We announced in our ‘all change’ edition at the end of September that we had detected a major shift in markets. This meant that all present trends would end in the immediate future and that reversals were likely. Most have since stopped what they were doing and have traded sideways, which is normal – prices seldom reverse into a new and opposite trend, as we often write.
Usually, trends end at extension signals and there is then a period of trendless price activity before a new trend can start. Usually we see one or more compression signals at the outset of that new trend and the first of these has now developed – see the third chart below of the Dow Transport index. That compression formed two days ago and broke upward yesterday, which confirms our strong suspicions that prices will be on a bull run for a while.
Elsewhere, most Asian equity prices have been under greater pressure than those in Europe or the US. Now we have seen weekly-scale bottom extensions in China and also in one measure of their Taiwanese cousins’ stock market. This Taiwanese signal might be a true gift from God as the prospects for the country remain good, if only the PRC will leave them alone for a while. There was also a daily-scale signal in China that came two days before the low which we didn’t report as it was a solitary occurrence.
Next, here are updates to the other examples we used in that ‘All Change’ edition, with blue arrows on the day of publication. All reversed to a greater or lesser extend within the next day or so and will now start to go their own ways as these daily-scale signals ‘time out’. If you bought European stock indices (Switzerland has been a good proxy for the EuroStoxx) stay long. Stay long currencies against the $ (£/$ has been a good proxy for $/€) too. If you bought US bonds and notes, put close stops as the purse-lipped Fed is currently more important than the free flow of buying and selling that we measure:
All signals from software supplied by our friends at Parallax Financial www.pfr.com
