- New Science in old markets -

US equities still in big compression – might be at a turn high?

Last week we reported a weekly-scale compression in the NYSE Composite Index, which had already made a similar signal 4 weeks before. This index ended the week with yet another one of these signals, showing that a lot of pressure is still building up for a new move although the compressed condition means the direction of that move is unknowable, as yet. There are top extensions in various Eurozone stock indices, as reported but we do not interpret these to mean an imminent decline in those markets - yes, they are stretched but the local version of QE will probably stretch them more. We have advised short sales in the equity indices of Norway and the UK, neither of which is in the Eurozone and both of these trades are currently profitable. We have also advised selling either Singapore or Hong Kong short as of the March 5th breaks of compressions reported in the 2nd March edition and both of these trades are also slightly profitable so far.

There was a grade 1 equity market turn due on Friday 13th or perhaps over the weekend, as reported in the latest turn update. This was expected to be mainly in Europe and Asia but the cluster of individual turns in it included a Dow long-term turn that was actually due yesterday, Sunday the 15th (these Dow turns can come at weekends). As US equity markets have rallied from a low point made mid-way through last week, this turn offers the possibility that a high point is being made right here and that we should use it to establish shorts that may prove very profitable if the eventual break down from these weekly-scale NYSE compressions proves to be downward.

Simply put, in the short-term US equity markets are in a range and we think that we are at or near the top of that range, so a low-risk short is possible here with a close stop and possible high reward, if the range then breaks down. In view of all the existing short equity advice that we have already issued, smaller short positions in US equity futures would be prudent - perhaps half now while keeping some ammunition ready to sell the other half, if the trade starts to work quickly. Charts:

NYSE weekly comp4+SP turn