The drop in equity markets yesterday took different forms in different parts of the world. It was just a violent ‘churn’ within an existing range in say, the S&P but some European markets had already been falling all month and now one of them (Belgium) has made a bottom extension. It may seem odd, but in prior years this unremarkable market has provided early warning of important moves. In some cases it has provided the only warning and that may be the case here too. It looks as though yesterday’s weakness was a ‘climax’ that will end the down-move. More on this soon, but some exploratory buying of stocks here seems sensible.
In the currency markets, the Canadian $ has been moving up for about three weeks. It has now made extensions against the US$ and the Yen. This is a good moment to start selling, even though the extension signal may not mark the start of a reversal, merely the end of the up-move.
