- New Science in old markets -

Bottom extensions in some equity markets and commodities. China update; bonds too

There have been two more bottom extensions in Australian and Korean equity markets, making a total of three such signals in different regions, so a general rebound seems possible. We already advised protecting short positions in Europe with close stops (or simply by taking profits) after seeing a bottom extension in Switzerland, and that now seems a sensible thing to do elsewhere too. There have been no signals in any general US index (although there have been some in sector indices - call or email us for details) but a general 'relief rally' would probably take US prices higher too. These are only daily-scale signals, of course, with a median shelf-life of about three weeks, so we are not calling for a major low point here. If you are short-term in outlook, by all means try trading from the long side for a week or so, as bear market rallies can be swift and travel a long way, but beware renewed weakness before long. Charts:

Three in a row - but only three and only daily-scale

There have also been bottom extensions in Copper and Soya Oil. These are always a chance to buy and we would do so. It is always prudent to wait for some signs of reversal before buying, but buy we should. There is also a compression in Soya meal. As ever, we can't guess which way it will break but IF it breaks upward, buy that too as both Soya products can then support each other in a combined rally, presumably along with Soya beans too:

Buy the first two, then maybe the third

Meanwhile, our 'long' trade in China continues to do well, with no sign of a top yet. Here is an update to our advice, which has unfolded in 'textbook' fashion. There was also a weekly-scale bottom extension at the beginning of this trade (not shown here), so it has a much longer prospective life than would be the case if it were merely based on these daily-scale signals:

This still has 'legs' - no sign of an end to the rally yet

Meanwhile our most recent advice to buy bonds has finally borne fruit. We ceased being bearish two months ago, because of monthly-scale bottom extensions in US Treasuries at the five, ten and thirty-year mark, as reported on April 1st. These are not helpful when trying to 'time' the entry to a trade, so we remarked that we might need several attempts at buying. Our second of these 'advices to buy' was in the last edition, on June 10th, based on bottom extensions in ten-year Notes and Bunds. These have since rallied, as have many others. Here is an update, showing those two plus Italian BTPs which also generated a signal on the same day. There are a pair of old compressions sitting just above here in US Notes (first chart), which will provide some resistance to the rally. Sell there, for a dip to ensue:

There is resistance in Notes starting at 119

All signals from software supplied by our friends at Parallax Financial www.pfr.com