Investing with the Moon

Posts Tagged ‘lunar cycles’

Waiting for continuation

Posted by Danny on September 19, 2016

Markets held stable after last week’s dip. Now it remains to be seen whether stocks will continue downwards or simply resume their existing up trend. The current lunar red period is ending and our LT wave for September suggests potential weakness until the 25th, so a downward continuation is to come sooner rather than later, if it comes… If stocks muddle through this week without further losses then an upward continuation will gradually become the more likely scenario.
Let’s have a look at the S&P chart:


The technical situation keeps pointing both ways. The slower Earl2 (orange line) is still not bottoming out, but the faster Earl (blue line) is turning up again. The MoM indicator is entering the blue zone, which typically marks important market lows, but also not turning up yet.
It looks like a bit more time will be needed to get a really good setup. So, I wouldn’t rush in just yet. What will happen next is still very much in the balance.

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Market downturn

Posted by Danny on September 12, 2016

US stocks fell to their lowest levels since early July after touching new highs earlier in the week. This is nicely in line with our LT wave chart for August. If the expected pattern pans out then more weakness can be expected after a rally attempt in the next few days.
Let’s have a look at the Nasdaq chart:


The Earl2 (orange line) keeps going down without any signs of a bottom in place. The faster Earl (blue line) and MoM have fallen back in line with it, and now also point down. This means we are in a downturn and better wait for a bottom in Earl2.
We remain in a lunar red period this week, so there is no good reason to rush back in at this point.
Major support for Nasdaq is around the 5000 level. As long as we stay above that level there is not much going on. If there is a convincing close below 5000 then the odds of a more serious correction would go up considerably.

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Still grinding higher

Posted by Danny on September 7, 2016

Markets have held very steady and the Nasdaq reached new all time highs yesterday. The S&P 500 is just short of new records.
The recent lunar green period ended with a 12 point gain for the Nasdaq and we are now in a new lunar red period. The red periods have been unusually strong so far this year, but that will end eventually and make place for the weakness we normally see in red periods. A quick look at the S&P 500 charts shows the current technical situation:


The Earl and MoM indicators are turning up from shallow bottoms. This means the sideways consolidation may be ending and another leg higher could start. But the slower Earl 2 (orange line) is still headed lower, which points to more downside or sideways action before we get another sustainable rally. Mixed signals means we better be careful in the coming weeks. There isn’t much of an edge in either direction for short term trades at the moment, so it is better to wait for a more attractive set up.

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Posted by Danny on June 6, 2016

Stock markets have started sputtering right at the obvious resistance levels. To push through or to pull back, that’s the question at this point. Let’s have a quick look at the S&P 500 chart:

^SP500 (Daily)  9_2_2014 - 6_3_2016

A push towards 2150 or a retreat to just above 2000, at first glance both appear more or less equally possible if you look at this chart.
My faster Earl indicator (blue line) is the first to turn down, which is often a good early warning sign but does not rule out a few more days of upside action (which could take the index to 2150 before pulling back). The slower Earl2 (orange line) keeps pointing up, which means that any pullback could be rather short-lived.

I am not going to put my hand in the fire for either outcome. With this kind of setup it is usually a good time to go fishing or surfing. Political noise, like Brexit vote, is likely to keep making headlines for most of June and that doesn’t make it any easier to tell which way the market will swing next.
A new lunar red period will start later this week, so from that perspective stocks are likely to remain under pressure in the coming weeks.
Note: a lot of commentary seems to take it for granted that a Brexit would mean a drop in stock markets. I wouldn’t be too sure about that. Stocks may go up on Brexit news, or just drop for a few hours and then rebound.. Always expect the unexpected.

Bottom line: yes, go fishing and come back by the end of June.

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How the stock market makes sense

Posted by Danny on March 7, 2016

Stocks kept climbing and on social networks a lot of investors are shaking their heads in disbelief, complaining that this market makes no sense. Just when they started feeling safe going short in a down market in a weak global economy the markets climb more than 10% in a few weeks… Huh, where is the logic? More on that below.
Let’s start with a look at the current Nasdaq chart:

^COMP (Daily)  7_16_2014 - 3_4_2016

Nasdaq Composite has climbed above 4700 without looking back. Three weeks ago it was still testing 4200. This is what I warned for two weeks ago: pullbacks have been very short and shallow because too many traders are looking for a chance to cover shorts. Is this rebound now done and over with? Maybe, maybe not…
Technically the fast Earl (blue line) has turned down, but the market is not coming along. The slower Earl2 (orange line) and MoM are still going up with further room to rise. This market may easily have another good week in it and by then the Earl2 and MoM will probably start to flatten out at high levels. Above 4700 the next major overhead resistance for the Nasdaq is in the 4800-4900 area, and that’s how high it could go before we see a meaningful pullback. Best approach is to go with the flow as long as my MoM indicator keeps pointing up. Once it turns down I would take some profits.

So, what’s the logic of stocks going up in a weak economy? Well, people who expect the economy and the stock market to behave in an easy logical way are going to be disappointed over and over again. We want the market to be logical, because when something is logical it is to some extent predictable, and when something is predictable it feels safe. Wouldn’t it be nice if stocks always went up on good news and down on bad news? We would all be rich fairly soon, just waiting for the daily news and doing our buying or selling based on it. Who would need a job if the stock market was that logical?
But clearly, that’s not what’s happening. It is very common for stocks (or the market) to go up on bad news, or down on good news. And it will keep happening… Here is why.

The inner logic of the stock market is not that it goes up on good news (or good economy) and down on bad news. The deeper logic of the stock market is that it is a zero sum game where you always must have a buyer for every seller. You cannot buy 100 shares without somebody else selling/shorting 100 shares. The implication is that the stock market cannot be logical in a superficial way. If stocks always went up on good news, then it would become an obvious edge that is too easy to exploit for every teenager with a TV or a computer connected to internet. A zero sum game doesn’t allow such easy edges to exist for very long. Traders will use that edge until it disappears, which means the market must stop acting logical based on incoming news. So it becomes chaotic and at times crazy, because it has to, and that tends to frustrate a lot of traders who expect their economic logic to work all (or most) of the time.
To trade well we must stop being “slaves of logic” and start accepting (and even anticipating) the apparent craziness that must emerge regularly in a zero sum setting. That’s why I like to say that there is always some madness to my method. There has to be because there is always some madness to the markets.
I called this site lunatictrader not only because I use lunar cycles, but also because I like to explore and study the crazy aspects of the stock market.
More on this topic on a next occasion.

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LT wave for March

Posted by Danny on March 1, 2016

The Nasdaq ended the recent lunar red period with a massive 323 point gain, one of the strongest red periods ever. In the recent months the market has been going counter to what we normally see in green and red periods, but somehow our LT wave keeps doing very well. This is very interesting as there must be some reason for this. I may be able to use the current observations to figure out in advance when the red and green periods are more likely to have a “cycle inversion”. I will keep you posted on the progress, if any.

Let’s have our weekly look at the S&P 500 chart:

^SP500 (Daily)  5_21_2014 - 2_29_2016

The S&P has reached its highest level since early January. Technically the slower Earl2 (orange line) is still going up with further room to rise. But the faster Earl (blue line) has peaked and is starting to go down. This suggests the market needs a bit of pullback or pause at this point, but there are good chances it will resume higher after the Earl bottoms out again. The MoM indicator is still pointing up as well, but appears to flatten out. A new lunar green period is now underway, but the setup suggests that this may become another weak green period. In best case scenario the S&P may march on to just below 2000, but more likely is a sideways period.

We also have the new LT wave chart for March:


The wave did very well in February, correctly indicating the weakness in the first half of the month, followed by a much more positive second half.
For March the wave suggests weakness in the first week, followed by strength until the 25th. The final days of the month look weaker again. The lowest LT wave values come on the 6th and the 28th. The highest LT wave value will be on the 24th.
For new readers, please remember that this LT wave is experimental and I cannot guarantee anything.

Posted in Financial Astrology, Market Commentary | Tagged: , | 4 Comments »

Market on the edge

Posted by Danny on February 8, 2016

Stocks turned down again last week, nicely in line with the LT wave chart for February. The reversal levels stay “double red” for most world markets, and the general mood is becoming really depressed. The Nasdaq chart shows that we are reaching a critical point:

^COMP (Daily)  5_28_2014 - 2_5_2016

The Earl2 indicator (orange line) keeps pointing up. But the faster Earl (blue line) has peaked out and turned down again. This means a drop to lower lows is a very realistic possibility for this index. If so, then the 4200-4250 area should offer major support and be the first target in that scenario. If that level doesn’t hold then the odds that we are in an extended bear market will jump up significantly. A pattern of lower highs and lower lows would then clearly stand out from the chart.

We will also enter a new lunar red period later this week, which may further contribute to downside pressures. So, I would be very careful until the Earl and MoM indicators turn back up again. Keep an eye on my reversal levels, which are shared on Twitter every day.


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LT wave for January

Posted by Danny on December 28, 2015

The last trading days of the year are showing a light upward bias, as they typically do. It is usually hard to read something in days with very light trading, so we will probably have to wait for next week to see where stocks are going next. Let’s have a look at the Nasdaq chart (click image to enlarge it):


The Nasdaq is back above 5000. The Earl and MoM indicators are going up, but the slower Earl2 is still going down. Major support just below 5000 (dashed grey line) has been tested three times in the recent months and has held nicely so far. As long as that remains the case the setup favors further gains once the Earl2 turns up, with good potential for new all time highs in the first months of 2016. A drop below the December lows would invalidate the bullish scenario, and if that happens the outlook would worsen quickly.

The LT wave for December was far from perfect but it correctly indicated the weakness in the middle of the month. For January the LT wave shows a similar pattern (click image to enlarge it):

LT wave

The first days of the month look strong, but then the LT wave suggests downside pressure until the 21st, followed by a positive tendency in the final week. The highest reading of the month comes on the 2nd and the 29th, with the lowest LT wave reading on the 19th.

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Waiting for a breakout

Posted by Danny on December 7, 2015

A few weeks ago I called for the S&P 500 to go sideways in the 2000-2100 range for several weeks. That’s what we are getting, but how much longer can it continue? Not very long I think. Let’s have a look at the chart (click image to enlarge it):

S&P 500

The S&P is back within a narrow range, just like it did in the first half of the year. The Earl (blue line) and MoM indicators are close to neutral and pointing down. The slower Earl2 (orange) keeps coming down from the major high it reached in early November and is now close to neutral as well. It is possible that the market is turning up already, but one or two more weeks of correction would make for a more attractive setup. So, I would still wait until the Earl2 drops below zero and forms a bottom. We stay in a lunar green period, which tends to favor a rising market, but the technical outlook still points the other way. So more sideways action remains my base scenario.


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LT wave for December

Posted by Danny on November 30, 2015

US stocks barely moved last week. I had suggested a sideways period is starting and that’s what we are seeing. How much longer will it continue? Let’s have a look at the Nasdaq chart (click image to enlarge it):


The market is hesitating just below the overhead resistance of this summer’s all time highs. The Earl2 indicator ( orange line) keeps coming down from a major high and is not in bottom territory yet. This suggests we will have to be more patient. The faster Earl (blue line) and MoM are more or less neutral at the moment and still going up. Even though we are starting a new lunar green period I think it will be difficult for the Nasdaq to push much higher already. So further sideways is my base scenario for the coming weeks.

December is coming up, so here we have the LT wave chart for next month (click image to enlarge it):

LT wave

The wave did not work so well in November. The expected positive bias in the first half of the month failed completely. The low in the middle of the month was not too far off, and the expected neutral period in the final week did come true. It’s a good reminder that we shouldn’t expect perfection with the LT wave.
For December the LT wave stays rather neutral until the 12th, with a slightly positive bias. Then there is a weak period until the 24th. LT wave expects Santa to come in the final week of the year, when the bias goes positive with the highest value coming on the 31st. The lowest LT wave value is on the 20th. If that produces a low in the market then it will be good idea to do so some buying.

Good luck and happy holidays.

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