Investing with the Moon

Posts Tagged ‘LT wave’

LT wave for September

Posted by Danny on September 1, 2017

Markets have been jumping higher in recent days and are close to new highs again. This is rather unexpected given the current lunar red period and goes against the projected weakness per our LT wave. What to make of this? Here is the current S&P 500 chart:

^SP500 (Daily) 11_3_2015 - 8_31_2017

The crucial support at 2400 has held easily and my indicators are pointing up. This paves the way for a possible test of the 2500 level in the coming weeks. But this could also be a fake-out move before a bigger downturn. If a lower high gets printed here then it will not look good and the 2400 level may get tested again.

Our LT wave was partially successful in August. Here is the projected pattern for September:


Expected weakness in the first half of August came right on target and the low on August 10 gave us a significant down day. But weakness continued longer than expected. The projected high on August 23rd was only a weak rebound and strength also stretched longer than expected with the best days coming at the very end of the month. So it looks as if the cycle is getting delayed by a few days. I don’t know if that will continue to be the case.
For September some mild weakness is expected until around the 9th, followed by a stronger period with an LT wave peak value on the 21st. The final week of September shows renewed weakness with a bottom value on the 28th.

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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:


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: 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:


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.

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LT wave for July

Posted by Danny on July 3, 2017

Investors’ resilience got tested again last week as stocks had some significant down days. The up trends in major indexes are not broken, but there is certainly reason to be cautious as I have been warning in my daily reversal levels posts and on Twitter. Here is the current Nasdaq chart:

^COMP (Daily) 10_29_2015 - 6_30_2017

All indicators are pointing down now and the Nasdaq may go for a test of the 6000 level before we see any signs of a tradeable bottom. We are in a new lunar red period and how the market gets through this period will probably be quite important. If stocks can muddle through without causing damage to the longer term up trend then another rally in late July/August would become the base scenario. A move back above 6300 would tell us that rally is on.
A sustained drop below 6000 would suggest we are in a more serious decline and then 5400 would become an initial target.

Our LT wave for June did a mediocre job. Here is the expected pattern for July:


Strength in the first days of June was followed by a sideways in the expected weak period, but projected strength in the final week of the month did not materialize in a convincing way.
The wave for July projects ongoing weakness until the 20th followed by a stronger week. Lowest wave values come on the 8th and the 14th with highest values expected around the 26th.

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LT wave for June

Posted by Danny on June 2, 2017

Markets continue to record new highs and the S&P 500 seems to have broken the resistance near the 2400 level. I didn’t see too many “sell in May” tweets, probably because that strategy failed last year, but that doesn’t tell us anything for this year. I would just ride this rally as long as it lasts, which is what we are doing with our reversal levels strategy.
How long? Well, the bullish scenario I updated last December is still on track: Dow 32000 revisited. It is feasible for the S&P 500 to reach 2500-600 by summer and then a final autumn surge could follow suit.
At the same time I want to keep an eye on the 88 year crash cycle I explored in this post from 2013: The long term crash cycle. This pointed to 2017 as the next candidate for a mania and crash. We will find out soon.

Let’s have a look at the Nasdaq before giving the LT wave chart for June:

^COMP (Daily) 8_18_2015 - 6_1_2017

Indicators are pointing up again after the brief pullback in mid May. We keep seeing a pattern of higher highs and higher lows. It is hard to fight a market like this. Short sellers keep getting punished and once they give up completely we may get the kind of final surge that pulls in the last bulls. Keep your eyes open and your ears closed.

Our LT wave had a decent month in May, here is the wave for June:


Expected strength until the 9th saw the S&P reach 2400 for the first time. The weaker period until the 23rd produced a significant dip followed by a strong final week.
For June the wave projects continued strength until the 5th and then a weaker period until the 20th. The final week is expected to be strong again, a pattern we have been seeing for several months.

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LT wave for May

Posted by Danny on May 1, 2017

The Nasdaq has climbed to new record highs while the S&P 500 keeps sitting just below its March 1 highs. The Nasdaq gained 243 points in the recent lunar green period, making it the best green period since October. Let’s take a look at the current Nasdaq chart:

^COMP (Daily) 9_22_2015 - 4_28_2017

The sideways pause that started in March has clearly ended, allowing this index to break out above 6000. The Earl2 (orange line) has made a nice bottom and all 3 indicators are pointing up at the moment. That’s a bullish setup, but the faster Earl (blue line) and the MoM have reached fairly high levels already. I think we can get higher highs in the coming days, which would allow the S&P 500 to break above 2400. But with a new lunar red period getting started I think it will be followed by a bit of a pullback.

The LT wave had another good month in April. Here is the wave for May:


Projected strength in the first week of April only resulted in a sideways and was followed by a pullback in the expected weak period. The final week was stronger again, nicely in line with LT wave. Not bad.
For May we see a very similar pattern. A positive bias appears to continue until around the 9th and then we get a weaker period until the 23rd. The final week of the month is stronger again. The highest LT wave value will come on the 18th, in the midst of the weaker period. The lowest LT wave values come around 13-15, which contains a weekend. Another low value comes on the 21st, which is a Sunday. When markets are closed on the expected weak days then the weakness may or may not show up on the subsequent Monday. This could make this month more difficult to read.

For new readers, please remember that LT wave is experimental and after two very good months it is probably time for a miss. Always stay skeptical and do not drop skepticism because a method or indicator has had a few good months…

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LT wave for April

Posted by Danny on April 3, 2017

Markets had a good week and the Nasdaq is close to new all time highs already. The S&P 500 has been a bit weaker. The recent lunar green period has ended with a 14 point gain for Nasdaq. Not a big gain, but the lunar cycle seems to be getting back to its normal rhythm after a long period of “divergences”. Let’s have a look at the S&P 500 chart before discussing the LT wave for April:

^SP500 (Daily) 7_24_2015 - 3_31_2017

The market tested important support levels and veered back up. That’s a positive and it has printed bottoms in my Earl and MoM indicators, but the slower Earl2 (orange line) is still headed lower. A pattern of lower highs and lower lows appears on the chart and that’s something we haven’t seen for a while. The thing to watch in the current upswing is whether it can challenge the March 1 highs or not. A clear push above 2400 would tell us the bull run is ongoing.

The LT wave had an almost perfect month in March and here is how it continues for April:


The up and down swings corresponded very nicely to the expected weaker and stronger periods in March and if the LT wave keeps performing well then the current period of strength can continue until the 10th or 11th. Then there is projected weakness until the 23rd, followed by a more positive final week.
There will be a major high value in the wave on the 8th, but that’s a weekend day so any related highs would probably come on the Friday before or the Monday after. If that is the case then it will be interesting to see if the market can reach new records. A failure to do so would indicate that the path of least resistance is shifting down.
The lowest LT wave values for the month come on 22nd and 23rd, which are also weekend days. If the market falls below the March lows around that time it would also tell us that a more serious correction is underway.
For new readers, please remember that the LT wave is experimental and a good month doesn’t mean the next month will be good too. So, don’t bet the farm on it.

Good luck.

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LT wave for March

Posted by Danny on March 1, 2017

The market has drifted sideways in the recent week and we are now going almost 100 trading days without a 1% down day in the S&P 500. That’s already the longest such streak since 1995. It will be interesting to see if this move joins the 100 club. Let’s have a look at the current S&P 500 chart:


The rally that started in November keeps going and there is no clear sign yet that the advance may be over. The MoM indicator stays in the +8 euphoric zone, but it has turned down which means we can do some first selling at this point. If MoM drops below +8 then do some more selling. See last week’s article.
The Earl (blue line) has turned down, which suggests a pullback is coming up. But maybe it will be no more than a few days hiccup before stocks climb to another record. There is no way to tell at this point, we just need to be aware that this market can suddenly go into blow-off mode here. Such a move becomes very difficult to read in its final stages, and traders who find themselves on the wrong side of it are typically given little or no chances to get out without significant losses.

The LT wave for March doesn’t paint an easy picture either:


The LT wave for February was partially successful. After some hesitation in the first week stocks surged to new records in the expected strong period until the 15th. The next expected weak period didn’t produce any decline and the final days saw new records again.
For March there is a peak value on the 1st followed by projected weakness until the 10th. Then a strong period until the 15th or 16th. A second weak period is expected until the 27th.
The lowest LT wave value of the month comes on the 7th, with a second low on the 27th. Peak values come on the 1st, 13th and 29th.

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LT wave for February

Posted by Danny on February 1, 2017

Markets climbed to new all time highs last week and the Dow finally got above the 20k level for the first time. But stocks appear to be pulling back from those new highs and that means we have to consider scenario two I described in my recent Dow 20k post. A sharper pullback could be in the making here.
Let’s start with the current Nasdaq chart:


The Nasdaq has outperformed the S&P 500 in recent months and is climbing within a narrowing wedge. That is always a dangerous setup, with or without Dow 20k, and is prone to a sudden drop once the high rate of change cannot be kept up.
The bearish divergence remains in my Earl indicator (blue line), while the slower Earl2 (orange line) has marked time by going sideways. This is typical for a market that has stretched itself out and up as far as possible, and that in itself is as dangerous as climbing inside a wedge.
The Nasdaq gained 41 points in the recent lunar green period and we are now starting a new red period. The setup suggests that we will finally get some downside action in a red period. A drop below 5550 would confirm this scenario.

I would remain cautious at this point and take some profits or at least keep stops very close to the market. A further climb is not impossible with this setup, but the odds are not good and the risk/reward ratio stinks.

To finish we have the LT wave chart for February:


The wave did a poor job in January, climbing higher when the wave suggested weakness and merely drifting sideways during what was supposed to be the stronger period. I have not seen this kind of “inversion” in the LT wave chart before, so I don’t know what it means (if anything).
The second peak on the 28th came close to the highs of the month and maybe that marks the return of normal cycles. If so, then market weakness should continue until the 8th and be followed by a brief period of strength until the 15th. The remainder of February is also weak, except for the last couple of days.
As always, this LT wave is experimental so don’t bet the farm on it.

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LT wave for January

Posted by Danny on January 3, 2017

Stocks had rather flat end of year trading with some weakness surfacing in the final days of December. The lunar green period produced a 54 point loss in the Nasdaq, a fitting close to a year which has been difficult for lunar cycle trading. More on possible reasons for this bad year and when “normal” cycles may return in a later article. Let’s first have a look at the current Nasdaq chart:


As I reported a few weeks ago, my indicators appeared stretched and a choppy ending to the year would be healthier than an ongoing surge to new highs. All my indicators are now coming down, including the slower Earl2 (orange line). This means the overbought situation is slowly getting worked off. But none of the indicators is showing any signs of bottoming out at the moment, so I would be patient here. Chances are we will see further downside action before we get an attractive setup to enter new longs.
We are also starting a new lunar red period and perhaps we are due for a normal cycle. The technical setup looks right for it. If we do get an early new year drop then Nasdaq 5250 becomes first target and just above 5000 if things turn ugly.

The LT wave for January also points to early weakness:


The wave for December did OK, not perfect. The expected weakness in the 2nd week did not pan out, but the neutral/flat trading for the rest of the month came true. Highs in the S&P came close to noticeable peaks in the LT wave on the 12th and 20th.
For January the wave projects weakness in the first week with a low value on the 4th. Then a strong period from around the 11th until 21st with a major peak value on the 17th. Last 10 days of the month are weaker again.
As always, don’t bet the bank on this. The LT wave is purely based on natural cycles and doesn’t use any market inputs.

As a final extra I want to point to the number of bullish stocks in the S&P 500. This is a chart I also post on Twitter from time to time, e.g. Dec 7. In a healthy bull market the number of S&P 500 stocks in bullish mode (based on my reversal levels method) is well above 250 (50%). In the beginning stages of a market advance the number of bullish stocks normally goes above 400 (80%) and stays above 300 during minor pullbacks. Once the number of bullish stocks drops back below 300 a deeper correction could be starting. This is the current situation:


The number of bullish stocks did climb above 400 on Dec 12, but has since come back down and is now at 278. This means a lot of stocks and sectors are already quite bearish and only a small majority of stocks remains in bullish mode. Maybe this is just year end profit taking… Or the market is about to turn lower. We will find out soon.

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LT wave for November

Posted by Danny on October 31, 2016

Stocks came under some pressure last week and the S&P 500 is struggling to stay above the important 2120 support level. As we pointed out last week, price action has been weak and there is nothing going on as long as there is no clear breakout, up or down. We are still in that situation but now my indicators are starting to turn down, suggesting that a breakout to the downside is gradually becoming the more likely scenario. Here is the current Nasdaq chart:


Earl and MoM indicators have turned down after a very weak rally attempt and the slower Earl2 is languishing at low levels, apparently unable to get back above the zero line. The lunar green period will be ending later his week and it looks like we will be lucky if it ends near breakeven for the period. This suggests the path of least resistance is down.

Looking at the LT wave chart for November offers more reason for caution:


We got the expected weakness in the first half of October, but the positive bias after the 15th was very weak. Most of the peak LT wave values happened to come on weekend days when markets are closed, but the other days didn’t produce any convincing green candles either.
Going into November the wave tries to hold up in the first days, but then shows a drop with weakness to continue until around the 17th. The rest of the month is hardly above neutral. The lowest LT wave value for the month comes on the 10th, and the high is projected for the 19th.
Does this mean the market will crash? No. Does this have anything to do with the upcoming US election? No. Four years ago when Obama was re-elected the S&P 500 dropped 6% in the next two weeks. I guess that whoever wins the election, some half of the population will be disappointed and may see it as a good reason to sell stocks. Everything is possible and there is no guarantee whatsoever that the projected LT wave pattern will pan out.

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