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US equities rally to resistance, copper & coffee extend

The spasm in US equities after the FBI's weekend announcement that they had no further interest in the email travails of Mrs Clinton has brought prices back up toward the point from which they fell in late October. There are compressions dotted all over the landscape at these levels and we expect that the rally will stall hereabouts. We suggested in the November 2nd edition that we would probably try to sell on such a rally and now looks like a good moment. Two typical charts, showing the near compressions:

sp-nas-comp-returns

Analysis from polls has given Mrs Clinton a 90% chance of winning. We can't say if that is correct but if it is generally believed then the current sharp strength in Stocks is the 'relief rally' that would be expected if she were to win - it's just starting early as the result is seen as a foregone conclusion.

This is usually a good moment to sell as it embodies the sensible old market adage 'buy the rumour, sell the news'. A Clinton victory is not yet news of course but many commentators are treating it as if it were and so it is probably discounted. Selling hereabouts also confers the advantage that if Mr Trump should once again upset expectations and defeat her, there would be a much bigger drop.

Elsewhere, two apparently unrelated markets have both made daily-scale top extensions - copper and coffee:

copp-coff-top-extsaWe usually advise caution when trying to short-sell from top extensions. The end of an up-move usually doesn't mean the start of a down-move as there may need to be an interval in which a 'top' forms. This means it is normally sensible to wait until that process is well under way. In this case, the two markets have different histories and so should be treated differently. Coffee has been in an uptrend and so caution is warranted as described above, when thinking about selling. Copper has been in a trading range for a year and so this top extension probably marks the point at which it turns down on its way to revisiting the bottom of the range - there may be no 'topping' process, just an abrupt shift from up to down. Sell copper and wait for coffee.

copp-coff-top-extsa

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