In our May 8th edition we advised that Japanese and Chinese stocks were likely to go up, no matter how other markets performed, also pointing out that the Chinese market in particular was poised for a big bull move. That has begun, so here is an update, China first:
We are now seeing some daily-scale top extensions that probably means this sharp upmove will pause or dip, but this is a long-term play so be wary of jumping out too soon, only to scramble to get back in again. "You can always find a reason to get out of a good position" as Jesse Livermore reputedly said in the 1920s. Here are those top extensions in China, with some analysis of Japan:
From which you should conclude that our 'buy and hold advice in China doesn't apply in japan, or anywhere else either. We said in the June 25th edition that you should take profits in stock markets as you find them, whether long or short, as we thought that prices were already trading in a range.
Equity induces in the uS and Europe compressed recently and seem to have broken up, as shown below. There has been little follow-through strength however and it may well be that they will re-compress, as has happened in the UK. We would be long of the Eurostoxx and the S&P, just to follow the signals, as an up-move is still quite possible but we wouldn't risk much:
Elsewhere, Copper has rallied well, probably driven by the same sentiment that is pushing China up and it has now extended at a daily scale. Soybeans are extended too and these signals have the usual meaning - a pause or dip in these uptrends. If long, take profits but wait a bit before trying a short - as we usually say when faced with top, extensions, they more often mark the end of an uptrend that the start of a down-move - some 'churning' may be needed before prices have a chance to fall. If you are bursting to sell short, go ahead, but don't risk much:
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com