There were top extension signals in heating oil and Rbob gasoline yesterday. These markets have correlated well with some equity markets lately (i.e. with those that don’t have greater concerns) and so this should be considered yet another warning that the general rally that started a few weeks ago is heading for a stall. Brave hearts could try shorts in energy hereabouts, just for a 'trading turn' - the senior signal is still the weekly-scale bottom extension that marked the lows in crude (not shown - see 2 July email). That was a signal that will stem declines through the summer months.
At the same time, some other markets have made daily-scale compression signals – copper and cotton (again) and now the Dow transport index. This last instrument is already compressed at a weekly scale so this new signal reveals that the feedback loops that lead to these signals are getting really tight. A break is imminent, so keep stops tight on long cotton and copper positions.
We still can’t tell if these markets that are rising are heading for a high point at next week’s turn or whether they will dip early (i.e. making a ‘swerve’ - see the userguide) and make a low instead – the odds are always about 4:1 against a swerve but we like to wait until the last moment before deciding. The turn is scheduled for Monday 23rdJuly but there is some spill-over into the next day and there is a long-term Dow industrials turn due on Friday the 27thJuly. Long-term turns come from a slightly different method, are applied to ~100 years of data from the Dow and they pick out the bigger turn events. It seems probable that this turn due on the 27th and the others that are due a few days earlier on the 23rd/24th will mark the same event, but they may not. There could be a dip into early next week followed by a rally into the 27th for example. We watch closely and will advise.