Gasoline prices (the Nymex Rbob contract) made a daily-scale top extension yesterday, meaning that the present rally will soon stall. This is the second such top extension in the recent up-move – the last one led to a sharp dip in the steady rise since mid-summer’s day and we warned last Thursday that its effect was waning. New rally highs quickly followed and now this second top extension. The ‘Senior Signal’ in energy markets remains the weekly-scale bottom extension in crude, which means that the low point has probably been made for many weeks to come, but that doesn’t stop ‘tradable’ dips. We would advise bold traders to try shorts here in any energy market except natural gas. Copper too is in resistance, as shown. Outstanding shorts may be protected by placing stops just above the most recent compressions.
Gold is compressed at a weekly scale. This is the first weekly-scale signal that we have seen in any precious metal since the top extensions that came toward the highs a year ago. The implication is the same as usual – a new trend is about to burst into life. Bulls will say that this portends a new up-move but we cannot only tell that it will move soon, not in which direction. Watch out, as gold has been a good bellwether of the state of fearfulness of the financial world.
One possible interpretation of these signals is that asset prices may stall hereabouts (including stocks) and the fearful flight into bonds and bunds may resume (bunds are near support -see last email). This may then provoke a renewed enthusiasm for gold. We will soon see - the answer probably lies with equity markets, where the Dow transport index - still important after all these decades - remains compressed, as we also wrote in the last email. We advise 'going with the break' as usual when compressions occur.