The S&P has hit a new high and we have been reporting compressions in the US and Europe. This does not yet mean that there is a new ‘leg’ of the 2013-2014 bull market starting however, as the compressions are at both a daily and a weekly scale. The dailies have broken up but the weeklies have not, both in the US:
And in Europe:
We were preparing to sell these markets before the last turn (due last Friday, the 9th May – see the turn update in the 23rd April edition) but the compressions did not break down and that turn seems to have marked a low point. Today we are due for another turn which is apparently marking a high. Turns come thick and fast in these weeks, so this churning is to be expected – as is the risk of whipsaw, hence our caution in the 7th May edition and now.
There is also a great deal of divergence in US indices:
in European markets:
and in the far-East too, which we do not show here - all of which is more characteristic of 'tops' as Charles Dow proposed 125 years ago. Be very careful here - we may just 'churn' some more. If there is to be a liquidity-driven new ascent in equity values we will have plenty of time to catch it and it is better not to guess ahead of developments...
Elsewhere, we have been sitting on a 'short sugar' recommendation for several weeks. This has traded either side of the entry price for days at a time but now new compressions have formed from which the price has broken upward today:
This break means it is not a good time to be short, so we would now cover. We remain bearish of commodities in general and will re-visit this one in due course.