Gold made a daily-scale top extension early last week as reported in the June 7th edition. This was a chance to sell short if you are an aggressive trader but (as usual) we pointed out that top extensions do not always lead to a reversal - some kind of 'top' may need to form before any weakness can begin, so patience might be prudent.
Since then, there has been a drop of almost $40 into yesterday's low, followed by a rally of about $20. In the meantime, platinum futures have made a pair of daily scale compressions, from which the price pushed down yesterday - this may have started a downtrend. Today there is also a small rally in platinum, which will find resistance right here, in the compressed area, as is normal.
This means that both platinum and gold should be sold here, risking a close above the high of the compressed area in platinum which is $956 for July futures. This platinum signal has increased the odds that the gold price did in fact 'make its high' at the top extension and that any subsequent rally should be sold - like now. Charts:
This has implications for stock markets. We pointed out in the May 22nd edition that weekly scale compressions had formed in the Russell 2000, Value line and Dow Reit indices which would soon lead to the next sustained move. These have all now broken upwards which means it is highly likely that the bull market/bubble has resumed. Updated charts:
We also see and hear an increased amount of bearish opinion, which will help prices move higher. Stock markets are expensive by most measures but that never stopped prices rising further and we expect that the Nasdaq will continue to lead the way higher until the eventual high point which cannot be very far away. The sharp drop in Nasdaq stocks on Friday and into early Monday was probably just another panicky sell-off and prices will quickly regain their highs and go further up.
Be very careful here. When the eventual turn-around comes and the next bear market starts, the normal sequence of events is for weekly-scale equity index compressions to form which then break downward. The charts above show just such weekly signals but the break has been upward. If prices reverse and drop back down through those compressions then we will quickly turn our view around. Until then, there will be money to be made in continuing to buy dips, especially in the Nasdaq.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com