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3/6/09 - AstroCycle Update - Full Moon low?
How to use the Charts - See Live Charts updated intraday - Read Weekly Update with Charts updated dailyETF Trading Strategy
My trading style is to hedge my bets and I prefer to have a mix of long and short positions that I can add to and
reduce when significant levels are reached and/or my outlook changes. My decisions are based on cycles, wave
structure and probable fundamental and/or psychological reasons for the expected move.
We are in a debt deflation environment similar to the 1930's and yet very different since the US Dollar is now a global reserve currency. The recent rally in the USD shows it is still viewed as a safe haven, but the Yen and Gold are also rallying and suggesting alternatives are already being considered. As we approach the expected 4.3 year cycle high in early 2010, the confidence in the USD and Treasuries should decline significantly and there will be a mad rush to convert into other assets, and the likely choices will be Gold and stockpiling commodities like Oil and Grains. I am long DBC (50%) and SLV (25%) for a rebound and will add more DBC above 20. I sold 75% of my SLV when we reached 14 and will look to buy back some near 12, 11 and even 10 I am long UDN (50%) for a pull back ahead of a December high in the USD. The Bear market that started in 2007 has taken over 60% out of US markets, but over 70% out of the Shanghai market, even though China is sitting on huge surpluses and their population is not strangled by excessive consumer debt like the rest of the world. Their market should be the strongest whenever a rebound starts in global equities, and it was up 50% in the last rebound from the November lows. The NDX to SPX ratio used in my Market Neutral system has reached very overbought levels and the Nasdaq should under perform the SPX, and the CAF should over perform the SPX. I am long CAF (50%) for such a global equities rebound into late Summer. I sold 50% of my CAF when the Shanghai made a lower low late February. I sold all my QID near the close on Thursday since we are close to a low. I will buy SSO and DDM once a low is confirmed around the Full Moon early this week. To avoid all the excessive volatility and losses incurred by whipsaws and stop losses, I have devised a simple Market Neutral system based on cycles and Wave counting to profit from the relative strength of the NDX vs the SPX. This system has generated excellent returns for a number of years with only one small losing period, and proved to be a winner again since the December 1st signal to buy equal dollar amounts of QLD and SDS began. Now that most gains are gone from the QLD and SDS trade, I have entered the opposite QID and SSO trade on Monday by trying to get the best price for each side during the day. The trade is early, since the cycles don't favor it until late May, but the shorter cycles favor a pull back into late March first, and I will look at reversing back to QLD and SDS if the price action warrants it then. I closed my QLD and SDS since the NDX to SPX ratio is dangerously overbought. I am long QID and SSO (50%) for a sharp pull back in the NDX to SPX ratio into late March. Cycles and Wave Counting
The SPX probably completed Minute Wave 3 of Minor Wave 5 and should be starting a larger Wave 4 of Minor Wave 5 rally back to the 780 to 800 area soon. A move back above the 700 level that lasts with strong Tick lines would probably confirm it has started, but the risk of making lower lows for the Full Moon of Tuesday night remains. The move down on Thursday was 47 pts and gave us a rebound of 22 pts, while the move down on Friday was 33 pts and still gave us a 19 pts rebound and is a sign selling pressure is declining and buying pressure is on the rise. The Tick lines are spending a lot of time in oversold and will need to start spending more time above the middle line together to show real buying and not just money shifting from Nasdaq to Nyse and back.
Click for Printable Chart Minute Wave 3 of Minor Wave 5 may still end near the Full Moon
All indicators are improving while we are making lower lows, and since a similar but weaker divergence in early February gave us a one week rebound, this one has the potential to last longer. However the still declining Tick line may be a warning sign that we need one further low to the 650 area for the Full Moon of March 10th before we can start a good rebound.
Click for Printable Chart Minute Wave 3 of Minor Wave 5 is getting oversold
The Tick lines have turned back down in a bearish way and are again flirting with very oversold levels, but the Put/Call lines are turning bullish but only from mildly oversold levels leaving this potential low unconfirmed for now.
Click for Printable Chart Minor Wave 5 will probably end in late April
The start of each major wave down since the all time high of October 07 can be seen clearly in the low Put/Call line on top, and is always confirmed by a matching high Tick line below. That first wave down is often retraced quite a bit as shown by the sharp pull back in the Put/Call line into the red arrows before the next wave down starts. The Tick line is very oversold and suggesting a Minute Wave 3 of Minor Wave 5 low is around the corner, but the Put/Call line is just breaking above a trend line and Wave 3's can be very swift and briefly go to levels no one expects as we just saw in October 08.
Click for Printable Chart Short and Medium Term Breadth
Equities
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Shanghai holds above 2000 level
The Shanghai continues to outperform most markets and exceeded the key 2000 level by 10% and will likely come down
to test the 2000 level once more in February before it rallies further into March.
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Shanghai was down a Fibonacci 73.2%
The Shanghai has gone through the most intense bear market by dropping a whopping 73.2% in 12 months and has now
rebounded 40%. China has large reserves and built a lot of new infrastructure for the Olympics that should benefit
its economy for decades and it should recover the most in 2009, since it is the manufacturing base of the world.
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Commodities
Commodities should rebound into March
Commodities were dragged down by Oil into the February 18th cycle date and should rebound to test the 20 year resistance level near 250 or more in March.
Click for Printable Chart
courtesy of StockCharts.com
The CRB lost the December lows
Commodities have been trying to regain the December lows on stronger momentum and StochRSi suggesting a break above
and a run to the 20 year resistance levels near 250 by the late March cycle date.
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Oil should rebound into March
Oil probably made a final low after the Bullish on Oil Barron's cover of January 26th, and should finally rebound to the 50 level by the late March cycle date.
Click for Printable Chart
courtesy of StockCharts.com
Oil struggling since 5.5 month cycle low
Oil is struggling to achieve any gains since it jumped up from its 5.5 month cycle low in December 08, and will
likely move up sharply into the next cycle high of March 12th, now that the
Barron's cover is old news.
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Oil is turning up near 5 year cycle low
Oil fell hard to the 1990 and 2000 highs near 40 for the 5 year cycle low of December 08 and has raised doubts on
how high the next rally can get for the 5 year cycle high of September 2010, but as long as the 5 year cycle low
holds, we are likely to move higher going forward.
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Gold will probably rebound in March
Gold pulled back into the February 27th cycle date from the upper channel boundary as suspected, but will probably extend the decline a little more to the lower channel before rebounding in March.
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courtesy of StockCharts.com
Gold will probably pull back into May
Gold broke the first parabolic trend line and since we have already reached the first of three Fibonacci targets
and also touched the upper channel boundary, this might be a high of significance already. Another Fib target for
a mid March high is near 1060 and that would leave a bearish false break of the previous high of 1033 as a top.
Note that a 10-15% pull back into May from the 1000 level would not breach the 1980 high of 850 or the blue
parabolic line angle set by the August 07 to March 08 exhaustion rally near 900. This would leave the door open
for another parabolic move higher to the 1200 level or so by the expected 8 month cycle high in July.
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Silver will probably rebound in March
Silver will probably reach the lower parallel channel near 12 before rebounding to the 13 to 14 area in March.
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Silver will probably pull back into May
Silver probably completed Wave 5 of Wave 1 near 14.50 and should rebound between 12 and 14 in March before making a
Wave 2 low near the 11 area in May and rallying for Wave 3 into the 8 month cycle high in July.
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Gold Miners index breaks possible triangle
The GDX broke the lower boundary of a possible triangle and pulled back into the cycle date of February 27th,
but may extend the decline a little more before rebounding higher one more time in March before turning down
more seriously into April.
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Gold Stocks should pull back into April
After gaining over 100% from the October lows and reaching the 200 day MA and previous break down level near 130,
Gold stocks are building a possible triangle near the top suggesting a correction to the 100 level into the mid
April cycle date.
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Grains will probably rebound in March
Like most Commodities, the Grains appear ready to rebound into March before a more serious decline in April and May.
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Grains should bottom in Spring and rise into Fall
Grains are trying to find a low near the 250 major support area, and will probably head higher into Fall after the
expected late June cycle low.
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Currencies
The US Dollar struggling with double top near 0.89
The US Dollar is struggling with a possible double top near 0.89, and is probably headed lower to the 0.80 to 0.82 area by the next expected cycle low of late March.
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courtesy of StockCharts.com
The US Dollar making a double top with weaker momentum
The USD made a marginal new high on weaker momentum suggesting a move back to the 200 day moving average near
the 0.80 to 0.82 level by the next cycle date of early April.
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The Yen probably rebounds to the 103 to 105 area this week
The Yen is turning up from its 200 day moving average and support near 100 with minor PPO and StochRSI divergences
suggesting a probable rebound into the next cycle date of March 13th.
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The Yen will probably break the 100 level for a Wave 4 low
The Yen reached the most likely target for this Wave 4 near the 100 level and will probably break that level briefly
by the mid March cycle date before it can start moving higher into the early May cycle date.
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The Loonie should rebound from the recent lows near 0.77
The Canadian Dollar will probably start a rebound to the 0.80 to 0.81 area this week, and would even need to reach
the 0.82 level to reduce the odds of breaking the 0.77 level on the next move down for the April cycle lows.
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The Canadian Dollar should decline into May
The CDN Dollar lost its struggle near 0.80 with weakening StochRSI and PPO and will probably head down to test
the recent lows near 0.77, and if it does not rebound strongly from that level, it will probably make new lows
near 0.75 or worse by the expected late April cycle low.
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Bonds and Rates
The 3 month Yield is fearful but no longer improving
The 3 month yield is still showing a lot of fear near 0.3% and we need to see this rise significantly
above 1.0% to signal a return to more normal credit conditions and the possibility of a lasting Equities rally.
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30 year Yield is struggling near the highs
The 30 year Yield held in a range since the cycle high of early February and will probably need one more drop below the range before it can try once again to reach the serious resistance near the 3.9% level.
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courtesy of StockCharts.com
Bonds holding support since February 6th cycle date
Bonds are holding support near 125 since the expected 6.5 month cycle low of and should probably reach the 133 to 137
area by the next expected cycle high of early May.
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High Grade Corporate Bonds may rebound this week
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High Grade Corporate Bonds should decline into May
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