We reported in the last edition that US equity indices were compressing at a daily scale, indicating that a new move was imminent into a trend that should last around three weeks or so. The break of those compressions happened the next day and it was upward, bringing the US into line with Japan, which had broken upward from its own compression signals two days earlier. Five days later, the market dipped back to the compressed area, in the normal ‘return movement’ which gave a second chance to buy. The up-move then resumed – see first chart below for the picture. Now, prices are at a level where there is some resistance to further gains from some old compressions in the Dow (second chart below):
We also reported that bonds were compressing and wrote that we would buy again if prices moved up from those compressions, as we have been bullish for a while and have been looking for the next ‘up-leg’. Prices did break up, so you should now be long again. The uptrend that started with that break has not yet led to a dip back to the compression, which may now be underway. These ‘return to compression’ moves are customary but not inevitable, so we advise staying long and buying more if prices drop back towards 140 in September 30-year futures, where the price would find support:
We also advised buying grains, which had all made daily-scale bottom extensions in early July. All rallied, but only the Soya complex provided much oomph, with beans rallying $2. Corn rallied 70c and Wheat traded sideways after a 90c rally, probably because Russia grudgingly allowed some Ukrainian Wheat to ship from Odessa. All these signals have now expired, so our advice has too. Place very close stops on long positions or simply exit. Updates:
Finally, we also recommended buying Gold in that last edition. The relevant bottom extension signal came from one of the God mining stock indices we use, and it was a rare failure. Perversely, it did catch the low point of the Gold price itself. Stay long:
All signals from software supplied by our friends at Parallax Financial www.pfr.com
