Last week there were daily-scale bottom extensions in Hong Kong and Australian equity indices. These had both dropped from highs made a few weeks ago and these extensions argue that the drop is overdone. This offers a chance for a trade on the long side ands we would advise buying either or both. We have expressed a view in several recent editions that commodities are due for a rally so it may be more sensible to buy Hong Kong as the Australian market is highly sensitive to commodity price moves and buying it now may lead to an unwanted concentration of risk. If that doesn’t worry you, buy both:
We have an outstanding recommendation to be short of US stock indices and we have been looking for a chance to sell Europe too. This fresh advice to buy these two Eastern markets does not affect that view and we will continue to look for signals that will trigger a sale in our preferred European short-sale candidates of Italy, Spain and France.