- New Science in old markets -

Top extensions in bonds and a stock market update

The sharp rally in government bonds since the latest outbreak of pessimism from the Federal Reserve has produced some top extensions, in the US but also in France:

Ten, thirty year, OAT extend

The scale of the move has been quite large and probably disproportionate to the actual change in Fed outlook that is said to have caused it. We thought there might be a big bond move coming for our own reasons, as written in the March 19th edition - a big turn was due and the markets compressed just as it happened, meaning that sentiment was stretched drum-tight, so these markets were poised for such a move. Now they have run far enough, quickly enough for these extension signals to appear. Don't be too quick to sell, for the usual warnings that we give when top extensions occur - there will be a first class opportunity to sell (probably soon) but we will wait a bit.

Stocks have also been churning a bit. There have even been compressions in Japan and Australia, which warn of more volatility to come and probably a new trend. We can never be confident about the direction as compressions mark knife-edge moments:

Japan & Austrlia compress

While the main China market (and its first cousin in Hong Kong) have been churning near their recent rally highs. Taiwan has just made new rally highs, only to extend and then fall back after last week's turn event.

Finally, that least-admired sector of 'banks in the US regions' has been falling for a while and has now made a bottom extension. If you want to hedge our recommended short positions in US equities with a long position, this would be a good candidate.

China, Taiwan, Banks signals

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