- New Science in old markets -

Bottom extensions appear in Europe

Swiss and Belgian equity indices made bottom extensions yesterday, after falling quite hard for almost two weeks.


These minor markets have often provided signals that give early warnings of a change in conditions and they are sometimes all we get - there may not be similar bottom extensions in the major indices.

As I write they (and other European markets) continue to fall but this is a reminder that prices are actually in broad ranges in many equity markets around the world. These price drops have brought markets down toward the bottom end of those ranges where it is sensible to cover shorts and do some buying.

As written in the November 2nd edition, we have been waiting for a bounce to sell some more equity instruments and it looks likely that there will be such a bounce starting from hereabouts. It is worth buying for that bounce as it could be large - we cannot tell, but the odds are that more weakness will not happen yet. We will buy the Dax and the Eurostoxx and may look at the US too - we will write more on that later.

We will probably stay short of the UK FTSE, as we think it has worse prospects than the others. See the October 7th and later editions for more on this.

All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com