The Eurostoxx and Dax indices both made daily-scale top extensions on Friday.
This comes at a time when various US indices have also been making top extensions at daily (and greater) time scales as described in recent editions, and the FTSE and other UK indices have rallied back into the area of old compressions:
As regular readers will know, when prices drop from compressed condition and so start a new trend there is often a ‘return movement’ that brings prices back up to the compressed area before the trend resumes. Compressions act as resistance, in other words once they have formed and the price has started to fall. The same is true in reverse when prices start a new uptrend as we will point out the next time it happens.
All this means the same thing – that equity prices are unlikely to move higher from hereabouts and that some reversal of the recent market strength is due. We have been saying this for a little while but the evidence keeps getting stronger, so be very careful here.
We are biased toward the short side and advise seizing on any signs of actual price reversal as a trigger to sell short.
All signals generated by software supplied by our friends at Parallax Financial Research www.pfr.com
