LunaticTrader

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Posts Tagged ‘lunar cycle’

The Euro and the Nasdaq

Posted by Danny on September 11, 2017

Stock markets are stagnating just below their recent record highs. The Nasdaq gained 89 points in the recent lunar red period, which is the best performance in a red period since early February. Is this the start of another major rally? Or just a fake-out before a significant decline? It is hard to tell right now. Here is the current Nasdaq chart:

^COMP (Daily) 11_24_2015 - 9_8_2017

Since our previous review of Nasdaq the bearish scenario has been avoided and the long term up trend line (blue) has held. The odds of a continuing bull market have gone up, but we still don’t see a sustained breakout above 6400. So, it’s too early to bury the bearish scenario.

We are starting a new lunar green period and our LT wave for September is positive for the coming weeks. But my Earl indicator has turned down with the MoM also stagnating at high level. So, I don’t know what will happen next. Something has got to give… Another rally to new highs is certainly feasible. But a downturn with sudden acceleration on break below 6200 is equally likely. We may even see the “path of max confusion” with major indexes eking out new highs for a day or two before turning down rather sharply. I would just wait for the inevitable breakout (up or down) and keep my powder dry until the uncertainty starts clearing.

As chart of the week I have chosen a monthly EURUSD chart:

euro

The Euro has been in a long term down trend (blue channel) since 2008. We see a strong rebound since the beginning of 2017, but now the Euro is bumping into the 1.20 zone, which has been a major support-resistance level for almost 20 years. I would not expect the Euro to break above this major resistance level on its first attempt. A peak as high as 1.22 or 1.23 is possible, but I would look for a significant pullback before the Euro can possibly break higher in 2018 or later. A multi-month pause may be up next, but I think a pullback to 1.12 is the base scenario for now. What could cause the Euro to weaken versus the $US? I think the upcoming “quantitative squeezing” is a prime candidate. If the Fed starts reducing their balance sheet, as they already announced, then it will make US$ more scarce. Simple supply and demand would then push the $ higher, especially if other central banks are waiting with this QS step. I plan to do an article on this “quantitative squeezing” and what consequences it will have for stocks and bonds. The EURUSD chart is something we will have to keep an eye on.

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Staying alert

Posted by Danny on August 29, 2017

Markets had a rebound last week, but it lacked vigor. The lunar green period ended with a 54 point gain for Nasdaq. Not bad, but it only recovered a small portion of the 206 point loss in the preceding red period. Here is the current Nasdaq chart:

^COMP (Daily) 11_25_2015 - 8_28_2017

The Earl index (blue line) has bottomed and climbed back to neutral, but the market is not really coming along very well. The slower Earl2 (orange line) keeps going down.
Expected strength around the 23rd per LT wave for August only gave us a weak rebound rather than a new record. This suggests the path of least resistance has turned down. A drop below 6200 would confirm that scenario. If so I would look for 5500-5600 as an initial target in that “correction”.

Since the trend is still in place a continuing rally is possible too. I would give that a 30% chance right now. In that case a breakout above 6400 would probably start a rally towards 6600 and thus new records.
If the uptrend (blue line) is still in place by the end of the current lunar red period then the odds for a rally to new highs would go up considerably. We will find out soon.

I will be back later this week with the LT wave chart for September. Stay tuned.

Posted in Market Commentary | Tagged: | 4 Comments »

Did the market peak?

Posted by Danny on August 21, 2017

Stock markets remain under some pressure, but overall the pullback is still small. It is amazing how quickly investors’ talk has changed to crash predictions, which makes me think there is more upside to come before we see a more serious decline. Here is the current S&P 500 chart:

^SP500 (Daily) 11_5_2015 - 8_18_2017

The S&P 500 is currently testing major support near 2420. A drop below 2400 would definitely not look good, but as long as that doesn’t happen we better the possibility of another rally here. All my indicators are in the bottom zone but not turning up yet. If the S&P can hold above 2400 for a few more days then the Earl is likely to turn up first, with MoM following suit. But that remains to be seen, of course. We are in a lunar green period and our LT wave goes strongly positive this week. That “should” give us at least some rebound rally and if that rally is very weak then it would be a very bearish sign.

The solar eclipse over the US will gather some attention today, even on Wall Street. I wrote about this eclipse a few months ago, so you may want to check out that article. See also my older article: Eclipses and the Stock Market. Basically, the historic tendency has been for stocks to drop in the lunar red period that comes two weeks before a solar eclipse. The Nasdaq dropped 206 points in the lunar red period that ended on August 11, again confirming that idea. And then the market tends to climb in the green period containing the eclipse itself. We will find out this week if that happens again.

That wouldn’t rule out a further correction or even bear market in September or October, but I wouldn’t worry too much as long as the 2400 level holds in the S&P 500.

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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:

comp-daily-5_5_2015-1_17_2017

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:

comp-daily-5_21_2015-12_30_2016

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:

ltwavejan2017

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:

spx

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.

Posted in Financial Astrology, Market Commentary | Tagged: , | 2 Comments »

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:

sp500-daily-2_27_2015-11_25_2016

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:

ltwavedec2016

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:

comp-daily-2_23_2015-11_11_2016

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:

spx

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: https://twitter.com/lunatictrader1/status/791993232792092673

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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:

sp500-daily-1_26_2015-11_4_2016

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:

comp-daily-1_20_2015-10_14_2016

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).

Posted in Market Commentary | Tagged: | 2 Comments »

 
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