One of the China equity indices that we follow compressed at a daily scale on Thursday and fell away from that compressed area on Friday, as shown in the second of these two charts. The first chart shows the weekly compression from which that same index has been falling since it occurred in mid-June. This illustrates the continued pressure that weighs on this market which continues to prevent us from advising that it is time to ‘buy China’.
There was a moment in late August when we thought that it might be possible to give this long-awaited ‘buy’ recommendation as a weekly-scale bottom extension was apparently forming in a China equity index. By the end of the week in question the ingredients for that signal had dispersed (the market merely stopped falling at that point) but they are gathering again now. By the time this fresh daily-scale signal has ‘worked off’ it may be that a weekly-scale buy signal will finally appear, so ending this long decline. Not yet though – traders can still sell rallies in these Chinese indices for more short-side profits in the near-term.
Some European equity indices made new daily-scale compressions on Friday, meaning that the next direction in Europe as a whole is still unclear. More on this later, but we still advise buying German stocks whenever there is reason to buy anything in Europe and selling Italian and/or Spanish stocks whenever the occasion arises to sell instead.