There was a daily-scale bottom extension in a Gold miners index yesterday (1st chart) which is a reason to buy Gold. In fact this is an even better reason to buy Gold than a signal in the metal itself would be. The high cost of extraction and processing (almost $900 per ounce on average) means that a small move up or down in Gold prices at current levels has an exaggerated effect on profits for Gold miners, so the mood swings that we measure are more pronounced in the miners than in the metal, producing very crisp signals. Buy Gold.
There was also a bottom extension in a Singapore equity index (2nd chart). This has been ‘out of step’ with other indices in the region, as it has been so weak in the last month. Buy it too.
Lastly, there was a series of daily-scale compression signals in US equity indices yesterday. The 3rd chart shows one example – S&P 500 futures. This comes as no surprise as we have already seen a weekly-scale compression signal last week, in a Small-Cap index, as reported. This has the usual meaning that uncertainty is increasing and that there will soon be an increase in range. That often takes the form of a new trend (of unknown direction) but a sharp increase in two-way volatility is also possible.
We have already advised keeping stops tight on the long positions in US equities we recommended in the sharp dip 2 weeks ago. We still advise that.
All signals generated by software produced by our friends at Parallax Financial Research www.pfr.com
