The sell-off in stocks has produced the first extension in a major US index as the Nasdaq made a daily-scale bottom extension yesterday – several measures extended and we show the QQQs. Several energy contracts also extended in the last 48 hours, as shown:
Various government bond futures have also risen into top extensions, as the so-called ‘flight to quality’ resumes. We have already seen a top extension in the US 30-year, as reported last week but now there are fresh extensions in the 10-year, the 5-year (not shown) and in Europe:
As another warning that fear has reached some kind of crescendo, the Euro has fallen against the Swiss franc lately, making a bottom extension yesterday:
There is one additional ingredient, which is that the largest cluster of turns that we expect to see this month was due yesterday. Whenever we see a coincidence of turns and extensions we pa additional attention and so we now expect to see reversals in all these extended markets and we would take positions accordingly. Cover equity shorts and go long. Sell bonds short and buy the Euro. Buy energy. Expect related moves in other markets that have yet to make signals (gold has rallied sharply for example, but there is no signal). These are probably going to be fairly short-term moves and we will advise further as things develop, as usual.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com
