There were a lot of bottom extensions in equity indices around the world as the markets fell to the lows of last week, as reported. The most recent of those came on Wednesday the 1st October, as shown in the midcap US index example in the first chart below. These signals are still ‘in date’ meaning that serious further weakness is unlikely for now. The markets’ tendency to rally from these extensions will be inhibited by the slightly older compressions signals that sit just above market levels in Europe and exactly at market levels in the US, as mentioned in the 3rd October edition and shown in the second and third charts here. This may mean that a new range will form, bounded by the recent price highs and lows – the extensions providing support and the compressions offering resistance. Perhaps more likely is that the rally will continue past these compressions after the current dip. Stay long of the suggested markets of the US, UK and Korea and we will advise further soon.
