- New Science in old markets -

Equities update

There are some continued divergences in equity markets, by region and sub-region.

US first. The ranging behaviour that has kept prices stuck for the last six months continues. For those that think this has to end soon, please look back to an earlier period in the US (1965-1982) and the period 2010-2017 in Korea. Waiting for a trend was frustrating, to say the least:

Long ranges

We still think that the trading range in the US is likely to continue for now and this will be characterised by repeated compression signals at weekly and monthly scales, interspersed with shorter-term trends, both up and down within the range. Most of these 'trendlets' will be signalled in advance by our methods, and we will continue to look at a wide variety of indices to find clues. It is possible to profit handsomely in such conditions, but you must be prepared to take profits, not try to 'run' them.

The most recent shorter-term signals in the US were top extensions some weeks ago (see June 13th edition for an example) that have now expired. We advised taking profits on shorts on June 19th and have been neutral since then. We still are, meaning that prices could move either way from here for a short while. There is likely to be a daily-scale compression in a major index in the next day or so - we will report.

Asia next.

The situation has looked more bearish in greater Asia as pointed out on June 20th. There, a Hong Kong index had broken down from weekly compressions, arguing that a proper bear market had begun. That seems to have been confirmed by subsequent weakness. An update:

Asia equity summary

This probably means that the markets have 'fallen enough' there for the moment but we are reluctant to recommend buying for a bounce. There is a chance to buy Japan though, as it has fallen back to some support from older compressions. This is thin evidence, but bounces in bear markets are wicked and worth trying to catch:

Japan in support

Now, Europe

There has even been some divergence here. Germany is seen to be more 'at risk' from the Russian agent of influence making US policy right now, so the Dax has been weak until a rally started 3 days ago. It too has recently fallen from compressions and they will provide resistance on any further small rise. The FTSE has been compressing and still hasn't broken either way. The musings in the media about the horrible prospects for a 'good' Brexit are so gloomy it is easy to see this index rallying a bit more and so breaking upward - watch out here. Others, such as Switzerland (shown last) are already moving upward from compressions and so there is some exuberance still possible in parts of Europe. Don't be short yet and maybe get ready to buy some FTSE on a break upward. You can buy Switzerland right now, but we will watch out for a re-compression, which is the main risk of 'buying the break':

Dax, FTSE, Swiss

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