the fish bites. And it also took me 20+ years to really learn that lesson. If women are better traders it is because they are generally better when it comes to waiting. Men have to learn waiting, so they tend to become better traders with age.
* We have several new and updated key target zones this week. The old Top1 targets for Nasdaq and S&P 500 are now out of the way. The new Top1 targets are 2001 for the S&P 500 and 4531 for the Nasdaq (see table below).
* In other world markets we are still waiting for China, the only market that remains in bearish mode, to break above its weekly key level. A weekly close above 2073.86 would turn the Shanghai Composite bullish, and then all the stock markets in our list would be in bullish mode. That hasn’t happened since we share these tables here on the blog.
* Bonds (TLT) have gone into declining mode. A weekly close below 109.13 would turn bonds fully bearish. Some of the money that comes out of bonds is likely to move into stocks. When that happens we will enter the bullish final stage of the 1920s scenario.
* Gold is digesting recent gains. Still bullish.
* The Euro refuses to show its hand. Now turning daily bearish again. But MoM is turning up on the weekly level. Mixed signals = wait.
* Oil has not shown follow through to the upside and now we get the logical downturn. Needs a close above 105.55 to get back into rally mode.
* Our weekly key reversal levels for the 30 Dow stocks are available here. 27 stocks are bullish this week, up from 25 last week. Above 20 is healthy, see : Keeping an eye on the Dow stocks.
***
Here are the tables.
Key reversal levels for next week:
| Weekly | Current | Mode | Key (W) | MoM (W) | Weeks | % Ch. |
|---|---|---|---|---|---|---|
| Nasdaq | 4,485.93 | 4,089.30 | 6.17 | 78 | 45.21 | |
| S&P 500 | 1,985.44 | 1,852.69 | 7.39 | 83 | 40.18 | |
| Nikkei | 15,437.13 | 14,551.48 | 2.67 | 4 | 1.53 | |
| FTSE 100 | 6,866.10 | 6,711.45 | 1.87 | 9 | 0.64 | |
| DAX | 10,009.08 | 9,394.49 | 4.74 | 14 | 4.02 | |
| Bonds (TLT) | 110.68 | 109.13 | 2.70 | 23 | 3.74 | |
| Gold (spot) | 1,320.42 | 1,276.50 | -0.37 | 2 | 0.42 | |
| $EURUSD | 1.3593 | 1.3738 | -2.26 | 7 | -0.70 | |
| Oil (CL) | 104.06 | 101.05 | 2.97 | 20 | 3.94 |
(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:
| 7/3/2014 | Current | W | Mode | Key (D) | MoM (D) | Days | % Ch. | Str. # |
|---|---|---|---|---|---|---|---|---|
| Nasdaq | 4,485.93 | 4,320.88 | 7.78 | 30 | 8.46 | 1 | ||
| S&P 500 | 1,985.44 | 1,941.56 | 5.47 | 30 | 5.15 | 1 | ||
| Nikkei | 15,437.13 | 15,070.94 | 3.30 | 31 | 7.12 | 1 | ||
| FTSE 100 | 6,866.10 | 6,778.87 | 1.11 | 2 | 0.73 | 5 | ||
| DAX | 10,009.08 | 9,872.29 | 0.21 | 1 | -0.20 | 5 | ||
| Bonds (TLT) | 110.68 | 112.73 | 0.41 | 1 | 0.27 | 7 | ||
| Gold (spot) | 1,320.42 | 1,290.50 | 5.15 | 16 | 3.73 | 2 | ||
| $EURUSD | 1.3593 | 1.3652 | 1.95 | 0 | 0.00 | 39 | ||
| Oil (CL) | 104.06 | 105.55 | -0.87 | 0 | 0.00 | 35 |
(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 | 4588 * | 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/ )
Stay tuned, Danny
Key reversal levels for week of July 14, 2014
Posted by Danny on July 13, 2014
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:
(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:
(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):
(* = 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
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Posted in Market Commentary | Tagged: DAX, Dow Jones Industrial Average, Euro, FTSE 100 Index, George Soros, gold, key levels, MSCI World, Nasdaq | 4 Comments »