We have been waiting for a major US index to make a top extension and that has now occurred in the Dow:
The present rally has been fuelled by a re-examination of the prospects for US interest rates that are now widely thought to be due a cut at the next Fed meeting in about 2 weeks. We wrote in the July 9th edition that this seems odd to us and it is quite possible that the markets will reconsider in the time between now and the Fed meeting on July 30/31 and begin to think there will not be a cut. We would start to sell short now. The usual risk warnings apply - top extensions mark the imminent end of up-moves but only occasionally the start of new down-moves, so be careful what tactics you use to construct a short position.
Elsewhere, more indices have gone sideways or down than have followed the Dow up, even in the US itself. The widely followed S&P500 has made a decent new high but Nasdaq futures (not shown) have not yet pushed significantly higher and the mid-cap and other important indices are churning near their old highs:
This fits our view that US equity prices will continue to trade in a range but that the range will be erratic and may be poorly defined. In this, new highs are possible but 'follow-through' into a new bull move is unlikely. In Europe, there has been much less enthusiasm for equities and the Eurostoxx has been trading sideways since a top extension on the 4th July. It has not reached the highs of 2017:
Our policy is always to choose the most vulnerable market when selecting short candidates. The failure of most European markets to follow the US upwards is strong evidence that they will be the better ones to sell short, so we would sell them here too.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com