We are expecting a large market turn today. The diagram of when turns are expected in the upcoming month is displayed in the AlphaMail section of this site but here it is again to emphasise just how large then turn should be. We add all the individual turns that we have identified as being due on a particular date in equity indices, and various futures contracts across all financial and commodity markets, building a 'stack' of the total. Today's stack is big.
Turns are a useful tool but they require careful use, as described in our userguide. They mark the end of existing trends and often therefore the start of new ones. We watch carefully as the turn date approaches and if say, prices have been rising into that date then we know with good certainty that a high point is being made. If prices have fallen, it will mark a low. Today's turn is mainly in equity markets, as the key shows and this presents a problem as there has been no prior trend that is readily identifiable. Most markets in Europe and America have been range-trading for the last few days (or even weeks) and we have even seen some compression signals. Compressions only occur when there is no trend at all, so we are in the rare situation of a turn that comes after a flat, trendless period.
When this coincidence of a turn with compressed conditions occurs it has the effect of 'turbo-charging' those compressions. Compressions usually mark the start of new trends and this coincidence of a big turn event with compressed markets means that the trend that is imminent should be a big one. As ever, we cannot tell which direction that trend will take as compressed markets are on a knife-edge and could go either way. This is frustrating but we must be patient and wait to see the start of the trend before 'jumping on board'.
We have flattened all positions and are poised to act when things clarify, hopefully in the next few days.