Today is the largest turn day of April, as a glance at the schedule on the main page will show. As usual, we expect that the market trend into the turn day will define what kind of turn it will be and US and European stocks are rising fairly uniformly, so it will probably mark a high point. The day is still young, so we don't yet know if there will be any other signals to confirm this assumption, such as a top extension in one or more indices, so we wait a bit.
Our underlying assumptions are still:
- that stock markets have ended their bull run
- trading ranges will dominate for the near future and possibly for even longer
Accordingly, we have been issuing buy and sell recommendations that try to capture the up-and-down moves within the range. Our last advice was to sell US stocks on the 16th and 19th April after which prices dropped sharply by about 3% from our sell level. We did not advise covering on the dip, but if you did, it's time to get ready to sell again.
We also advised adding shorts in the UK equity market on the 24th April. After a 1 day dip, the £ currency weakened sharply so UK equity prices resumed their rise and values are now about 1% higher than when we recommended the short sale. As we point out in this piece, we expect that US and European equity prices will peak today (or shortly after) so we would hang on to this UK short position.
Elsewhere, there have now been several other extensions in currency pairs involving the US$ to complement the $/Yen top we reported in the April 26th edition.
As in the case of that $/Yen extension, these all point to a pause or reversal in the $'s recent strength. We remain $ bulls in the longer-run but would continue to advise caution here. If you want to try a trade against the $ for the next week or so, we would suggest buying any currency that hasn't fallen far during the $'s rise. the Canadian$ is one example.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com