The strong rally in many equity indices since the lows of mid October has now produced top extensions in several Nasdaq indices in the US, many sector indices too and in the Russell 1000 large-cap index:
The later part of the rally was accelerated by Japan's announcement of further monetary stimulus and the Japanese domestic market was the main beneficiary. It too has now made a top extension:
But as noted in the chart of the French market, rallies in Europe have been much less impressive and these indices are mostly falling some way short of the resistance levels that we had expected to see reached on this bounce. This is of course an important clue and we now advise selling European indices short. Our favorite candidates remain the markets of the Southern edge - Italy, Spain and France and we would choose Italy and France as candidates this time. We may add Asian and US indices too, but we wait a bit - our last recommendation to sell short US indices has only just been stopped out so we are cautious about repeating a mistake. We would however take profits on the 'bargain hunting' purchases that we advised in US Oil and gas, Media, banking and asset management in the October 16th edition.