- New Science in old markets -

Big turn time

There is a large turn cluster in equities that is due to start today, lasting three days and which is at its densest on Friday, the 11th April - the most likely date for the turn event. There are also fixed income turns due tomorrow and/or Friday the 11th, many commodity turns in the same three-day period and currency turns too on Friday. This is the largest and widest-spread collection of turns for many months and the effects should last for some weeks.

Regular readers will know that turns generally mark important highs and lows in price but that we do not know in advance which they will turn out to be. We must wait until the day arrives and judge then what is happening from the prior trend – uptrends lead to highs, downtrends to lows. Sometimes the prior trend is indeterminate and then we must wait for the ‘outrun’ period to see what has happened. Occasionally the prior trend is ‘flat’ meaning that the turn could result in either a new uptrend or a new downtrend, rather like outcome of a compression signal. If markets are also compressed at turn time, this has the effect of 'turbo-charging' the compression.

At the moment, we are in the indeterminate or even ‘flat’ state in most equity markets. The very recent trend (that is, over the past few days) has been downward in some indices but the slightly longer-term trend is flat in many too – a few are even compressed, such as Canada, shown here:

So things remain cloudy although they may clarify in the next two days as the turn reaches its crescendo – we will report. The longer-term outlook for equities remains poor but a rally can start at any time, so we are neutral for now.

Bonds and notes are compressed again, with the same implications - a break is imminent which will probably be large but we cannot tell which way the price will jump:

One clue may be from the BTP (Italian government bond) contract, which has recently made a top extension:

This is not a good indicator for fixed income markets in general, but may indicate that another wave of Euro-worry about debt is about to begin. Any good crisis needs a trigger and this one has stood the test of time - it will probably be the source of many such scares in the years to come, as argued here often before.