Yesterday we advised selling any rally in European and US stocks that might occur today or tomorrow in order to establish short positions, for those not already short. Instead of rallying, prices have simply dropped and now we see widespread bottom extensions in Europe, as of today's close. A sample:
This obviously changes things, as now we have a coincidence of bottom extensions with a turn (which is due today or tomorrow). We would cover any outstanding shorts in Europe, take 'trading' long positions in Germany and tighten up stops on any US short positions. There have been bottom extensions in the far-East, as reported and these too represent buying opportunities.
This does not change the longer-term bearish opinion that we still have of equity markets in the US and Europe, but it now looks likely that there will be a rally for a few days or even weeks. The prospect of 'no more QE' may have removed the reasons for the uptrend in US equities but we should remember that the European equivalent (called OMT) has not yet been used to buy a single government bond. The promise to do so is still there however, so there is one fewer reason to be bearish about European equities than about those in the US.