We have been long-term bulls of China and Japan since the edition of May 8th 2020. The subsequent rise has taken the values of both up by about a quarter, which we think is just the beginning (especially in China). That doesn’t mean that prices will just march upward, grinding ever higher and there have been some shorter-term top extensions along the way. These generally lead to dips which can be bought or flat spots from which prices then head higher again, possibly after a compression signal as these indicate that a new direction is imminent .
Both have recently made new top extension signals at both weekly and daily scales, as has India, the 3rd Asian ‘big beast’. It seems to be time for another pause or dip, which means it is less suicidal to try trading from the short side for a while. Charts:
Here is the shorter-term picture, with added commentary about the unfolding story:
We are still waiting for a signal in US indices. We kept pronouncing that prices of the main indices would be range bound for the last weeks of 2020, starting in the November 9th edition. This broadly turned out to be the case, with a slight upward bias and we retired that view in the December 21st edition as the relevant signals were now too elderly to be reliable. The market condition has remained unchanged since then, as is the way of existing conditions – quite like Newton’s first law of motion for markets. We will eventually see a new signal that will provide a clue as to what happens next but it hasn’t happened yet. We will report as soon as it does.
It may be that the Asian market tops reported in this edition will have an effect on the rest of the world but we are wary of applying analysis across different markets unless there is good recent correlation.
All signals provide by software developed by our friends at Parallax Financial Research www.pfr.com
