Last Wednesday there was a compression in a Nasdaq index that we follow that seemed to be breaking up a couple of days later – it didn’t. This came soon after another compression in Dutch stocks and now we have seen one in France. The Nasdaq has now moved back below that compression but has yet to close below it. The low of the compressed day was 2790, so that is the level to watch:
We are watchful in case all these compressions eventually break the same way – if that were to be the case then we would recommend a trade. There is a slightly higher probability that we will see a downward break because of some weekly and monthly-scale top extensions in a few US sectors reported to you recently but these are not sufficient for us to call a fresh ‘sell’ yet. In the meantime, please be patient as false breaks out of compressions are fairly common and can be traps for the unwary. Holland and France:
We expect that most equity market shorts will have covered by now, as the signals that made us advise that trade on the 17th September are now almost expired but if you are still short, just put a reasonably close stop and wait.
Copper has weakened a bit and crude oil has too but the other energy markets have not fallen as much. Now we have a fresh compression signal in heating oil. Stay short of copper and energy markets and use this fresh signal to place a fairly close protective stop on those energy positions. A clear closing break of 3.1625 (the high of this new compression) would be a strong hint to cover, for now.