- New Science in old markets -

Top extensions in Asian equities. US update

The Singapore equity market rallied sharply over the last eight days and has now made a daily-scale top extension. So has China, but there the signal is at a weekly scale, whereas Taiwan has continued to rally, making daily-scale top extensions as it goes - these moves are getting tired but as usual we advise some patience before selling - the rise may be ending hereabouts but there is no particular reason to expect a sudden drop - that doesn't mean it is impossible but 'spike' tops are rare.

Sing, Chin, Taiwan top exts

Some people have begun to suggest that the time to sell Asia will be when a deal is actually announced to settle the trade dispute between the US and China. This is based on the traditional 'buy the rumor, sell the news' adage that often works well. This may be right but we are a little nervous of this approach because it anticipates something that hasn't yet happened and which may not happen at all. We prefer to hold that trick in reserve until:

  • The news actually occurs
  • The market has responded to it by rallying to new highs (for the move)

In which case we would happily join in, as we have these bearish signals. In the meantime, it seems 'too clever' to use that contrarian approach at this early stage.



Meanwhile, US indices pushed up from the compressions that we reported in the April 1st edition and so we covered our shorts. There has been no follow-through to the strength and so we are on the sidelines for now - there is a conflict between the big turn event that was due around March 19th, which coincided with a top extension and the recent upward break of these newer compressions. That 'turn and top' combination is a clear bear sign but the break upward from compressions is bullish. This may resolve soon, possibly by the appearance of new compressions which then break downward. Pending some new information, we wait. An updated chart:

Midcap top and comps

Watch out for the biggest turn of the month on the 19th, as shown in the turn calendar on the front page - that may also provide clues.


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