- New Science in old markets -

Stock turn update and review of current trades

Stock markets were due to turn last week, most probably on Wednesday 17thJuly, which was the middle day of a large three-day cluster of turns. Prices were rising immediately before the turn period so we expected a high point to be made but most equity values in the US and Europe did not make an obvious high point on any of these three days and have now mostly pushed even higher. The exception to this has been the Nasdaq, which did indeed make a high point on the 17th and subsequently dropped almost 2% very quickly. We did not single out Nasdaq instruments as particular short-sale candidates, so this has not been useful:

In the 18th July edition we wrote that weakness should follow quickly from any high made that day. Because that did not happen, we now advise either abandoning the short campaign at this very early stage or placing very close protective stops – this second option only because the medium-term and longer-term outlook remains poor, because of monthly-scale top extensions (updated example below). We prefer to admit a quick defeat on this short-selling attempt in order to try again soon. That opportunity might be very soon as we continue to see sporadic top extensions – most recently yesterday in Canada:

There are more turns due later this week (although they are only grade 3 – see the July 2nd edition) and yet more in the weeks that follow, all of which may offer more chances to sell short. We wait.

We have outstanding recommendations elsewhere, so here is an update:

Gold has continued to rally up from weekly-scale bottom extensions and there is no sign of an extended condition in this up-move. Stay with long positions from the June 27th edition:

US Bonds and notes have risen erratically since the bottom extensions shown below. We advised long positions on June 23rd that have been modestly profitable and we are looking for an exit soon. The better trade has been to buy Euro bunds, which we advised one day later, advising traders to add more longs on the next dip. Hold longs:

The dollar presented us with an easy ‘sell short’ for the July 10th edition. Stay with these two advised positions shown below, but we are looking for an exit soon – these were only daily-scale signals and their active life is near an end:

Energy markets have stalled in their rally and we advised starting a short-selling ‘campaign’ in crude oil in the July 11th edition, adding RBOB gasoline on the 15th. There has now been a bit of weakness, so we advise staying short:

These markets may not drop more than 5% or so before some support is visible (the best support is even lower at around $99.60 in crude) but we suspect that the longer-term prospects are very poor, as they are for other commodities. We do not have other signals to short-sell copper or the grains yet but we are on high alert while we wait.