Dow futures made a daily-scale top extension on Friday. This is the first of the 'big three' main stock index futures to make an extension in the present rally and comes after several other similar signals reported since March 4th. As we pointed out in that edition, the first top extensions after a rally usually mark the start of a process of 'topping out' that can take a while and this new extension is a significant further step in that process. If you have followed our advice to build a short position carefully we would use this to increase the pace. The Transport index top is a chance to take profits on the long position we advised in that index/ETF in the January 21st edition.
Longer-term the picture remains cloudy as there have been weekly-scale compressions in many indices in Europe and the US that have now broken upward - just about in the case of Europe:
There are other, older weekly-scale compressions just above here that will offer resistance, added to the obvious point that Dow futures are at the top of a well-defined trading range. Combining this with the new top extensions probably means that a pull-back is due that will be worthwhile for shorts. We will comment further as events unfold and there will be a longer-term piece on equities later in the week.
Elsewhere, we have more evidence that the commodity rally is also running out of steam. We have reported top extensions in copper and the minerals and mining sectors in recent editions and now there are two more in sugar and soya oil:
This is a chance to sell either or both of these short, and by implication also to sell soya beans.