Our key reversal levels going into next week:
| Current | Status | Key (W) | MoM (W) | Mode | Key (D) | MoM (D) | |
| Nasdaq | 3590 | BULL | S: 3410 | 6.69 (7.47) | DECLINE * | R: 3635 | -1.62 (-1.39) |
| S&P 500 | 1633 | BULL | S: 1595 | 3.79 (4.96) | DECLINE | R: 1667.20 | -5.82 (-5.72) |
| Nikkei | 13389 | BULL | S: 12634 | 1.33 (2.12) | DECLINE | R: 13844 | -2.85 (-2.98) |
| FTSE 100 | 6413 | BULL | S: 6313 | 1.79 (2.12) | DECLINE | R: 6543 | -3.17 (-3.61) |
| DAX | 8103 | BULL | S: 7999 | 2.42 (2.73) | DECLINE * | R: 8322 | -2.99 (-1.78) |
| Bonds (TLT) | 105.99 | BEAR | R: 112.48 | -6.73 (-7.0) | RALLY * | S: 104.64 | 1.26 (-0.19) |
| Gold (spot) | 1394.8 | BEAR | R: 1431 | -0.93 (-2.39) | RALLY | S: 1350.70 | 6.32 (6.74) |
| Euro/US$ | 1.322 | BULL | S: 1.3062 | 2.66 (2.65) | DECLINE * | S: 1.3321 | 0.12 (1.30) |
| Oil (CL) | 107.65 | BULL | S: 97.82 | 5.4 (5.76) | RALLY | S: 105.41 | 2.66 (2.32) |
(Legend: W = weekly, D = daily, R = resistance, S = support, MoM = momentum monitor, * = changed from previous week/day)
(for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
I have been too busy, so my promised article on the MoM indicator will have to wait a bit.
Important developments in the key reversal levels last week:
* All covered stock indices are back into decline mode, and the overall picture shows momentum (MoM) continuing to go down as well, both on the weekly and daily basis. This means it is too early to declare this correction over. All covered markets remain in bull status, but some are coming close to testing their weekly key reversal levels.
* Bonds (TLT) have switched into rally mode by climbing above their daily key reversal level last week. Momentum is going up nicely. So, the next hurdle is now the weekly key reversal level, which is currently at 112.48.
* Gold reached its weekly key level, but failed to hold above it and was turned back down. So it remains in bear status. The daily momentum has now turned down for gold, which suggests that the recent rally is probably over for a while.
* The Euro/US$ has fallen into decline mode, as was already indicated by its stalling momentum last week. Stalling daily momentum has become downward momentum and we should now watch the weekly key level at 1.3062 to see if the Euro can hold on to bull status.
* Oil tried to rally but failed at the $110 hurdle again. Weekly MoM remains down. It is still undecided where oil prices are going next: above $110 or below $100. But the repeated failure at the $110 level suggests that a move to the downside is becoming more likely.
And here are our key target levels:
| Key Targets | Top | Top2 | Bottom | Bottom2 |
| Nasdaq | 3730 | 3830 | 3530 | 3210 |
| S&P 500 | 1738 | 1799 | 1576 | 1522 |
| Nikkei | 16580 | 17980 | 12710 | 10450 |
| FTSE 100 | 6750 | 7100 | 6205 | 6110 |
| DAX | 8550 | 8920 | 7210 | 7030 |
| Bonds (TLT) | 128.50 | 134 | 102 | 96.25 |
| Gold (spot) | 1448 | 1540 * | 1078 | 1001 |
| Euro/US$ | 1.36 | 1.3950 | 1.2350 | 1.17 |
| Crude Oil(CL) | 109.40 | 121 | 89.50 | 77 |
(* = new target, Bold = closely matches a major weekly key target )
(for more details about these key targets, see: https://lunatictrader.wordpress.com/2013/08/20/key-target-levels/ )
Important developments last week:
* We recorded a new top target level for gold at 1540. Of course, it won’t come into play until gold gets above its 1448 top target. It tried last week and turned back down.
* Oil prices tested their top target at 109.40 again, and was met by selling again. Oil has now failed at this level four times since July.
An important point to remember: these key targets are to be used as target zones rather than a fixed price. I use a +/-1% on them.
So, when gold reached 1433.70 last week it tested its top target at 1448. I consider the target broken only when there is a close more than 1% above the target (or below the target for bottom targets). In this case we would need gold to close above 1462.50 (= 1448 + 14.5) to consider this target broken and start looking at the next one.
It is actually common for two well known candlestick patterns to appear at these target levels. Near top targets we can get shooting star candles and near the bottom targets we tend to get hammer candles.
Watch for them. If a hammer or shooting star candle occurs within a target +/-1%, then it is a good opportunity to initiate some positions to benefit from expected price reversal. For example buy some put options when a shooting star is seen on a top target, or buy some calls when a hammer is formed at a bottom target. A small position to get a foot in the door, and then add to the position if the market does indeed turn and moves past the key reversal levels we list in the table above. You can always sell the options for a small loss if the market does not turn and goes on to break through the top or bottom target. These are trades with 5 to 1 or even 10 to 1 reward-to-risk ratios, so you don’t need a lot of winners to come out ahead with this method.
In a future post I will focus on the various practical trading strategies that can be used with these key reversal and key target levels.
Good luck,
Danny
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Key reversal levels for week of September 16, 2013
Posted by Danny on September 15, 2013
Our key reversal levels going into next week:
(Legend: W = weekly, D = daily, R = resistance, S = support, MoM = MoM indicator, * = changed from last week)
(for more details about these key levels, see: https://lunatictrader.wordpress.com/key-reversal-levels/ )
(for information about the MoM indicator, see: https://lunatictrader.wordpress.com/2013/09/14/mom-indicator/ )
Important developments in the key reversal levels last week:
* All covered stock markets are back in rally mode with daily momentum (MoM) going up nicely. Weekly momentum for most markets is now starting to turn back up as well, which means stocks will probably be showing a fully bullish picture again by next week… unless we get a sudden downturn.
* All stock markets remain in bull status, and well above their weekly key reversal levels.
* Bonds (TLT) are still in bear status and decline mode. But both the daily and weekly MoM are going up. Bonds are coming off a very pessimistic MoM-7.7 bottom on the weekly chart, which indicates a nice rally is in the cards once it can close above its daily key reversal level at $104.49. This could happen as soon as the Fed announces tapering of its QE program in a classic “sell the rumor and buy the news” reflex.
* Gold has gone into decline mode, and is now seeing quickly falling daily MoM. I wouldn’t consider to buy gold until we see MoM stabilize and turn up again.
* The Euro/US$ is back into rally mode, but not very convincingly. This remains a very choppy market, with little or no momentum either way. It will go into a good trending move eventually, but we have to be patient. I think the better odds are for a move to the downside, so on a close below the daily key level at 1.3213 I would consider taking short positions.
* Oil remains in rally mode, but both the daily and weekly MoM are going down. The repeated failure to climb above $110 and the weakening momentum suggest that the path of least resistance is down for oil. Time will tell.
And here are our key target zones (we recommend using a +/-1% zone around these targets):
(* = new target, Bold = closely matches a major weekly key target )
(for more details about these key targets, see: https://lunatictrader.wordpress.com/2013/08/20/key-target-levels/ )
Important developments last week:
* We have one new bottom target for the Euro/US$ at 1.2870.
* The Nasdaq reached its top target at 3730 last Tuesday and has remained stuck at that level for the rest of the week.
* The DAX is also close to its top target at 8550.
* Bonds (TLT) are testing their bottom target at 102 again.
* Oil seems to have failed on its second attempt to get above its $109.40 top target.
Good luck,
Danny
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Posted in Market Commentary | Tagged: FTSE 100 Index, key levels, MoM, Nasdaq, Oil Prices, S&P 500, TLT | Leave a Comment »