The extensions reported in the £ against the yen and swiss franc in the August 9th edition have now been joined by a similar signal in Cable – see first chart below. We would now buy the £.
The Euro has also weakened in recent days and ha fallen far enough, fast enough to generate extensions against the yen and swiss franc. The sequence of events that led to the £/$ extension started with £ extensions against these same two (yen and swiss) so we might expect the same order of events here. Things are rarely so neat in the markets so we are inclined to think instead that both the £ and the rally will rally from here with no further signals to guide us. Buy the Euro too, probably best against the yen.
US stocks continue to churn and there were more compressions yesterday – here are a Value line and the Russell 2000. There is nothing to do here except try to trade the range and avoid whipsaw. The range has already become a bit erratic and will probably continue to be so, which means it is not easy to catch any decent moves – be careful. We are monitoring closely even if we don’t write much about it.
Energy Prices have been compressing. Here are WTI crude and Heating oil, both of which have compressed, apparently broken into new trends a few times and then re-compressed. We have not advised taking any trades here for a while and this is the reason as once again whipsaw is a very real danger. We are waiting – probably for a weekly scale compression that would then quickly be followed by a ‘real’ break. Nothing yet.
Lastly, there has been a drop in gold mining stocks that has now produced an extension. Our advice to buy gold, based on an extension signal in the metal itself expired some time ago and this new signal means that we may take another look at it soon. On its own, this single signal is thin evidence for resuming a bullish stance (unless you are a ‘gold bug’ in which case any excuse will do) but it is a warning not to ignore gold just because it has fallen a bit:
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com
