The recent few days of firmer stock prices in most parts of the word have been significant. Some new daily-scale compressions had formed just before this small rally and so prices have pushed up above the compressed areas, which is what we expect at the start of a new up-leg:
The longer-term picture is still for rallies to stall, as we wrote in the last edition, due to the existence of weekly-scale top extensions in the S&P and Dow a few weeks ago. These are still 'in date' so will act to inhibit rallies for another few weeks. Rallies can still happen however and it looks as though one has begun, joining the rally that started in China ten days ago with the upward break of a similar compression there (see last edition, May 18th).
The only cautionary note about the near term comes from some mid-cap US indices which are still compressing. We would prefer to see these also break higher before becoming 'full bulls'. As usual, these daily-scale signals have a shelf life of around 17 days from their formation:
Elsewhere, Gold futures have made a couple of daily-scale top extensions:
We have been bullish about Gold since the April 6th edition and we remain so. These top extensions probably just mean that the rise will pause or retrace a bit as markets rarely drop from top extensions. More often they begin to 'churn' until a compression forms, as seen in the S&P chart (middle of top picture) and then a new direction can begin. Protect profits:
All signals provided by software developed by our friends at Parallax Financial Research www.pfr.com