- New Science in old markets -

Top extensions in equities – take profits

There were top extensions in many US stock indices on Friday, which was also a turn day, indicating that the recent upmove is now over. The S&P futures shown here are just one example. These extensions were at a daily scale, which puts them in conflict with the weekly signals which have started to point upwards, as reported in Friday’s edition. This conflict may be resolved by a dip a prices from hereabouts followed by a resumption of the uptrend or it may mean that there will be some fresh signal at the weekly scale that also points down - we will advise.

Other evidence has also occurred that a dip is likely. There was a solitary top extension in Hong Kong last Wednesday and then another in Holland the next day. Separately, these are of little import but together they mean that there are enough of these signals to warrant fresh advice.

 

S&P top ext

We now recommend taking profits on long positions in US and European equity longs and either tightening protective stops on Asian longs in Japan and Korea or simply getting out. We don’t usually advise taking different positions in equity markets around the world but this time we also advise taking short positions in the US and Europe. Our favourite European candidates are always the equity markets of Spain, Italy and France and this remains the case. All have risen more since the ECB announcement of supportive policy on Thursday last week and there seems little to choose between them now. Perhaps Italy has the worst prospects from a political standpoint but even the Northern countries around Germany look vulnerable here so it probably doesn’t matter which market to choose.

 

HK and Holland top exts