Luna $ Ticks

October 30, 2008

Projected Short Term Top

Filed under: Trading SPX SPY — moontrader @ 11:38 am

Here’s an updated chart with the bottom on 10/28/08 accounted – which, if you don’t know, was not a crash – and a projection for a short-term top, or better, a potential date for the exhaustion of this rally – considering the criteria I presented in a post yesterday remain valid.

Let me elaborate a little further on it. I’m trying to develop a technique to predict potential sharp movements in the market based on cycles. As I said before in my “about” page, the starting point of my study is the amazing discovery made by Christopher Carolan and described in his book “Spiral Calendar.” However, I believe that the technique presented in the book is full of flaws and I’m trying to find a way to filter for tops and bottoms, using the same time cycles.

The market is constantly alternating between short cycles of movements up and down. During, let’s say, a movement up cycle, the market has a positive predisposition and a relative optimism, and stocks (or whatever asset you are using – providing it is not easily manipulated) tend to go higher inside this time frame. Does it goes constantly up during this period? No. But during this period, the asset will present higher highs and higher lows, for instance. When this period ends the market reverses the sentiment for another cycle.

Last weekend I projected a date for a bottom, but I went bold, shone my crystal ball and called for a crash. The crash didn’t occur, but the bottom did occur, after which the market made a strong reverse. Do you get it? If the thing doesn’t happen inside that time-frame (according to this analysis based on cycles) then the thing won’t happen because the sentiment – or the “mood” – has reversed and you’ll have to wait till the next short term reversal when the sentiment will be negative again. Attention: I’m talking about the short-term.

Now, taking the next short-term tops that follow the bottoms I used to predict this week’s date for a bottom (or crash), they project tops in a very tight time window: either 11/06/08 or 11/07/08.

So, based on this analysis, this rally should hold until Thursday or Friday next week.

Another point: Chris Carolan’s work focus on predicting long-term reversals, while mine is dedicated to help the short-term trader.

If you have any insight, comment, criticism or suggestion, feel free to drop a comment.

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29 Comments »

  1. I am new to your site and am not real familiar with your technics but very intrigued. I have been tempted to buy the book the Spiral Calendar. You keep referring to the DMA 3X3. I am more than somewhat familiar with technical analysis. But what is the DMA 3X3 or how can I investigate it. Thanks.

    Comment by Tom — October 30, 2008 @ 11:45 am | Reply

  2. Ray Merriman does cycles work and, in his publication written one year ago, forecast November 6 as a three star reversal date. See http://www.mmacycles.com/ for more info.

    Comment by Alan — October 30, 2008 @ 11:55 am | Reply

  3. Good study, Moon…

    Comment by 2SWTrading — October 30, 2008 @ 12:04 pm | Reply

  4. Alan
    do you have direct link to that article?

    Comment by Fork_Master_Serg — October 30, 2008 @ 12:18 pm | Reply

  5. Thanks 2Sweets.

    Alan, thanks for the link. Seems to be a completely different technique but it’s good to know that we have the same dates.

    Tom, I’d encourage you to buy his book, which is out of print but you can find used ones for a bargain at Amazon. DMA is Displaced Moving Average. It’s a simple moving average displace forward or backward a number of periods. In this case, 3 period moving average, displace 3 bars ahead. I also use the 7×5 (7 period moving average, disp. 5 ahead) and 25×5. You can find DMA on Prophet Charts. In ToS you have to program them, which is very simple.

    Comment by moontrader — October 30, 2008 @ 12:21 pm | Reply

  6. Ray Merriman published this Nov. 6 date, and lots of others that have been prescient, in his annual 2008 Forecast book, which is released annually on December 15. You can order one now for next year. To be honest, he is an astrologer, as am I, but he is also an astute trader, technician and cycles analyst, and his optional services include daily or weekly updates on index futures, currencies, commodities,and international markets. All these markets are covered in his annual book, which is all I get from him. You can read his weekly summary on his website, published every weekend. Hope that helps. He is currently looking at next week as a major reversal week, with Nov. 6 as the focal date.

    Comment by Alan — October 30, 2008 @ 4:37 pm | Reply

  7. I was trying to fit Tim Bost’s projection into the current fork
    and it looks like perfect fit
    assuming
    1) we will not go UP tomorrow(10/31) :)
    2) his targets are correct. :)

    Comment by Fork_Master_Serg — October 30, 2008 @ 5:56 pm | Reply

  8. To balance Alan’s praise, I need to add a caveat about Ray Merriman. I have subscribed to one of his monthly newsletters for about a year. In late 2007/early 2008 he made some remarkable calls, but in the volatility of the last few months I have found his “cycle turn dates” quite useless. I hope he gets his mojo back, but have decided not to renew. If you understand a little astrology, he pretty much says what he knows in his free weekly commentaries anyway. His cycle analysis has been consistently off and adds little value.

    Comment by Larry — October 30, 2008 @ 9:50 pm | Reply

  9. There was no crash last week but let’s see the next weeks forecast.
    One thing I analyzed without any charts and data is, the Market or my stocks always move in the opposite direction of my thought and analysis. So am following the opposite of my mind for now :)

    Anyway, really like the blog and have been reading for about a week.

    Comment by Experx — October 30, 2008 @ 11:23 pm | Reply

  10. moon:
    Just started reading your posts. Referral by your posts on the Slope.

    Your analysis of calling this year’s bottom is illuminating. I’m wondering how this coincided with Tim calling the bottom for the year as well.

    And, now a short term reversal on Nov 6 or 7.

    I think you mentioned somewhere that we always get a “patriotic rally” after the election. But, many on the TV are saying that if Obama wins, it will be negative for the market. Any more elaboration on this?

    Thanks for blooging!

    Comment by DalalStreetKing — October 31, 2008 @ 3:08 am | Reply

  11. With all due respect. How can one project that the bottom is in for the year in the previous day’s post, & then turn around & project a short term top a week & 1/2 later?

    If the bottom “is” in for the year, what happens when the mkt hits the short term top? A retest of the bottom?

    If a bottom has been reached, wouldn’t the mkt move higher for a while (couple of months?), with a resumption of the downtrend starting again in early 09?

    Comment by mktstudent — October 31, 2008 @ 7:12 am | Reply

  12. MKTStudent, with all due respect, the market doesn´t go straight up or straight down. It moves in a zig-zag. Second, there´s no crystal ball here, I make my calls based on a clear analysis. However, I confess that I went a little beyond when I called the crash, but inside that window projected through important bottoms, we did have reach a bottom. It wasn’t below 10/10, but close and important, since we had a huge rally afterwards. Third, do you know an indicator called VIX? It says that the volatility is high, and that means wild swings. VIX doesn’t go back down to 12 the minute after the bottom is reached – otherwise the market would be no fun. Fourth, it looks like a bottom has been reached – although I need to see more evidences of that, and yesterday we closed above DMA 7×5 – so, what I’m saying is that this rally should last until end of next week, and then we’ll have a correction movement of this rally. Or even new lows, who knows? Anything can happen. My analysis tells me in this moment that this rally will top next week between the 6th and the 7th. Got it?

    Comment by moontrader — October 31, 2008 @ 7:33 am | Reply

  13. Dalal, it wasn’t me who said that we always get a “patriotic rally” after the election. The bulk of my analysis are my charts. I check the news but almost don’t use them.
    Now, I’ve heard that Obama could bring Volcker back to the FED, and this man thinks like that (excerpt from an interview):

    “Well, the Federal Reserve had been attempting to deal with the inflation for some time, but I think in the 1970s, in past hindsight, anyway, [it] got behind the curve. It’s always hard to raise interest rates.

    By the time I became chairman and there was more of a feeling of urgency, there was a willingness to accept more forceful measures to try to deal with the inflation. And we adopted an approach of doing it perhaps more directly, by saying, “We’ll take the emphasis off of interest rates and put the emphasis on the growth in the money supply, which is at the root cause of inflation” – too much money chasing too few goods …- “so we’ll attack the too-much-money part of the equation and we will stop the money supply from increasing as rapidly as it was.”

    And that led to a squeeze on the money markets and a squeeze on interest rates, and interest rates went up a lot. But we didn’t do it by saying, “We think the appropriate level of interest rates is X.” We said, “We think the appropriate level of the money supply or the appropriate rate of the money supply is X, and we’ll take whatever consequences that means for the interest rate because that will enable us to get inflation under control, and at that point interest rates will come down,” which, of course, eventually is what happened. “

    Comment by moontrader — October 31, 2008 @ 7:46 am | Reply

  14. Tyring to get it…not easy though. Taking a step back, the move down thus far has been so swift, that it’s hard to really want to step & buy to play any short term bounce. Guess this is where the guys/gals who trade with defined risk mgmt systems & are nimble get paid.

    In my very humble opinion, all the short term (1 year) charts look broken but seem poised/ready to retrace some of the move (guess this is where traders try & use Fibs/forks/waves to project the possible retracement), all the intermediate term charts (2-5 year) look like they’ll do some sort of consolidation before a continuation down(looking at weekly charts) which could involve a retrace up to perhaps the July lows, & all the long term charts (> 10 years) look like there’s lots more to come.

    Thanks for the analysis. As with any analysis, as long as it enables you to make profits, then it’s good.

    Y – absolutely have heard of the vix. Sometimes I try & tune out a lot of the external indicators everyone seems to be following in order to concentrate just on price. Perhaps I should expand my arsenal…

    Comment by mktstudent — October 31, 2008 @ 8:45 am | Reply

  15. Moon – I am looking in to fractals – where would you recommend I get startet? Thanks.

    Comment by Donna — October 31, 2008 @ 12:41 pm | Reply

  16. Donna, check out Chaos by Jame Gleick. You might also be interested in the market studies of Benoit Mandelbrot.

    Comment by pythagoruz — October 31, 2008 @ 4:04 pm | Reply

  17. Thank you pythagoruz

    Comment by Donna — November 1, 2008 @ 6:35 am | Reply

  18. Moon (and all) –

    I am new to astrological patterns as well. Question – What is the best way to utilize the turn dates? Am I looking to be short going in to Nov 6 area? Am I waiting for Nov 6 to unfold before I enter? Loaded question, I guess. Maybe I should read the books, first. ;) Thank you for your excellent analysis.

    Comment by Donna — November 1, 2008 @ 6:37 am | Reply

  19. Donna,

    Yup, read the books; the aforementioned book by Merriman is a good place to start, though it won’t be available until Dec. 15; or go to his website and read this week’s summary, which places the November 6 turn date in a larger astrological context. You might also visit http://www.stariq.com for some non-economic exposure to astrology, as well as for Merriman’s weekly column.

    The short trend is definitely up at this point so I would be on the lookout for reversals to the downside. The Sun-Jupiter sextile and the Sun-Uranus trine on November 10 are normally indicators of topping action, so this rally might hold up into that time, but probably not much longer. Astrology is just one tool amongst many for trading financial markets; I would suggest not getting too attached to when to make your move. Be patient, and ready to pounce when all the ducks that you use line up. Astrology, and Moon’s even more specific cycle prognostications, alert you to a higher than normal likelihood of a reversal in the November 6 time frame. But we are living in extraordinary times as exemplified by the Saturn-Uranus opposition on Election Day, the first such aspect in 40 years!
    All rallies and downdrafts are likely to overshoot, percentage-wise, and maybe in time as well.
    Good Luck!

    Comment by Alan — November 1, 2008 @ 9:56 am | Reply

  20. Moon

    All charts I see allows a correction downwards in the following days. Is it possible a bottom on Nov 6-7? (Instead of a top.)

    Comment by Paleface — November 1, 2008 @ 4:39 pm | Reply

  21. Alan
    I don’t see anything about November 6 in this week’s summary
    He talks about Nov 4th as “Gorilla in the room” – where is 6th?

    Comment by Fork_Master_Serg — November 2, 2008 @ 1:08 am | Reply

  22. F_M_S_,

    The November 6 date is in his 2008 Forecast book; the date lies at the center of a cluster of important astrological configurations between November 2 and November 10. That is why I suggested that anyone interested in the confluence of cycles, astrology, and technical patterns, consider ordering his 2009 Forecast book, which will list next year’s critical reversal dates for a variety of markets. And yes, it is true that he allows for a margin of error of + or _ 3 days in calculating these dates. That may be too imprecise for what you are trying to achieve. But I can’t tell you how many times I have initiated a trade two or three days early in anticipation of his reversal date only to find that if I had just stayed patient, and waited until the exact date, I would have achieved significantly better results.

    Comment by Alan — November 2, 2008 @ 9:49 am | Reply

  23. Paleface,

    I think Nov 6-7 could mark a low, prior to a final blast upwards into November 10, but if that is to be the case, we had better see Asian markets and the futures down on Monday morning. Historically, the first trading day of the month has a significant upside bias. On the other hand the astrological formations on Monday early morning have seen big downdrafts throughout this year when they have occurred, which is even more reason to think that if we are up on Monday that we are closing in on a significant high.

    Comment by Alan — November 2, 2008 @ 9:58 am | Reply

  24. >Nov 6-7 could mark a low, prior to a final blast upwards into November 10

    Wow, a 2 day blast? 8-9 is a weekend :)

    Comment by Fork_Master_Serg — November 2, 2008 @ 5:55 pm | Reply

  25. Donna, Fork, Alan and others, according to the chart above, November 6th would be a top. How significant it would (will) be I don’t know. I wouldn’t discard the possibility of new lows, although I find it difficult to happen. What we might see in the coming weeks is a slow decrease of VIX, a slow decrease of the investor’s fear, while the market struggles to resume an uptrend. Which means we’ll have some wild swings ahead, with or without new lows for the year.

    Comment by moontrader — November 2, 2008 @ 8:35 pm | Reply

  26. Donna, my analysis has nothing to do with astrology. It’s based on Christopher Carolan’s Spiral Calendar – which I recommend – and the moon cycles I refer to are just an alternative to the Solar cycles. Chris Carolan’s studies reveal that you can have a more precise correlation between cycles using lunar days.

    Comment by moontrader — November 2, 2008 @ 8:37 pm | Reply

  27. “Donna, my analysis has nothing to do with astrology. It’s based on Christopher Carolan’s Spiral Calendar”

    …and Christopher Carolan’s Spiral Calendar is based on astrology. So, see, I have nothing to do with astrology :)

    cycles are created by planet movements and astrology is a study of influence of those movements of human psychology.
    ..and based on that influence people buy or sell stocks. So as you can see, Donna, were is absolutelly no correlations between my studied and astology :))

    Comment by Fork_Master_Serg — November 3, 2008 @ 2:16 am | Reply

  28. THANK YOU ALL. AND A GREAT WEEK OF TRADING TO YOU AS WELL.

    Moon – Any update on the DMA chart from a previous post? What does it take for the pattern to unravel? One close under DMA line? Two? Thanks!!

    Comment by Donna — November 3, 2008 @ 7:41 am | Reply

  29. Fork_Master_Serg, Carolan’s Spiral Calendar is not based on astrology, only on solar and lunar cycles, that have strong physical effects here on earth, e.g. seasons and tides. Life has evolved over millions of years to be influenced by these time cycles, although exactly how is not clear.
    Astrology believes that remote planets with infinitessimally small physical influence can have significant effects based on weird arrangements – squares, trines and so on that have no physical basis. Astrology is baloney IMO while the spiral calendar does seem to operate in the markets to some degree.

    Comment by Dave — November 16, 2008 @ 7:46 pm | Reply


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