Stocks have kept going up and the Nasdaq is reaching the 5400 level, as we suggested it would in our post two weeks ago. So, what’s next? Let’s have a look at the S&P 500 chart:

We stay in a lunar green period for the rest of the week, so we can prepare for some kind of top in the coming days.
Technically the S&P 500 is facing several overhead resistance levels between 2220 and 2300. I don’t think we are going to race straight through them, but of course I could be wrong.
My Earl indicator (blue line) has turned down already, and the MoM is entering the “euphoric” +8 zone. As you can see in the chart MoM reaching +8 often marks major peaks, which are typically followed by a significant pullback or by several months of sideways churning. MoM reaching -8 typically marks tradeable bottoms. Nothing is perfect but this is something that works pretty persistently in any market. MoM indicator for various markets and stocks is posted on my Twitter every day.
On the plus side the slower Earl2 (orange line) is still climbing healthily and appears in no mood to turn down already. This could be enough to hold up the market into year’s end. It makes it more likely that we will get sideways action with only marginal new highs being printed in December. So, that is my current base scenario.

Let’s also have a look at the LT wave for December:

The wave did quite well for November. The timing was not perfect as the expected low came a few days earlier than the wave suggested. But of course we can conveniently blame that on the US elections. The overall pattern worked out nicely with expected weakness early on and a positive bias for the second half of November. For December the pattern is not so outspoken as it hovers close to neutral with small swings up and down. The longer average (yellow) peaks out in the first week and then goes more or less flat. There is a slightly weak period in the second week and another weak period comes around Christmas when markets will be mostly closed. The middle of the month and the final days look a bit stronger.
As always, remember this LT wave is experimental and doesn’t rely on any market data, so use it wisely.

Since the warning signs we posted a few weeks ago we have seen a significant dip in US stocks, which suggests the market has chosen down as its next direction, at least for now. This is giving us a bit more clarity, but not much because the market is still holding up pretty well and has not dropped to levels from which a quick comeback would be difficult. Here is the current Nasdaq chart:

All three my indicators are pointing down, which definitely keeps the door open for a deeper drop. But all three are in bottom territory, so a tradeable low may come sooner rather than later. A new lunar green period will start later this week, but our LT wave for October indicates it will be bumpy.
There is no easy trade at this point. The current drizzle could give way for a clear sky, or for much harder rain.. I would still stay patient and wait for a better setup to enter new longs, for example when Earl and MoM indicator turn back up. Keep an eye on my daily reversal levels for possible buy signals in the coming week(s).

Stock went mostly flat for another week and have ended the lunar red period with a 17 point gain for Nasdaq. More often than not sideways price action resumes in the direction of the existing trend, and with a new green period starting we could easily get another push to new highs in the coming weeks. This is the current Nasdaq chart:

The technical situation is not clear cut. The slower Earl2 (orange line) has turned down, which is a warning sign. But the faster Earl (blue line) is just below the neutral and may turn up for another brief spurt higher. If so I would look for 5300-5400 as a possible zone for a peak.
A failure to rally would probably send the market the other way and then Nasdaq may face a drop to 5000-5100.
There is no easy play to make at this point, so I would just stick to long term positions and wait for better setups when it comes to swing trades. Looks like another good week to stay on the beach rather than in front of a monitor.