Investing with the Moon

Posts Tagged ‘lunar cycle’

Show Time

Posted by Danny on July 17, 2017

The S&P 500 has broken out to new record highs, nicely in line with what we shared last week. But the Nasdaq index has not made it to new highs yet. Here is the current chart:

^COMP (Daily) 10_13_2015 - 7_14_2017

The Earl and MoM indicators are clearly going up, with no signs of topping out yet. But the slower Earl2 (orange line) is merely flatlining below the zero line, which is exactly what I warned for in last week’s post. We need to watch carefully what happens in the next week or two. If the markets just chop around with S&P 500 stalling below 2500 and Nasdaq staying near the 6400 level, then it would indicate a very weak market with little or no fuel left. Then the Earl2 would probably continue to negate the new highs and that would be an ugly setup heading into August-September. See late September 2016 for a recent example of such an Earl2 non-confirmation. Stocks climbed to marginal new highs after a pullback, but the Earl2 stayed very weak below the zero line. A more significant second dip followed suit.

A more vigorous advance with S&P climbing above 2500 would reduce this concern. So it is show time.

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Hesitating to go higher

Posted by Danny on January 18, 2017

The S&P 500 keeps going sideways while the Nasdaq is setting a string of new all time highs. The market is probably trying to make up its mind here, burst higher or start a correction? The first lunar red period of the year ended with a 191 point gain for the Nasdaq, see Performance. The cycle inversion we have been seeing last year just seems to continue. I will do a special post soon on why and when normal lunar cycles may return. Stay tuned.
Let’s have a look at the current Nasdaq chart:


The Nasdaq has taken another swing higher, but warning signs remain. The Earl (blue line) is turning down with a bearish divergence in place. The slower Earl2 (orange line) has not done anything and still shows a top in place. The MoM indicator is also turning back down after another visit to the +8 zone. Not the kind of setup I want to buy, so I would just stay patient here.
We are starting a new lunar green period, but if the cycle inversion carries on then that is not a plus. The LT wave for January suggests a peak near the 17th followed by increasing weakness for the remainder of the month. We will soon find out if that projection holds up.

There is no reason for instant panic, but the setup doesn’t look great and I am getting a lot of partial profits and sell signals in my reversal levels method. So, I would be careful until the sky clears and take some profits in positions that have grown too large. Most indexes keep bumping into overhead resistance and without a strong catalyst they will probably not succeed to climb much further in the short term.

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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 December

Posted by Danny on November 28, 2016

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.

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The next leg up

Posted by Danny on November 14, 2016

Stocks performed a major turnaround last week and are breaking out to the upside. Chances are good that markets will keep rallying into year’s end. Here is the current Nasdaq chart:


The October highs are likely to offer some resistance. But all my indicators have turned up from major lows. And there is further room to rise. We will also start a new lunar green period later this week. A climb towards 5400-5500 is a reasonable expectation. A revisit of the 5000 level would not look good. If that happens we will have to re-evaluate the picture.

The number of bullish stocks in the S&P 500 is also back above 300:


This number had been signalling weakness since late August and was stuck in a downward trend. We would want to see this number get back above 400 (=80%) if this rally is for real. That’s also what we had in February and July. A drop back below 250 (=50%) bullish stocks would put question marks behind the bullish thesis. When there are important changes in this indication I usually post them on Twitter, as I recently did here:

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A very clear situation

Posted by Danny on November 7, 2016

Stocks have come under increasing pressure and important support levels are slowly giving way. The recent lunar green period ended with a 190 point loss for the Nasdaq, one of the worst green periods this year, and continuing the pattern of lunar cycle inversion we have seen all year. As we have been pointing out for weeks, the path of least resistance has turned down. But will it stay that way? Let’s have a look at the S&P 500:


The important 2120 support level has not held up the market and I would now expect 2120 to become overhead resistance for any upward move. This index has dropped to the lower bound of the down trend channel we pictured a few weeks ago. This means it is still not a break down from which it is hard to come back. But it offers us a very clear situation now.
If the S&P drops any further, say below 2070, then we are likely to get a downside acceleration with the first meaningful support just under 2000. If on the hand the S&P bounces back and makes a convincing move above the 2120-2140 zone, then the road towards new highs would open up.
My 3 indicators are all in bottom territory, but not turning up yet. The MoM is entering the blue-depressed zone, which normally happens only a few times a year. We just don’t know yet when and where it will turn back up. But I will be ready for it.

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Some drizzle, no rain

Posted by Danny on October 17, 2016

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).

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Looking up again

Posted by Danny on September 26, 2016

Last week we wondered whether the market would continue to correct, or gradually turn up again. It now looks we did indeed muddle through the week and stocks are searching for new highs again. We remain in a lunar green period and the technical situation has improved. Here is the Nasdaq chart:


The slower Earl2 (orange line) has finally bottoming out and the Nasdaq is printing new record highs. The Earl and the MoM indicator have further room to rise. So, a climb to overhead resistance near 5400 is feasible, but of course not guaranteed. Around 5400 I would look for selling to come in at the long term trend line (green).
Reversal levels are in bullish mode for all major indexes and time will tell where this upswing ends.

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Flat trading

Posted by Danny on August 22, 2016

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:

^COMP (Daily)  11_20_2014 - 8_19_2016

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.

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No letup

Posted by Danny on August 8, 2016

Stock markets kept pushing higher and the recent lunar green period added 121 points to the Nasdaq. Will there be no letup?
Of course the market cannot keep climbing without any pullbacks, so we will get a letup and probably sooner rather than later. Lunar cycles have not done well so far this year, but the recent green period could mark the return of some normalcy in that department. A new red period is getting underway, so we will find out soon. Here is the current Nasdaq chart:

^COMP (Daily)  11_3_2014 - 8_5_2016

The Nasdaq has come very close to its all time high and may break it any day. But my technical indicators are indicating potential problems. The faster Earl (blue line) keeps weakening and may paint a bearish divergence soon. The slower Earl2 (orange line) is flattening out and may turn down any day. The MoM is starting to pull back from a major peak in the +8 euphoric zone. That’s not a setup I want to buy, especially not when a new lunar red period is starting.
The LT wave for August is also indicating weakness after a possible top today (+/-1 day).

I wouldn’t be too greedy at this point. It has been a great rally over the last 6 weeks, but trees don’t grow into the sky. I will take some profits here and then see when the next buying opportunity comes along.

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