The purchase of either the MDax or more probably the CAC that we recommended in the August 17th edition was originally issued with the usual 1% stop-loss. We proposed to update that and now we have fresh information we can do so. There have been two new compressions in that market in the past two days and they seem to be breaking down today:
There is still some support from the older compression signal that occurred in the second week of July, shown ringed in pink but the picture generally does not seem so bullish now. The equity market turn due on the 17th also looks like a high that came a day late. We would tighten stops from the present level of 4724 to just under the lows of that July compression. The traded low that day was 4842 so we would choose a price a bit below that, bearing in mind that there is a ‘gap’ below that day’s trading and prices may simply be dipping back to ‘fill the gap’ before continuing higher.
The outlook for stocks in general is still mixed – we have been more bullish lately (excepting China) but these latest signals call that view into question. Trading ranges continue and there has not yet been a clear break in either direction so selling high and buying low remains a sound tactic. It seems probable that we will see the bottom of the range again soon – possibly as soon as next weekend as the upcoming turns schedule shows a complex turn due across the 22nd/23rd August, meaning that the extreme price of the change of trend involved could be on Friday the 21st August or Monday 24th.
These ranges will not last for ever as they are already in record-breaking territory so a break is already overdue and could come at any time.
