Today is the day when we expect a grade 2 cluster of turns in equity markets – a 'middle ranked' turn on our scale where 1 is large and 3 is small. We don't rank turns in other assets as there is too little data but stock markets provide copious amounts to analyse, hence the ranking system. The turn (see Sept 9th edition for the turn update) is accompanied by one in bonds today or tomorrow and we wait to see what this all means.
The most likely situation is that the turn is occurring on time and is marking a low in equities. The Dow has made a new low for the move in both cash and futures markets during today's session and these various Dow instruments provide several of the individual turns that we expect from this cluster. Turns mark the extremes of moves and so we are 'set up' for a low in US equities right here and now.
This means that you should protect profits from the short-sales advised in the September 17th edition, by covering all or part of the position, placing close protective buy stops or by selling some puts. We do not have a bottom extension in any of the equity indices (yet) and so we cannot recommend taking long positions but an extension could occur soon, so we are watching carefully.
This advice also applies to short sales in Europe, where we advised choosing France as the best candidate. The CAC made a new low for the move today and has now bounced. A rally is now possible and we expect to find another place and time to advise short-sales in France again soon. As stated in the turn update edition on the 9th September, we expect a bigger turn on October 17th which may provide that opportunity.
We cannot tell what this means for bonds as the direction of a turn depends entirely on the prior trend – up trends lead to highs at turns, down trends lead to lows. The prior trend in bonds is flat. We watch and wait.
More soon.
RE
