Our March 8th edition that we Headlined ‘All change’ did indeed catch the moment where many markets abruptly changed direction. Stocks rallied, Gold fell, the Euro rallied against the $ and bonds peaked and dropped. This last change actually happened a day earlier, so we missed it but we had been advising to sell bonds at a level close to where the market stalled, so hopefully you were able to profit from it. Energy dropped too but we had already advised taking profits on long positions adopted in January on March 3rd.
Now there are some signs that this two-week-old phase may be ending. It is quite rare for so many markets to move in unison, so it is more likely that some will continue on their current path while others will pause or reverse. Here’s the evidence:
Five year notes have extended at a daily scale, as has the Yen against several of its trading partners – here we show $/Yen. We didn’t pick the Yen as one of the markets that would move on March 8th, but the Japanese regard it as a ‘haven currency’ when international tensions grow, so it is no surprise that it fell (i.e the $ rose) as markets relaxed a bit over Ukraine.
It seems unlikely that everything will now reverse back to pre-March 8th price trends but some end to the present phase is probable. Take (or protect) some profits and wait a bit. In equity markets there is also some resistance around here from levels that we showed on March 16th in Spain and Italy. Here is an update to those two plus another from the UK. As a result, it is worth trying a short hereabouts (just for a dip, as we think there is more upside to come later) and our favourite candidates are those equity markets that have rallied least – the Netherlands, Austria, Greece and either of Italy or France. You don’t need to risk much, as a penetration of these old compressions would be a signal to get out.
The situation is different in US equity markets. There, the rally started later and our March 8th ‘All Change’ edition merely marked the middle low point in what turned out to be a ‘triple bottom’. That has persuaded some technicians that a new bull market is beginning, but we are not technicians. Our longer-term view of the US has been most influenced by some weekly compressions in various indices that broke lower as we have been reporting for many weeks. This turned us bearish, although we have tried (as usual) to catch both up-and down moves within our overall bearish posture. There has now been a new weekly compression in a popular mid-cap index and at a daily scale in another mid cap index. Compressions are moments of ‘knife edge’ from which markets have an even chance of moving up or down so we now withdraw to the sidelines to see what happens next. Of course, if Europe falls, the US is unlikely to go up, but we like to examine each situation on its individual merits. Charts:
The exception to this ‘take profits’ advice is in Copper. This was not part of the general ‘All Change’ advice on March 8th and we advised buying it for another reason (one of our usual habits) – the return to a compression. This was in the March 16th edition and has worked well. Keep it:
All signals generated by software produced by our friends at Parallax Financial Research www.pfr.com
