The recent burst of strength in US and European markets has pushed Nasdaq values up above the daily-scale compression reported in the 4th September edition, which gives fresh impetus to the long position already advised. The old bottom extension in Dow futures was getting toward the end of its life and this break means that you should stay long for some more weeks – at least two and maybe more. The Dax has also compressed at a daily scale and pushed higher, so it looks like a new up-move is in process there too.
This means that we willeventually get another chance to short-sell the Southern European indices but that moment may be some time away.
The Asian markets have produced a longer-term reason to be bullish – a new weekly-scale bottom extension in Indonesia. We saw one of these in China at around mid-year, as reported in the June 30th edition, which made us call for a new bull market there. This is in progress and it now looks as though others will join in – we do not expect to see many more signals than this, so we conclude that he recent pessimism about emerging markets in Asia has been misplaced and is simply wrong. Buy.
There is a bit of froth developing in stock markets however, so be careful about chasing strength. Finland made a top extension yesterday, after the big run-up caused by Nokia’s acquisition and now Korea has made a similar signal.
These are not reasons to jump out of long positions but are reasons not to be blindly bullish. Dips will happen and we will try to catch their beginnings and ends as usual.