It is hard to read the mood of the crowd when it is buffeted by serial policy announcements made in the middle of the night by tweet from the White House but we are still able to discern some things from those markets that have been progressively discounting a trade war. Until adults are back in charge we will have to make the best of things. This usually means ‘fading’ news-driven market moves.
The abrupt weakness that has seized some sectors of some stock markets in the last few days has started to produce a few bottom extensions. We are particularly interested in this signal from Singapore, as it is the country that has benefited most from the expansion of world trade in the past few decades:
This seems to be saying that the market thinks the prospects for a serious worsening of trade relations between America and the rest of the world are unlikely and that this dip represents a chance to buy. That may be wrong of course if there are more toddler temper tantrums in the near future and that this exercise in ‘negotiation’ between the US and everyone else that is currently happening turns out to be a gigantic error.
For now, watch out for some bounces from hereabouts in equity markets and trade accordingly. If you are short on our recent advice, take some profits or protect yourself with tighter stops. Equity markets are probably still in the ‘churning’ period that we expect to see after top extensions form and the chance of whipsaw is high.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com
