Investing with the Moon

Posts Tagged ‘LT wave’

LT wave for May

Posted by Danny on May 1, 2018

Stocks have largely gone sideways in the recent month. It remains unclear whether the next major move will be up or down.
Here is the current S&P 500 chart:

^SP500 (Daily) 6_30_2016 - 4_30_2018

Technically the Earl (blue line) peaked out in mid April and has come down to the neutral line. No signs of a bottom.
The slower Earl2 is still climbing, but appears to be flattening out near the neutral line. And the MoM indicator is also in the neutral zone. None of this offers us any clues about the next move, so all we can do is wait.

It’s time for our LT wave for May:


The wave did pretty well in April. Expected weakness until the 12th saw the index hover near support just below 2600. The more positive bias for the remainder of April saw the market test the 2700 levels as we expected. Volatility did clearly drop, so that was a good call too.
For May the wave projects another weak period until around the 11th. This is to be followed by a strong period until the 28th. The final days of May show weak again.

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LT wave for April

Posted by Danny on April 2, 2018

Markets are going through another significant downswing. Volatility has been high compared to what traders got used to in 2017. This was of course inevitable, and it is something I was watching as an indication that we are getting into the late stages of a multi-year bull market. See: Updated long term scenarios and charts.

So, what’s next? Here is the current Nasdaq chart:

^COMP (Daily) 6_14_2016 - 3_29_2018

The long term blue trend line in Nasdaq is clearly broken. But the Nasdaq is still in a higher highs and higher lows sequence, so it’s too early to declare the end of the bull market in this index.
The Earl (blue line) is turning up from a major low. The slower Earl2 (orange line) is still dropping fast, but well into bottom territory. The MoM indicator has fallen into the blue pessimistic zone (<-5), where major buying opportunities are usually found. Once the MoM turns back up we will have a nice setup to do some cautious buying here.

If major indexes drop below their February lows, then more bearish scenarios would gain traction. That wouldn't rule out new record highs later on, but it would probably push them further back in time.

Our lunar cycle has been on fire so far this year, so that's something to keep an eye on as well. A new green period starts later this week, so it will be interesting to see if it keeps rolling on: lunar cycle tracking page.

Our LT wave did a decent job for March. The peak early in the month came with several days delay, but the subsequent weak period ended on target at March 26.
Here is the LT wave for April:


There are no outstanding peaks or lows in the projection for April, which suggests volatility will drop. We see a period of mild weakness until the 12th, followed by a more positive bias for the remainder of April. The lowest LT wave value comes on the 4th, and there is no daily peak value worth talking about.
If the wave holds up then I would look for a low in the first trading days of this week, but probably not a major new low. And then a very gradual recovery that could lift the S&P 500 back to near the 2700 area.
Let’s see.

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LT wave for March

Posted by Danny on March 2, 2018

Just a quick message today to get out the LT wave.

Our wave did OK in February.
The month was as volatile as the wave projected and the major swings lined up with the wave pattern more often than not. Expected strength around the 5th did not show up, other than one good rebound day on Feb6, and the market declined straight into the expected bottom value on the 11th (which was a Sunday). This was followed by a strong week right into our expected peak on the 17th. Weakness in the 3rd week came in the form of sideways churning and then we got a few good up days in the last week. The final days of February did not show expected strength and this means March is starting on a weak foot.

Here is the LT wave for March:


A strong period is projected until around the 5th and followed by a prolonged weak period until the 26th. The final week of March looks better.
Peak LT wave values come on the 3rd and the 28th. The lowest value of March comes on the 12th.

Good luck.

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LT wave for February

Posted by Danny on February 5, 2018

Markets have finally started a pullback. We did get a 1% down day for first time since August and we also got a 2% down week for the first time since Sep 2016. This means we are starting to see more volatility, but that doesn’t mean this bull market is over already. See my recent article.

Here is the current S&P 500 chart:

^SP500 (Daily) 4_27_2016 - 2_2_2018

No major trend lines have been broken so far, but all my indicators are pointing down now. The Earl (blue line) peaked out a week ago and is dropping fast. The slower Earl2 painted a major peak a few days ago and is nowhere near bottom territory. The MoM indicator has also turned down after reaching the maximum euphoria +10 for a few days. This is not how a good buying opportunity looks like, but we are entering a lunar green period and I do expect some strong rebound days, but probably not new highs any time soon.
I would just wait for the dust to settle and once my 3 indicators start bottoming out we can look for new buying entries.

The LT wave did poorly in January. Expected strength in the first weeks panned out ok, but that strength continued well into the projected weak period. Those gains were given back in the last week, so it wasn’t too bad after all. But the timing of peaks and bottoms didn’t match.
Here is the LT wave for February:


It looks very volatile with alternating stronger and weaker weeks. Peak LT wave values come on the 5th and 17th. And the bottom values are projected around the 11th and the 23rd. I have no idea how this will pan out. The market may just dance around within the wide range that is set by the recent January high and the possible low that we get in early February.

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LT wave for January

Posted by Danny on January 2, 2018

Markets have continued to trade in “painless” fashion, just grinding higher without corrections worth talking about. Naturally this will not continue forever and it may end sooner rather than later. Here is the current Nasdaq chart:

^COMP (Daily) 3_18_2016 - 12_29_2017

The latest all time highs came just before christmas. As long as the blue trend line stays intact there is no problem, but once it gets broken a significant correction will be highly likely. The Earl indicator (blue line) has turned down again, indicating a downturn may have started a week ago. The slower Earl2 (orange line) has been weakening for several month already. This is still not a setup that wants me to do more new buying. The risk/reward ratio is just too poor here.

After weak performance for November our LT wave for December has been close to perfect. Here is the LT wave for January:


Expected weakness until Dec 5 was right on the mark and followed by a market advance throughout the expected strong period until Dec 22. Weakness in final week came true as well. Doesn’t get much better.
For January the LT wave projects strength until around the 10th followed by weakness for the rest of the month (with some possible bounce around the 20th). Highest LT wave value comes on the 7th with the lowest coming on the 25th. If we do not see new record highs in the first 10 days of the month then the bull run may be over and the rest of January could be down sharply. We really need to watch the long term trend line (see chart above) in that case.

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Higher it goes

Posted by Danny on December 4, 2017

Markets have burst higher in recent weeks, taking most major indexes to new record highs. Does this mean the market has nowhere to go but up? Maybe. We will have a look into that question later in this article, but let’s have a look at the Nasdaq chart first:

^COMP (Daily) 3_10_2016 - 12_1_2017

Instead of threatening to go down the Nasdaq is breaking out above the red channel it has been occupying most of the year. The longer term up trend remains firmly in place. If anything stocks are accelerating here. But how much longer?
Some warning signs remain in place. There are bearish divergences in the Earl (blue line) and Earl2 (orange line) that do not go away. This has been a painless advance for such a long time now. Some investors will probably panic as soon as we get a 5% drop from the highs some day. I would rather wait for that panic to do any new buying. But we may have plenty company when it comes to waiting for a >3% pullback.

Our LT wave for November did very poorly. It could hardly be any worse, actually. Markets climbed when we expected weakness and fell when the wave indicated strength. Will that continue to be the case? I have no idea. Here is the wave for December:


Weakness is projected until Dec 5, followed by a stronger period until the 22nd. The final week of the month looks weak again. This means that if we see no downside action in the next couple of days the market could just continue to march higher into xmas. And with very thin trading in the final week of the year it remains to be seen how that expected weakness will pan out.
Personally I will rather watch from the sidelines until our cycles get into gear again.

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LT wave for November

Posted by Danny on October 30, 2017

Stocks have reached new record highs. But bullish participation has started to weaken again ( see Outlook for week of October 30). A shrinking number of stocks is carrying indexes higher and that’s always something to keep an eye on. Let’s have a look at the Nasdaq chart before sharing the LT wave for November:

^COMP (Daily) 2_16_2016 - 10_27_2017

The Nasdaq keeps moving within a nice channel it has been occupying for most of the year. Friday’s jump has taken the Nasdaq to the upper bound, but this is not a breakout that suggests upward acceleration.
My indicators are showing red flags as well. The Earl (blue line) shows a bearish divergence, while the slower Earl2 (orange line) has peaked and turned lower. The MoM is also on a downward trajectory after peaking out near the 8-euphoric zone. While none of this presents obstacles that cannot be overcome, it is not the kind of setup that prompts me to do fresh short term buying.

Sometimes the best strategy is wait and see. This is an aging rally and there has been no pullback worth talking about for more than year. If investing was always this safe and easy then nobody would be working.

October was not a good month for our LT wave. Expected weakness early in the month did not pan out, but projected strength in the 3rd week came right on target. Markets pulled back from record highs in the final week, when the wave suggested new weakness. But that didn’t carry on and the index bounced right back in the final days. Here is the wave for November:


Weakness is expected until the 7th, with lowest LT wave values of the month coming on the 6th and 7th. If that brings a market low then a rebound should follow until the 17th or 20th. The final 10 days of November look weak.
Remember the LT wave is experimental, so do not bet the bank on it.

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LT wave for October

Posted by Danny on October 3, 2017

Markets have crept to new record highs. But is it a convincing breakout? The S&P 500 stays within its narrowing range so I would still keep my powder dry here. One or two down days could easily wipe out a full month’s gains, that’s how slow the recent advance has been. Let’s have a look at the Nasdaq chart:

^COMP (Daily) 12_30_2015 - 10_2_2017

The Nasdaq has climbed and closed above 6500 for the first time. But it has taken more than two months to get 1% above its late July highs. My indicators are unimpressed with this move. The Earl (blue line) and MoM are near the zero line and nowhere near the highs they reached in recent months, which is a clear bearish divergence. And the Earl2 (orange line) is flatlining just above the zero line, completely negating last week’s push to new record highs.

While this doesn’t rule out a further climb it is not the kind of setup that prompts me to buy or stay heavily long. Sometimes you just have to watch and wait and this is one of those times imo.

Our LT wave did a mixed job in September. Here is he wave for October:


Expected weakness until Sep 9 panned out nicely and was followed by a stronger period with a market peak around the 21st as projected by LT wave. But subsequent weakness did not materialize and stocks climbed to new highs in the final week.
For October the wave suggests weakness until the 13th and then a stronger week with a peak value near the 19th. The final week shows a drop again with an expected low near the 27th.

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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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