There was a top extension at a daily scale in the Spanish stock market yesterday. The market has opened slightly higher today, which is also a turn day and today's higher opening price is a new rally high for the present move. This makes it highly likely that this market is making a high point here, from which it will retreat. We have been surprised by the recent strength in Spain, but there is no reason to think that the longer-term pressures that are pushing it down have reduced or gone away. Sell short now.
For new readers, it is worth pointing out that top extensions act differently from bottom extensions simply because markets behave differently at tops and bottoms. ‘Spike’ bottoms are quite common as panic-driven selling reaches a crescendo at the market low but tops rarely form in the opposite way. Panicky, short covering rallies often do bring the end of up-moves but there is usually a wait of several periods (days, in this case) before any real weakness begins. Accordingly, we recommend starting a short-selling campaign here, selling short now and then using any early dip to cover some of those shorts, in order to re-sell any rallies that occur within the next week, staying short overall while waiting for the market to drop.