LunaticTrader

Investing with the Moon

Posts Tagged ‘iceberg’

Bitcoin wakes up

Posted by Danny on October 26, 2015

The market kept climbing last week and didn’t stop for any of the resistance levels we had expected. It’s also not bothering about the current lunar red period. What’s going on?
Maybe we are seeing the first positive red period in almost a year. And that would be an indication that the market is starting another leg higher in its multi-year bull market. It will be more clear by the end of the week. Let’s have a look at the S&P 500 (click image to enlarge it):

S&P 500

The S&P is back within the range it held from February until August. The next major overhead resistance is now at 2100-2130. The Earl (blue line) has dropped a bit but appears to turn back up. We could be going to a bearish divergence in this indicator. The slower Earl2 (orange line) is still going up but getting very high. This looks like a market that is more than ready for a pause, so I don’t think there is much upside left at this point.

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Bitcoin quietly gave a weekly buy signal in our weekly reversal levels a few weeks ago. In my previous articles on bitcoin I was rather bearish: What will replace bitcoin? and Bitcoin price targets, but now could be a good time to turn bullish. Here is a long term icebergs chart for bitcoin (click image to enlarge it):

bitcoin

For the first time since late 2013 we see some significant bullish energy (green) enter the picture. In 2013 the rallies ended in massive overheating (red lava) followed by major corrections. My downside target of $180 was reached earlier this year and a nice base has formed just above $200.
A very long period of “floating ice” has just ended and bitcoin is slowly heading higher. How high can it go? I don’t know, but with this chart $500+ is certainly not out of the question.

As I wrote in 2013, the value of a crypto-currency will start to depend on real intrinsic value that becomes tied to it in some way. It is now clear that this can also be the value of services that are being connected to blockchain technology. This is starting to happen with Bitcoin and also with newer implementations like Ethereum.

Danny

Posted in Financial Astrology, Market Commentary | Tagged: , , , | 4 Comments »

Iceberg chart for gold

Posted by Danny on September 8, 2015

Stock markets had another rough week. We got the serious down days and the nervousness I warned for in last week’s post. Now the question becomes whether the August lows will be revisited or not. Let’s have a look at the Nasdaq chart (click image to enlarge it):

Nasdaq

We are in a new lunar green period, but that has not resulted in a sustained upward move so far. Meanwhile the Earl and MoM indicators keep going up, while the slower Earl2 (orange line) is about to bottom out at a deep low, on a par with the major lows it reached in April and October 2014. Three weeks ago I recommended to stay very cautious until we see a clear bottom in the Earl2 indicator. The Earl2 is now flattening out and will probably turn up in the next few days, so now is the time to start looking for some bargains.
Major upward resistance is near 4800, the late 2014 highs. And support is probably just below 4600, the January lows.

I would also like to point out that the Skew index hit a very high 142 last Friday. This means that a lot of crash insurance was being bought and unusually high premiums were being paid. Fear is very high in the market. From March until a few weeks ago the Skew rarely went above 130 and mostly traded near 120. This means investors weren’t all that worried and didn’t buy much crash insurance (if any). But now that we have seen a market drop the Skew is suddenly jumping to its highest level in almost a year. This is an example of buying boots after the flood. See the article on Skew index that I posted earlier this year: Forget the VIX, watch the SKEW. This suggests we are in a short term correction, not at the start of a long bear market. Throughout the bear markets of 2000-2003 and 2007-2009 the Skew consistently stayed low and didn’t even get above 130, much less 140. A low Skew means complacency, a high skew means fear. So, right now we have fear. And as the saying goes, it is time to buy when others are fearful.

Some people have been asking for more Iceberg charts. I will try to do one very week. We will start with gold (click image to enlarge it):

Gold icebergs

Gold had a nice bout of bullish energy (green) in the beginning of 2015. “Lava” marked the peak in January. “Floating ice” appeared at a bottom in March. Some erratic bullishness showed up in May and June, but that hardly managed to keep the market flat. “Floating ice” marked the next bottom in July. And now we have had another rally attempt, but bullish energy is even weaker than on the previous occasion. It has only painted a few “small islands”. In a healthy bullish market the amount of green climbs above 4, and that’s what I would wait for if you are looking to buy gold for long term.
If you missed out on my earlier article introducing the Iceberg charts, you can find it here.

Danny

Posted in Financial Astrology, Market Commentary | Tagged: , , , | 12 Comments »

Iceberg charts

Posted by Danny on August 10, 2015

It was a challenging week in the stock markets. Maybe we are due for the first failed lunar period of 2015.
In recent months I have been working on a new type of stock chart, with the intention of visualizing the market in an interesting new way. More on that further down this article. Let’s first take a look at the Nasdaq chart (click image to enlarge it):

Nasdaq

The Nasdaq had a nasty downturn in the last days of the week. Since the July record highs we see a lower low and a lower high on the chart, something we haven’t seen on this scale for quite a while. That doesn’t have to be the end of the world, but for me it is a good reason to turn into “show me” attitude. My technical indicators have turned back down, and now I just sit back and let the market prove to me that it has the strength to recover from this “dip”.
If it doesn’t then the chart will start looking ugly soon, because what looks like an intact up trend (as given by the blue channel) would quickly change into a visible down trend (shown by the red channel). That would mean a drop to 4700-4800 area, if not worse.
A move above 5200 would invalidate the potential down trend channel and tell us that the bull market is still on.
My weekly outlook based on reversal levels has also been giving warning signs for over a month. This may pass without much further damage, as it often does, but there is no way to tell. Even the worst of bear markets start with a few innocent looking down days.

***

I am a visual type of person and I like colors. A picture can say more than a thousand words, so I have been working on a type of stock chart that can give a better visual picture of what is going on. It is still a work in progress, but I already like the current result, so I am going to show some “iceberg charts” for the first time. Here is crude oil (click image to enlarge it):

Oil iceberg chart

There are no indicators or moving averages in this chart, they are not needed. The icebergs are the kind of landscape that you see at the bottom. A lot of information (and math) is packed in it, but presented in such a way that it becomes easy to “read” what is going on. The elements you find in the iceberg charts are:
1) Green mountains, covered with more or less ice (grey). The more green the more bullish the stock is behaving at that point. Stocks in healthy bull markets show plenty of green mountain, often uninterrupted for months. Some ice on the mountain is OK, but too much ice (and little green) means the continuation of the bull move is in question. If all green disappears it is usually better to sell the stock.
2) When there is no ice left on a mountain you see a red line (e.g. May 2015 in the chart), or “lava”. This indicates the market is very hot and probably at or near an important peak. A stock can stay hot for weeks, so don’t sell immediately. I usually sell half or all of the position as soon as the lava disappears.
3) Open water appears when no green mountain or even grey ice is present. This means the stock is dead in the water, bulls are too weak to take it higher and the stocks is probably grinding down (e.g. July 2014 in the chart). As you can probably guess, there is no good reason to own a stock that is dead in the water. We wait for green grass to tell us that a new bullish phase could be starting.
4) Sometimes you see icebergs in the water, small grey spikes without any green in them (e.g. Sep 2014 in the chart). Icebergs indicate that there is a rally attempt, but it is so weak that no green grass appears (no growth). Before you know it the stock is falling even further, if not sinking like the Titanic. Stay away from icebergs.
5) Small islands (e.g Oct 2014 in chart) are not much better than icebergs, usually followed by a further drop. But sometimes a small island is soon followed by a big green mountain, so they can be like the first green sprouts after a long winter.
6) In open water you will sometimes see floating ice (white lines in the blue water at the bottom, e.g. Aug 2014, Nov-Jan 2015 and Jul-Aug 2015). When you see floating ice it means hell is freezing over for the given stock. There is often floating ice at major bottoms, but not every case of floating ice is “the bottom”. If a stock is crashing it is best to wait until the floating ice disappears if you intend to buy near the lows. To play safe it is even better to wait for green grass if you want to buy after a period of floating ice.

Armed with this knowledge you can read stocks in a way that is not possible otherwise. You can quickly spot “regime change” in any market, you can see if a stock is red hot (lava), dead cold (floating ice), healthy green bullish or just dead in the water. Icebergs warn for possible dangers ahead. Here are a few more examples. Apple (click image to enlarge it):

Apple iceberg

Apple has been green bullish most of the time. It was dead in the water around the new year and has again gone dead in the water since May-June. You didn’t miss anything if you sold when the green grass disappeared.

S&P 500 (click image to enlarge it):

S&P iceberg

The S&P had lava in July last year, and saw floating ice at a few major lows. Since the start of 2015 the green bullish energy has been weak with plenty of small islands. An iceberg in June gave way to a quick dip and since July we see more green bullish. If this can be kept up then the market should go higher. If it doesn’t then the S&P will probably go dead in the water again.
I intend to post some iceberg charts from time to time, as it is a nice way to add some color to my articles. Hope you like them. Feedback is welcome as always.

Danny

PS: adding iceberg chart for FTSE 100 per reader question, see comments below.

FTSE 100 icebergs

Posted in Financial Astrology, Market Commentary | Tagged: , , | 7 Comments »

 
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