There was a bottom extension last night in the Indonesian equity index that we follow. The non-China, non-Japan markets of Asia have a slight tendency to move together and the last signal we had for this group was from Taiwan. This compressed and moved down, leading us to warn in the August 6th edition that some weakness was coming – there is an update here:
This new bottom extension in Indonesia now warns that this weakness in the region will not last much longer.
There is also another sign that the current drop in US equities will not continue for much longer – a bottom extension in the oil and gas sector:
This is the second such bottom extension in a US sector index – the first was in REITs, as reported in the August 16th edition. We don’t have any such extensions in the main indices yet and so this is not yet a reason to cover shorts but it puts us on warning that some areas are already getting ‘sold out’. There is a turn due on Thursday 22nd August (i.e. in 2 days) which may well mark the low of this drop and we will watch carefully for any extensions in the main US indices in the next 48 hours. We would only expect a bounce, not a resumption of a major uptrend as the weekly and monthly-scale top extensions already reported to you show that these markets are unlikely to rise further for many months. We will try to catch the twists and turns however, and so will look for a place to cover shorts soon.