We advised buying Chinese equity markets in the April 28th edition, based on a daily-scale bottom extension and this signal and advice was confirmed by a weekly-scale version at the end of that week. The only practical effect of the weekly version of the signal was to extend the life of the advice from ~17 days to around 4 months. Now, a related index has compressed and moved higher, signifying that a new ‘leg’ has begun in this uptrend. The compressed area will provide support on dips, as usual and it is likely that the price will re-visit it before heading even higher, also as usual. Here’s the story:
The Japanese market has also risen in the last week, again from some daily-scale compressions. We would buy dips toward the compressed level, BUT please note that one of the Japanese indices that we follow just made a new weekly-scale compression, so the longer term is uncertain. If that should also break upward then a major new trend would be developing. It hasn’t happened yet, so we would wait a bit and see if the usual dip back to the compressed area happens soon:
US indices have been range-trading for the last 6 days, with prices tightly bounded. That range is nested within a broader range that started to form at the end of April. Now, several indices are forming daily-scale compressions, so this tight range looks abut to break. As ever we don’t know which way the break will be, but there is resistance just overhead from a weekly-scale compression in a mid-cap index, as reported in several recent editions, including the last one on May 27th. That broke downward, so ending the older broad trading range of recent quarters and we recommended selling short on any ‘failure’ of a rally back up towards it. That gives us a slight preference for a downward break from these new compressions, but it is by no means certain. If you sold short, stay short, with stops above these new compressions – this is another good use for this type of signal; to tighten stops. If you didn’t, sell a closing break of these new daily compressions – we show the Dow mini futures as our example here:
On May 17th we wrote abut Crude Oil: ‘buy this sometime soon, probably on a pullback’. This was because prices had just moved up from a daily-scale compression and we expected the usual ‘return to compression’ that provides a good entry point. Exactly that happened, as shown here. We don’t have a reason to sell yet:
All signals generated by software produced by our friends at Parallax Financial Research www.pfr.com
