We have been following the course of compressions that we saw in each of these 4 main asset classes. They have correlated, separated and now are each going their own way. Stocks are seemingly steepening their uptrend, especially in the US where the S&P is at new highs for the rally of 3175 for June futures, up another 2% on good employment numbers. This is starting to worry us as there has been another top extension in Japan, as shown in the first chart below:
There is also a top extension apparently forming today in the Eurostoxx (we'll know at the end of the day, so we don't hsow it here) which makes us think this equity rally is now on shaky ground. We still like China, for reasons given in recent editions but we would take all profits in the US, Japan and Europe based on our buy recommendation in late March.
We said then, and still think now, that the most likely future condition for stocks in most places will be trading ranges. Whatever range stocks are in, they are much nearer the top of it than the bottom, so the risk/reward has become skewed against long positions. We will look for places to try selling short but if you are aggressive, start now.
Meanwhile, bonds obviously broke downward from their recent compressions - there may be a rally to sell but we expect that prices will go lower in the next few weeks. Gold has also moved lower, from its cluster of compressions and this looks bad too.
Lastly, the $ has been falling (the bottom right chart above shows the Euro rising) and this has now produced an extension. Cover $ shorts and reverse into long positions.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com