Today should mark the biggest turn event in equities for the past few months, as listed in the March 10th turn update edition. Sometimes we must let the turn event pass before we can see its effect but the picture today seems clear already. At turns, markets should make a new high or low and then quickly reverse – sometimes even on the same day. That is what has happened as I write – the main US equity indices have all made local highs from which they have retreated substantially, with 2 hours to go until the close. The Nasdaq has dropped more than 1.5% since the high made earlier today.
This reinforces the likelihood that a high point was made earlier today from which prices will drop in the days and weeks to come – perhaps a lot, perhaps only within the existing range. The longer-term evidence has been pointing to an equity market 'stall' for some time as we have been reporting and a big drop remains entirely possible. The risks at least are to the downside and positions should be taken with that in mind.
We prefer not to tighten protective stops on short positions too much as spasmodic rallies that fail are always possible. We will advise if there is some room to do so again soon.
