- New Science in old markets -

Commodities update and a few more equity bottom signals

The Crude oil, sugar and coffee markets all made top extensions in October and all have since dropped. Here are some updated charts:

WTI, Coff, sug top updte

We wrote in the relevant editions that pointed out these signals (October 2nd, October 16th, October 19th) that each of these markets is in a bull phase and that we thought there was more potential to profit on the long side than by being short - that the upcoming dips flagged by these signals should be bought, in other words.

Now, Crude oil is back down into support from some older compressions and there have been bottom extensions in some of the energy sector indices and ETFs. This last point was reported in the October 24th edition, since when there have been more signals:

XLE & Oil&gas bott exts

So this seems like a good moment to cover any energy shorts you may have and reverse into long positions. The sugar and coffee markets may also be bought soon, but we currently don't have a reason either to cover any shorts or to purchase longs - we just wanted to remind you that we think these dips (although predicted) are temporary.

Elsewhere, there have been more bottom extensions in equity markets. Some have made slight new lows, some have made significant new lows and some have held and are now bouncing. We still haven't seen bottom extensions in any of the 'big three' US indices, so we are still only recommending nibbling at the long side in equity markets generally. It is perfectly possible that we won't see such signals at all and that a rally will develop that we miss, but we are content to wait for a little longer being mildly bullish for now. A selection of recent signals:

Valug wkly, Mex & ftse dly botts

One outlier is the Brazilian market. This has been buoyed up by the expected (and then actual) victory of the right-right candidate in the recent Presidential election  - offering some economic hope after years of mismanagement. This seems to be a classic case of 'buy the rumour' sell the news' and we also have a couple of top extensions. If you want something to sell short to hedge long exposure to other markets, sell this:

Brazil tops

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