- New Science in old markets -

US Equity index compression update – try a long position

The NYSE stock exchange index has been making compressions at a weekly scale since early February, as often reported here and it just made another one last week. For the first time in this series, several other US indices also compressed at a weekly scale, as shown in the S&P100 example shown here next to the NYSE:

NYSE & OEX weekly comp

This argues that a break out of this compressed condition is getting much closer and this view is backed-up by a series of daily-scale compressions too, including these two already mentioned and the S&P500 futures too. Here are the NYSE and S&P futures:

NYSE and S&P daily comps

These daily-scale compressions seem to be breaking upward so far today, which probably means that prices will soon be back up at the high end of the recent trading range. If that is achieved, an upward break from the weekly-scale compressions is then possible, so there is a tactical play available here:

  • Buying a half position in US stock index futures here (risking that these upward breaks today may falter and fail on the day) would establish long positions that could then be held for enough time for a potential upward break of the weekly-scale compressions to occur.
  • If that larger-scale upward break were to happen, the second half of the long position could be taken. This 'buying a break of a daily signal in anticipation of a break of in the weekly version' is a way to minimise the danger of whipsaw that is always significant in a trading range.