Notes, Soya and an update on US stocks. Gold.

There was a daily-scale top extension in 5-Yr US T Note yields yesterday – these behave as the reciprocal of price, so this is a bottom extension in the actual instrument.

This comes hard on the heels of similar signals in European Government bonds earlier in the week, which is good evidence that the market has run ahead of the fundamentals. We remain long-term bears, as we have been since monthly-scale bottom extensions in the 10-Yr Note yield series in early 2020, but there is need for caution. The shelf-life of a monthly signal is the same as for all the other i.e. a median of about 17 periods. This one is at the outer limits:

**This rare signal worked well but is getting a bit old**

There was a top extension in Soy Meal on Wednesday. This is the latest in the ‘saw tooth’ pattern that this important market has made in the last 4 months of sharply rising prices. It’s also a nice illustration of what we expect from our signals – we usually catch the interim peaks on the way up, which can prevent over-enthusiasm leading to expensive mistakes. We now expect another pullback from hereabouts and would trade accordingly. This is not advice to sell short and stay short. That moment will come but this isn’t it. We would need to see much longer-term signals and preferably a compression breaking downward (as in US stocks recently) before we can become proper bears:

Lastly, an update to our US stock market view. We have been ‘playing the bounce’ since some daily-scale bottom extensions in the main US indices caught the lows of the January drop. We have warned that this is probably ‘just a bounce’ and gave levels at which we would take profits on longs and reverse into short positions. Those levels were reached yesterday so you should be out of long positions and (at least have started to) be short. Here is an update to the weekly and daily charts of the Small Cap index that we have been using to illustrate our view:

Extra-lastly, The Gold market has held its price gains through the week. That means it is now up and out of the weekly-scale compression we reported in the last edition and so the scene is set for greater gains. All bets are off if it drops back into the compressed area by the close, but we are long!