There were top extensions in several of the broader US indices yesterday. This comes a week after the first such signals occurred, mostly in the Nasdaq. This indicated that the rally there would stall, which it did, and now these signals from the broader indices should do the same for the market as a whole. Stay short.
The consequences for Europe should also be a continuation of the weakness that started a few days ago. These new top extensions in the US coincide with 'secondary' rallies in Spain, Italy and France that have taken prices back up near to the highs made on or around the 22nd October and which present another chance to sell those markets. We would avoid selling the Northern European equity markets, even though Germany has also extended. We have made our arguments in favour of Germany and against the Southern countries many times in prior editions – The feedback built in to the Euro fails to restrain German growth and inhibits the South – and this is a long-term view. When it is time to sell in Europe, we prefer the three Mediterranean countries listed above and when it is time to buy we prefer Germany, all other things being equal.
RE
