Investing with the Moon

Posts Tagged ‘Vietnam’

Key reversal levels for week of June 9, 2014

Posted by Danny on June 8, 2014

Comments for this week :

* Another strong week for stocks and the Nikkei has finally joined the other markets by turning bullish on the weekly level. All major indexes remain with upside weekly MoM.

* In the daily key levels most markets are still going strong as well. The DAX and the FTSE100 are hesitating a bit near obvious resistance levels, but all markets are showing nice gains for the recent rally.

* In other world markets the Russel 2000 index and Vietnam have turned bullish. This leaves gold stocks and China as the only remaining bear markets in my list.

* As I continue to repeat: go with the flow. There is no point in standing in front of a train. The only indicator that really matters is “price”, all the rest is entertainment designed to scare you out of good positions. Bullish sentiment, VIX, and so on.., are all indicators that continue to get it wrong until they get it right eventually. Keep your eye on the ball, and that is “price”.

* Bonds (TLT) were rejected at their Top1 target at 114.60, and have fallen into declining mode on the daily key levels. If TLT gets a weekly close below 108.53 then bonds will be fully bearish.

* Gold tries to muster some strength. But it’s only another bear market rally unless gold manages to break above its key reversal levels.

* The Euro has stabilized and is close to going into rally mode on the daily level. We still see no clear direction for the Euro.

* Oil price is stable as well. A move towards $110 is in the cards if oil can crack above its Top1 target at $104.

* Our weekly key reversal levels for the 30 Dow stocks are available here. 28 stocks are bullish this week, up from 26 last week. Above 20 is healthy, see : Keeping an eye on the Dow stocks.


Here are the tables.

Key reversal levels for next week:

Weekly Current Mode Key (W) MoM (W) Weeks % Ch.
Nasdaq 4,321.40 4,012.60 0.95 74 39.89
S&P 500 1,949.44 1,820.42 4.78 79 37.64
Nikkei 15,077.24 14,336.59 -0.91 0 0.00
FTSE 100 6,858.20 6,694.59 2.87 5 0.52
DAX 9,987.19 9,272.70 3.62 10 3.80
Bonds (TLT) 111.59 108.53 5.05 19 4.60
Gold (spot) 1,252.92 1,314.44 -1.66 1 0.30
$EURUSD 1.3640 1.3789 -1.10 3 -0.36
Oil (CL) 102.66 99.44 1.25 16 2.54

(Legend: Mode: green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | for more details about these key levels, see: )

Latest daily key reversal levels:

6/6/2014 Current W Mode Key (D) MoM (D) Days % Ch. Str. #
Nasdaq 4,321.40 4,179.97 5.99 11 4.48 1
S&P 500 1,949.44 1,904.08 6.89 11 3.24 1
Nikkei 15,077.24 14,613.62 8.55 11 4.62 1
FTSE 100 6,858.20 6,790.12 0.52 31 2.64 2
DAX 9,987.19 9,794.28 4.76 32 4.01 2
Bonds (TLT) 111.59 112.90 -1.79 3 -0.15 7
Gold (spot) 1,252.92 1,273.24 -5.16 8 -0.93 12
$EURUSD 1.3640 1.3694 -2.51 20 -0.78 12
Oil (CL) 102.66 101.76 0.37 17 0.74 2

(Legend: Mode : green = bullish, pale green = weak bullish – may have peaked, red = bearish, pink = mildly bearish – may have bottomed | Key: key reversal level | W = weekly mode | for more details about these key levels, see: )

Our current key target zones (we use a +/-1% zone around these targets):

Key Targets Top1 Top2 Bottom1 Bottom2
Nasdaq 4390 4531 3975 3742
S&P 500 1950 1755 1641
Nikkei 15650 17220 13860 12940
FTSE 100 6800 7110 6230 5980
DAX 10240 10450 * 8715 8510
Bonds (TLT) 114.60 115.70 102 96.25
Gold (spot) 1424 1541 1185 1075
$EURUSD 1.3950 1.42 1.3366 1.2870
Crude Oil(CL) 104 109.24 94.60 91.85

(* = new or updated target ) (for more details about these key targets, see: )

Stay tuned, Danny


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The 60% rule

Posted by Danny on February 10, 2014

As an investor it is quite important to realize how reliable our methods or indicators are. If we don’t know the limitations of our tools, then how are we going to use them well? Some readers may be surprised to know that I have never more than 60% confidence in any of my methods, cycles, indicators or forecasts. I expect them to be wrong at least 40% of the time. And I never have more than 60% confidence in methods, indicators or analysis I find elsewhere on the internet or in books, no matter how compelling the evidence that is being presented. That’s what I call the 60% rule. More on that and on its implications for trading further down in this post.

Let’s start with our customary look at the S&P 500 index (click for larger image):


Last week’s drop saw the market test important support near 1750 before rebounding. We have another week of lunar red period to go, so it’s quite possible that the lows get tested again this week. But several of my indicators now show a nice bottom. The MoM indicator has actually dropped to its lowest levels since May 2012.
So, I think the recent lows will hold and then we will probably see the market climb back until March or April. Sentiment has become especially negative for emerging markets, but my weekly key reversal system is starting to give long term buy signals for markets like Indonesia and Vietnam. Of course, we cannot be more than 60% confident in any of the above.

Why this 60% rule? Well, if we are lucky enough to find some edge in the market it will always be a small edge. There are no big edges to be found in liquid markets. If we find something that works 60% of the time we can do very well already. But our game plan will need to take into account that we will be wrong 40% of the time. Peter Lynch, the famous investor, formulated it like this:

“In this business, if you’re good, you’re right 6 times out of 10. You’re never going to be right 9 times out of 10.”

The advantage of knowing that you will be right only 6 times out of 10 is that you start with realistic expectations and will not suffer from overconfidence. It also comes easier to cut losses short when you know that you will be wrong 4 times out of 10.

So, I always aim for 60% accuracy with my methods and in my forecasting. And that’s hard enough to do. For example, we expect markets to be stronger in lunar green periods than in lunar red periods. How reliable is it? Comparing the green periods to the red periods that come immediately before and after, is a simple way to remove effects from longer term trend and offers a fair comparison. Since 2009, when we started this blog, the green periods have outperformed the red periods that come before and after it 57.5% of the time. So, quite close to 60%.

Good luck,


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