Yesterday’s equity market turn date came and went without clear evidence about the trend. Some indices in the US and Europe did make new lows, which would indicate that the turn marked a low point – this would mean that the drop is now over. Quite a few US indices did also rally for the prior 36 hours or so into the high point of the day however, which could also mean that there was a ‘swerve’* and that the turn marked a high point instead. This is less likely but still possible.
Those who covered shorts to take profits in the last 24 hours should now wait. We stayed short in France and the US but have tightened stops – this situation will soon clarify, probably within the next two days.
*A swerve occurs when a market is trending toward a turn day and so we expect that the trend will end at the turn – in the current case we expected a low point. Instead, the market veers against the trend for a day or two and makes a temporary high point on the turn day instead of a low. The trend then resumes – in this case there would be further falls. This can happen in both uptrends and downtrends but is always unusual. We are always on the alert for swerves, even though they are uncommon, because they happen during strong trends, which obviously we do not want to miss. There is more on this in our user guide.