The various US stock indices that we follow have been diverging again. This has been a feature of the latest market phase - the S&P500, Nasdaq and other indices containing the fashionable 'engine room' stocks that have driven the boom make new highs, while the mid-cap and large-cap indices flag a bit. Our advice to trade from the short-side, meaning to sell short, cover all or some on a dip and then re-short a rally remains in place. This does not mean sell short and stay short. We have yet to give that advice.
As before, when we advised the same tactic from early Spring until October, it would have produced profits in the mid-cap and Dow futures but this time also in the S&P500. Adopting it in the Nasdaq would have been less successful, so far. A summary:
Government bonds have also diverged since we advised buying all of them, based on a Bund signal on 14th October. Here is an update to that chart. The advice is now 5 weeks old, which is tw weeks beyond the shelf-life. We suspect that this was a bear market rally and we will be looking for reasons to sell short.
US Bonds have been volatile and have only managed a series of spasmodic rallies since the 'buy' advice on the 14th October. On the 2nd November, in the immediate aftermath of a new compression, we advised that any rally that happened would stall in the area of an older compression (marked as '3.' in the chart below). The rally occurred and did stall exactly there. It now seems likely that the market will continue to drop through the one remaining older compression (just before the November 2nd up arrow) and the bear market will resume. We will try to find further occasions to trade it accordingly:
Also on November 2nd, we advised buying the US$, using the $ index as our example - see first chart below. That index made two more compressions before actually starting the up-move, but we did not see a reason to amend the advice. Now, the Euro has fallen against the $ (as the $ rose) and there has been an extension. Take profits and reverse into $ short/Euro longs:
All signals generated by software produced by our friends at Parallax Financial Research www.pfr.com