- New Science in old markets -

US Stocks make top extensions, copper too

There were lots of top extensions in stocks late on Friday 14th, which was also part of a turn date which was due the 13th/14th, as reported in the July 27th edition. This comes just after yet more central bank/government intervention in markets was announced - this time in America, joining with Europe and China in this heroic task. Described by one commentator as trying to provide a ‘sugar rush’ to the faltering economies of the world, this is yet another step in trying to shield us from the normal ebb and flow of fortune. It is not our job to provide either moral or practical criticism of such actions, no matter how mad they may seem - we just try to predict markets. Sell stocks for the next few weeks. Charts of the US extensions:

These are just a sample but you can see that pretty much all sizes of stocks are represented here - small, medium and large cap. There were also separate sector index extensions in gold mining (again), oil and gas, media, leisure goods, insurance, financial and also general financial, consumer cyclical, banks, auto manufacture and asset management. Exit any longs that you may have taken on the 6th September (actually we advised buying German stocks) and try going short here. This implies that other markets will also stall of course and we may get other similar signals soon. We may not, of course, so please consider this to be the warning. The only other stock index signals already seen today and yesterday are top extensions in Canada and Thailand (not shown). The longer-term view of stocks remains unclear, for the same reasons given recently – the Dow transport index is still compressing at a weekly scale, although it came close to an upward break last week.

 

There was also a top extension in copper, so we advise exiting ‘trading’ long positions taken on the last compression break and braver traders may try a short here.  It seems unlikely that the copper market will simply start falling from here – it may take a while to ‘roll-over’ - but this seems like a sensible time to sell short anyway. There was also an extension in $/Swiss franc (and in £/€ not shown) which brings the number of $-related extensions to 3 in the last few sessions. Stay long $.

Bear in mind that all these signals are only at a daily-scale. There may be longer-term implications that we can only see later, but these signals have a median shelf-life of around 17 trading days. If markets have not started to move in the expected direction within 10 days of daily-scale signals, we encourage you to take some protective action – review the trade, tighten stops, look elsewhere for more trades.

More soon.

RE