The month of October is underway and so far it has seen stocks rise and the dollar fall. Commodities have been mixed once more. The long-term trends are still up for stocks, down for the dollar and mixed for commodities.
The S&P 500 December contract advanced 1.49% for the week, erasing most of the two previous weeks’ losses and coming within a couple of ticks of the highs for the year. Support has therefore continued to hold. Friday’s candle was a doji, which suggest indecision and some resistance, not unsurprisingly at the highs of the year. The index could therefore go either way this week depending on the outcome of a likely test of 1470.
As surprising as it may seem, especially with all the chaos and uncertainty around the globe, a clear break above 1470 may open the way for a move higher towards all time highs. If the S&P 500 can clear 1470, there is little in the chart by way of resistance to stop such a move. Of course, there are many other factors that may get in the way, such as the U.S. Fiscal cliff, but technically speaking it is a possibility.
The Dax opened the week lower but found support around 7200 and has since put in a good recovery and may test the highs of the year in the week ahead.
December Gold reached its highest level since March but failed in a test of $1800, which coincides with the March highs. If the yellow metal can clear $1800 there is little in the way of resistance on the chart to suggest that it would not make a move towards last year’s all time highs.
As is the case with several commodities markets, there are long lower shadows on the weekly charts that indicate the lows being rejected. The trend remains up for the yellow metal.
Silver remained flat for the week but had moved around during the course of the week. The weekly charts show three consecutive spinning tops/doji patterns, which suggest that the market is unsure of future direction. A break above the recent consolidation would suggest a move to our next target at 3800 was on the cards.
Last week we wrote on Crude “However, the long-term trend is still down for Crude and we may yet see a move down towards $88”. The low for Crude was $87.80 slightly surpassing our $88 target during the week before a mild recovery. The trend is still down and a test of last week’s lows likely.
The dollar index did rise initially last week but then resumed the longer-term downtrend as the dollar resumed recent weakness. The Pound continued to find resistance at $1.63 and was lower during the week before recovering and ending the week flat. If $1.63 can be cleared, the next target would be around $1.67 but for now that resistance level is proving to be a big obstacle.
The dollar did manage to advance against the Japanese Yen, the Aussie and New Zealand dollars but was weaker against most of the other majors. It is now close to a change of trend to down against the Swiss franc.
Interest rate futures
The 5 year T-notes briefly hit new all time highs but were rejected once more as expected, so although the trend is still up, there is undoubtedly resistance at the highs and limited upside potential. All upside moves seen recently are effectively running into brick wall resistance. The trends for now all remain up in this sector.
The 30-year T-bonds remain the weakest market of the sector and will likely be the first to give a confirmed change of trend to down.