There were daily-scale top extensions in two principal US stock index futures yesterday - the S&P500 and the Nasdaq 100:
We had advised selling short of the large-cap US indices (and southern Europe) in the August 15th edition, as prices rose into the area of the compressions shown in the first chart above, but this resistance did not stall the rally. Now that there are these fresh extension signals, we have a reason to stay short.
Elsewhere, last week there was a weekly-scale bottom extension in the main commodity index that we follow. This means that we now expect some end to the general commodity weakness of the last four months and so some rallies. Commodities are poorly correlated one-with-another and so we will report separate ‘buy’ signals as they arise. The first one has already happened in the Platinum market, so we would now buy that:
Lastly, there was a top extension in the $ index yesterday and a bottom extension in the Euro/Dollar rate. These signals complement the extensions that we had already started to see in $/Yen and indicate that the dollars recent rise will stall.
The dollar has risen against other currencies as the process of what some have called ‘competitive devaluation’ has continued. The US contribution to this has reduced with the ‘tapering’ of the money-printing called ‘QE’. It seems that this $ appreciation has now gone too far and we now expect some contrary reaction to the $’s strength. We have an outstanding recommendation to be long of the British pound and we now suggest buying these two other currencies as well. The Japanese contribution to monetary expansion is still in full effect, so it may be that the euro is the better buy here as Japan has the unstated policy objective of weakening the Yen over time. Fighting that may be too brave…