As we mentioned in Thursday's seminar, there was a top extension in the main Nasdaq index last week. This comes at a time when we have been sceptical for some weeks about US equities ability to continue their bull run. We have been recommending trades from the short side in the Dow and Mid-Cap futures and we are looking for reasons to become more bearish. This is a good reason, so you can now add some short Nasdaq to the mix, pending further advice. Remember, this is just a daily-scale signal, so the expected shelf-life of this new advice is around 17 days. Charts:
Meanwhile, China has been 'bumping along the bottom' for a while as the market tries to gauge the impact of the Communist party revealing that it is the same old command-and-control beast that it ever was. The longer-term implications of the stranglehold that President Xi's regime is reimposing on the economy are disastrous. Misdirection of resources and plunging productivity growth are the inevitable consequences, as Western politicians would do well to contemplate, instead of running scared.
Meanwhile, the quiescent Chinese population are more interested in getting on with life and these dire predictions are for the medium and long term, not the next few weeks. We do not like to buy the first break up from a compression, preferring to wait for the usual 'return to compression' that happens early in most new trends but we have liked the look of China for over a year. Buy it. There has also been a compression in Germany (second chart below) that has yet to break. Be careful here, as the market will probably get a lot more active - another consequence of compression signals:
All signals provide by software developed by our friends at Parallax Financial Research www.pfr.com