We recently reported a top extension in the main commodity index that we follow and it has now made another. These signals are just at a daily scale but we think that commodity prices are only experiencing a bear market rally, so they may well be enough to start the next multi-week decline. There have also now been top extensions in two commodity-dependent equity indices, Australia and Indonesia, which seems to confirm our emerging commodity bear view:
....and there has been the first top extension in an actual commodity, Soya oil, which can now be sold short:
We expect more signals that will show other commodities to be sold short in the near future, but there are none yet.
Equity markets continue to churn and we continue to be bears in the US and Europe. There was a fresh top extension at a weekly scale in a Nasdaq instrument last week (which had made a fleeting new high) and this confirms our bear view:
As usual when working with top extensions at or near contract highs, it is not expected that prices will simply drop from here. Rather, this is most likely to be part of an ongoing process of ‘topping out’ that will eventually lead to declines. It does mean that trades can probably still be taken on both sides of the market and we advised long positions in US and German equity indices just before Christmas that we reversed into shorts just before New Year. At the moment we have outstanding ‘sell short’ advice given in the February 14th edition and this is both a short term (three weeks or so) and longer-term (up to four months) view.
US Treasury Bonds are also churning and we have an outstanding ‘sell short’ recommendation from the 4th February edition. This advice is near the end of its three-week shelf life and now there has been a compression in Five-year notes:
If this breaks downward, it will add new life to the ageing short-sale advice, so watch carefully here.
More as we see it,