Apologies for radio silence last week – the extra internet demand in our area of rural England broke our connection for a few days. Fortunately there has been no change in view – if there had been we would have sent a temporary edition from some other location.
The bottoming signs in commodities and stocks reported in the last edition have resulted in good stock market rallies in some countries, less impressive strength in others but no discernible bullish effect on most commodities – although weakness has abated a bit.
First, there have been weekly-scale bottoms in some other equity markets, which reinforces our view that the big drop has ended. Weakness may resume but not for some time.as these weekly-scale signals have a shelf life of up to four months. Keep buying dips as we think a range will now form and that was the low end of it. Two example signals:
Next, there have also been weekly-scale bottom extensions in a few commodities, mainly energy markets and cotton:
This also confirms what we wrote in the last edition, that the weakness in these is likely to be at or near an end. Buy some, but don’t expect much rebound in energy. There may be a big bounce (there is no signal-based reason to stop one) but the real driver of energy prices is the political maneuvering between Russia and Saudi Arabia where we have no extra insight to offer. It is highly probable that cooler heads will prevail upon the crown prince in Riyadh to stop pumping so much more crude, but when?
Elsewhere, there have also been daily-scale extension signals in wheat and cotton, but they point in different directions:
Wheat has risen and this has produced a top extension. Protect profits on longs recommended in the March 3rd edition and think about selling short. We are not keen on aggressively selling short because we think the general drift in commodity prices is likely to be upward for a few weeks, but this is a ‘good’ signal, so have a go.
Cotton on the other hand has made multiple daily-scale bottom signals on the way down, but this extend-while-sliding/bounce/new-extension-and-reversal is a familiar combination at a bottom. Buy some.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com
