Copper futures made a weekly-scale bottom extension last week:
This adds to the daily-scale version already reported to you in the April 18th edition and is yet more evidence that commodity markets are ‘oversold’ for the time being. Bottom extension signals mean ‘this market will not go not down’ rather than ‘this market will go up’ but there is often a rebound in such cases and we have already recommended trying some long positions. This weekly-scale signal means that any long position adopted hereabouts might turn into a longer-term ‘hold’. Nonetheless, we still think that commodities are in bear markets so will try to find the appropriate time to advise selling again. If a good rally should occur, feel free to take profits, as is always sensible in a contra-trend trade.
There is a stock market turn due in the three days ending today and we are not sure yet what it means. We have been thinking that one the many upcoming turns would present an opportunity to sell short US and Southern European stock markets again and we have been expecting some strength here, as warned. It is too early to say that this is the right moment to re-short however as we will need some supporting evidence, such as a top extension in a relevant index. In fact we have just seen the opposite signal – a bottom extension in Finland, one of the Northern European markets that is usually considered similar to Germany:
Ordinarily we would advise taking a long position on such a bottom extension, especially as we like the prospects for all German (and related) assets in the medium-term. This time we wait, as it is too late – this market has rallied strongly already today although this chart does not show today’s action so far. A better reason for hesitation is that the evidence from other markets shows that any rally in US or European markets from here will not travel much distance.