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Top extension in Value line index

There were top extensions in both the Value Line indices yesterday, at a daily scale. The difference between the arithmetic and the geometric versions is one of calculation and they look practically identical, so here we only show the latter:

valug top ext

We have been waiting for just such a signal, as written in yesterday's edition and can now prepare to sell US stocks short. The usual health warning applies to top extensions - they do usually mark the top of up-moves but do not necessarily signal the start of down-moves. There may need to be some 'topping' process before prices can start to decline, so be careful of being bearish too early here. The 'topping process' may be brief or may be longer, but it typically involves prices churning back-and forth at the highs (perhaps even making slight new highs) before any drop.

You can sell short now so as not to risk missing the opportunity, just in case the turnaround is quick, but you may need to be patient.

More soon.


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