- New Science in old markets -

Equities – first signs that the drop is ending

There was a bottom extension yesterday in a Belgian equity index that we follow. This unremarkable index has produced early warnings of the end of trends numerous times in the last twenty years, sometimes providing the only signal that we get. Here it is:

Belgium bottom extension

This comes relatively soon after we warned that European (and Kiwi) stocks were likely to drop. Here is an update of the charts sent in that August 30th edition with the sell advice arrowed in red:

NZ, SE tops Dax ret to comp (update)

This drop has now 'done enough' and you should cover those shorts taken a week ago and start buying Europe.

We said in that same edition that the rally in US stocks was ending, due to a solitary top extension signal in the Dow - updated below. We also said that it was worth waiting to find an opportunity to sell the US short as these top extensions often begin the process of 'topping' rather than marking the point at which it is safe to sell. That remains the case. We wait, as another rally seems likely here which may only last a few days - the biggest turn of the month is due on Monday the 10th (see turn schedule) and that may provide us with the chance we seek. In the meantime, it is quite likely that there will be 'churning' price action in the US within that rallying tendency, so expect two-way price movement. Don't get whipsawed.

Dow top ext update

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