- New Science in old markets -

Canadian stocks make top extensions, Italian bonds a bottom

In the last few days, a Canadian equity index that we follow has been making top extensions and the upward momentum there has faltered. This is entirely normal as top extensions occur near the end of a move and the most likely outcome is that the current trading range will continue for a few more days pending a fresh move, or that there will be a reversal into a drop that should start quite soon.

We are already positioned for a fall and have our eyes on the end of this week/beginning of next week when there is a fairly large cluster of turns, as seen on the front page of this site. That turn could mark the low point of a dip that starts now or the high point that leads to a bigger dip later on. We are betting on the first option but will not be stubborn.

Italian government bonds have dropped in recent days, as the tortuous process of forming an administration between two sworn enemies grinds on and that fall has been enough to produce a bottom extension - we have already reported bottom signals in the shorter end of the US treasury market and this is another reason to assume a bullish view of government bonds:

Canada top exts BTP bottom

All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com