- New Science in old markets -

US Equities push higher, China and Europe stall

Here is the 4th update to the same weekly charts that we have been publishing since late October. The two US indices shown have (just about) pushed up above their compression levels and so are now seemingly embarked on a new uptrend that should last three months or so, if it gets started. China, the third index shown has (just about) pushed down, so starting a new down trend:

Valua, Small cap, China wkly comps4

Of course it seems unlikely that the stock markets of the world's two giant economies will head in different directions for a prolonged period of time but these are the signals that we see and we are reporting them. Weekly-scale signals are not very useful for 'timing' trades, so we will rely instead on those at a daily-scale when recommending action.

There have been a few such. The Nikkei made a daily-scale top extension a few days ago, that has probably brought the rally that started with a weekly-scale compression to an end:

Nikkei wkly comp, dly ext

It is worth pointing out that this market too has been in a trading range for a long time - since the Autumn of 2017. Like the US market, there is a chance that it will break out of this range and start a new uptrend, but this top extension needs to 'work itself off' before that is possible. That is why we continue to wait, here as well as in the US.

Europe is poised too. The run-up in prices that started at the beginning of the year has resulted in some top extensions, as reported. These include examples in the Dax and Eurostoxx:

Dax, Eurstx daily tops

Here in Europe, the main Eurostoxx index has been in a shallow ascending channel, like an upward sloping range:

Eurostoxx weekly channel

As with the US, Japanese and Chinese markets this broadly 'ranging' behaviour is entrenched. Such behaviour tends to continue unless there is a good reason for it to change, so to expect a 'break out' into new uptrends is asking a lot. The background conditions for such a break upward do exist because there is a general pessimism in the world about things in general and about economic prospects in particular. New bull markets begin in conditions of general gloom, but we wait for some of our own reasons before we advise buying. Still we sit on our hands.

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