As we move toward the large market turn due next Monday 23rd July, some fresh signals are appearing. In the US, the pharmaceutical sector has made a daily-scale top extension while one of its main components (Abbott) has made one at a weekly-scale. This is the first sector index to provide us with such a clue and it adds a bit of weight to the idea that we are heading for a high point at this turn. The broader US indices are rallying, but with little strength as yet.
The direction of markets into a turn provides the best clue as to what the turn will bring – uptrends result in highs, downtrends lead to lows. ‘No prior trend’ can lead to either an up- or down-move. Elsewhere, more markets are rising than falling but some are moving sideways. A selection follows:
The likeliest outcome still seems to be that some equity markets will keep moving up into this turn and then make a high point followed by a drop. If so, the ones to sell short will probably be those that are currently trending sideways and may be compressing too – they are most vulnerable. This situation will clarify as the next few days go by (there is still time for a ‘swerve’) see the userguide on our website to refresh your memory about swerves.
The grains have stopped rising again after some daily-scale top extensions in corn and wheat. It is too dangerous to try short-selling markets that are moving up from weekly-scale compressions, so we wait. The situation in the soy markets is different. There we have seen weekly-scale top extensions in soya meal, which is apparently the one in demand (cattle feed for beef-loving China) and daily-scale top extensions in soy beans. That leaves soy oil, which is the weakest of the bunch, bumping up against overhead resistance from old compressions. This is now a short-selling candidate, ‘at market’.
Copper compressed, moved up, then came down a bit and re-compressed. Cotton did something similar. These charts show an update and the prudent thing to do if you bought the initial break is now to put a fairly close stop - underneath these serial compressions. The upcoming turn includes most markets and if a general change in weather is coming, these commodities will be no exception.