Stocks continue to drop, making new lows for the move on Monday. There is nothing new to say except to remind you that the top extensions that we warned of in US equity indices at the end of August were at both a daily and weekly scale. The daily signals have pretty much elapsed now but the weeklies still have a lot of life left. An update:
Practically speaking this means that rallies are now possible (we warned of increased volatility anyway and this always means both up and down moves) but that they should be sold. It is also possible that we caught the top of the Nasdaq bubble and it is certainly worth behaving as if this is the case. Protect short positions in the near term but don’t get bullish.
Elsewhere, the thirty-year treasury yield series has made a compression at a daily scale. This is a warning that bonds are always capable of scary volatility too and that it is now more likely. It seems very unlikely that this will lead to a prolonged up move in yields (i.e. a down move in prices) in the present economic climate but be prepared for a sharp short-term move in either direction.
The British £ has been falling against other currencies and this has now produced a bottom extension in the £ vs the Yen. Buy the £, even if only against the Yen:
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com
