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Compressions in Energy. Top extension in Italian Bonds

The lull that has led to range-bound markets seems to be ending. Both WTI Crude Oil and Natural Gas have compressed in the last few days, although there is no clear break yet. Interestingly, there has been some increased correlation in the price movements of these two in recent months, as should be expected - they are after all competing sources of energy. Nonetheless, there has been little or no connection between the two until recently:

Crude and Nat Gas comps

There are also some signs of imminent compression signals in US stock indices, which might mean we will change our bullish view adopted in the August 16th edition. That view was within the context of our larger-scale expectation of a continued wide-ranging market, which continues. We will write as soon as the first new signal actually appears.

Meanwhile there was a top extension in Italian Government Bonds. These have been rising even more briskly than other bonds in recent days, driven by the unlikely stimulus that a left-wing coalition is now to form a government, against the expectation that the right-wing League (La Liga) would do so after an election. No-one should prognosticate on Italian politics with any hope of success, so the miscalculation of the La Liga's leader that he would win a working majority in an imminent election should be forgiven. Sell BTPs short, as soon as there is any sign of weakness:

BTP top extension

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