The past week was a shortened trading week due to the US Thanksgiving holiday. It is also a week characterised by lighter trading volume. Things should be back to normal this week.
From last week: “The S&P 500 also broke support this week but also reversed higher from Wednesday’s lows and may yet breakout to new all-time highs.” The S&P 500 did breakout to new all-time highs this week and finally reached and exceeded our long-standing 2600 target. However, it did so on the lightest trading volume of this year today. That is to be expected during a holiday week and next week will give a stronger indication of the strength of the trend.
The Nasdaq 100 reached the 6400 target written about here in recent weeks from the running wedge, but this rally has also been on pitiful volume. There is also bearish divergence between price and RSI as well as other measures of momentum, so although the trend is up, the rally is weak and long in the tooth.
Sugar has continued to trade gradually higher, albeit after a correction since it broke the upper boundary of the near five-month ascending triangle during the prior week. Sugar has a bullish COT profile due to a recent rare record net long position of commercial hedgers, and 16.59 is the next target.
Lumber finally exited, delving our fifth largest winning trade of the year and over 6000 points since we entered back on the 5th September. It was interesting to note that our long-standing target of 46100, mentioned many times in prior weekly updates, was so close to the actual top of 46190.
EUR/USD closed above the right shoulder at 1.1921 which we wrote about last week, and this confirms the failure of the head and shoulders top and keeps the long-term uptrend for the Euro intact. We may now see further Euro strength and EUR/USD head higher towards 1.21.
The rally in the dollar index from the September low to the October high was insufficient to give a change of long-term trend to up. The head and shoulders bottom pattern has also been invalidated. As we wrote last week, failed patterns often give stronger signals than successful patterns, and the index remains in a long-term downtrend and may make its way all the way back to the September low.
The British Pound has held support and has consolidated this week above its 50-day MA, keeping the long-term uptrend intact. Price also remains above the 200-day MA. However, the RSI is butting its head against the 60 level, which is bull market resistance. A move above last week’s high accompanied by a decisive move above 60 on the RSI may give rise to higher prices, possibly back to the local top at 1.3695
Interest rate futures
Interest rate futures have continued to consolidate but have been sideways to up this week. The long bond has run into resistance which has held for a couple of months, but price remains above both its 50 and 200-day MAs.
The 3-month Eurodollar future is the weakest market in the sector and this week it fell to its lowest level since June 2015 basis the back-adjusted continuous contract, actually dipping below its 200-week MA in the process.
The trend remains down for interest rate futures, with the shorter-term markets being the weakest.