- New Science in old markets -

US and European equities compressing – watch out

There have been daily-scale compressions in several US indices - the NYSE composite, both cash S&P400 midcap and the futures contract and also in the main European 'generic' index, the Eurostoxx:

Midcap, nyse $ EuroStx comps

This means that pressure is building up for a new move, which is not  surprising considering the extraordinary and contrary forces at work right now. We never can tell which way a compression may break - they are times of maximum instability, which we liken to being on a knife-edge. The answer is to sit on your hands but be prepared for increased activity. We have already seen (as predicted) an increase in volatility and this could mean another increase - this is another possible consequence of a generally compressed condition.

One clue may be that we were expecting quite a large turn on Monday in US stocks that seems to have coincided with a low point. This turn does not show up in the normal 'turn schedule' published in AlphaMail on the front page of our site but stems instead from another method for predicting long-term turns that we mention from time to time. If prices hold and start to rise again (as we have already predicted in the May 10th and May 16th editions), then don't stand in their way.

Energy prices are also compressed. More on this in the next edition.

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