- New Science in old markets -

US stock market update and Grain turn due on Monday.

The equity turn derived from the long-term Dow series that was due on Wednesday this week has come and gone. The Dow made a new high for the move on that day, which was then exceeded the next day. This clear prior trend into the turn confirms that it should mark a high point, although it is clearly at least one day late. The missing ingredient in the recipe was any top extension signal from a major US equity index and now we have several:

These are just four of the US equity top extension signals we have seen in the last 48 hours – there are others in the Russell 2000, the Dow Transport and REIT indices (as already seen) and various Dow and S&P500-related futures and other instruments. Various indices and ETFs representing small cap, mid cap, consumer goods, food, general financial and retail sectors have also made top extensions. This up-move is overstretched.

The Dow measure of the UK stock market also extended, as did Australia, so a general pause or dip in equities seems likely from hereabouts:

Some Asian markets have already dropped in these last two days – Korea fell by 3.5% from a high made on the turn day and we reported last week that Japan and Hong Kong are also extended. Be careful here if you are long – we have already recommended establishing ‘trading’ shorts in the US and other markets are also vulnerable.

Elsewhere there are a large number of grain turns due next Monday 28th January, with some slight spill-over into Tuesday. This comes at a time when the recent rallies in grains are faltering and so it seems likely that this turn will mark the low point of the current dip, to be followed by renewed gains. We will know more after today when we can see better if there has been any very clear trend into the turn day. At the moment a low point seems likely.