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Commodities make bottom extensions, more European top extensions and China breaks down

We had expected to advise selling short some more commodities in the last few days to add to the existing short recommendation in copper. Prices continued to fall away from the recent compression signal in the commodity index however, without providing any new opportunities and now we are starting to see some bottom extensions in individual markets. This means we now expect to see the end of the current drop in commodity hereabouts, although these prices usually don’t move in ‘lock-step’ with each other so some may continue to fall. Charts:


Crude oil and wheat, which have also been falling are also extending:



as are soya oil and even sugar:


Obviously this means that we expect more bounces, probably within the overall bear market that seems to be in place. Protect profits on copper shorts and try to buy some others – perhaps crude is the best bet?


We have been seeing yet more top extensions in European equity indices to add to those already reported to you - now there have also been signals from Austria, Portugal and Greece (not shown). We are expecting a turn to occur either yesterday or today, so these rallies should 'stall out' hereabouts and we have already advised selling Spain and Italy into this strength in our last edition, or simply selling France without waiting.


Now there is something even more worrying from China. We have seen weekly and monthly scale compressions in one of the China indices that we follow and the weekly version has just broken down. The monthly version has not yet and we will have to wait until month-end to see whether it will also do so but this weekly break is enough to expect some further weakness to occur in the next weeks and months. For would-be long-term investors in China this means 'wait'.


More soon