The past week has seen some big moves in commodities, where metals and grains markets have made large moves higher. The energy markets are also showing continuing signs of strength, and there may be a change of long-term trend in the energy sector this week. Commodities, on the whole, continue to move higher as we see further evidence that the commodity bear market is over. Commodity strength has been boosted by a resumption of the long-term downtrend for the dollar, where the dollar index has dropped to its lowest level since August.
The S&P 500 has been unable to make any headway above all-time highs and appears to be rolling over. For now, the long-term trend is still up, with the RSI holding above bull market support at 40. Price is also above short-term support and the 50-day moving average. However, with the weakness seen in other global stock indexes, we may see both of these tested in the coming week.
We continue to monitor the broadening top formation on the Nasdaq 100, which has long-term bearish implications if the setup is completed. This week has seen short-term support broken and price move below both its 50 and 200-day moving averages. Additionally, the RSI has broken below the 40 level for the first time since February. This all points to lower prices and a resumption of the long-term downtrend over the coming weeks.
The Nikkei is also showing considerable weakness having been unable to hold above the 200-day moving average. Price dropped sharply on Thursday, moving well through the 50-day moving average. The RSI has also fallen to the 40 level, and we will likely see that level decisively broken this week, which would result in a return to the bear range for the Japanese index and would suggest a resumption of the long-term downtrend was imminent.
Silver has traded higher throughout the week and continues to head towards our 1850 target calculated from the breakout from the 16-month wedge and the neckline of an inverted head and shoulders pattern.
Gold has also seen strength this week, breaking above the March high, with the breakout confirmed by the RSI breaking the 60 level. In recent weeks, we’ve mentioned the possibility of a head and shoulders top formation in Gold. This week’s break above the right shoulder and subsequently the head means that pattern has failed. Using standard failed head and shoulders price projections indicated further strength towards the 1350 level.
Soybeans and Soybean Meal have shot higher again this week, with Soybean Meal both markets recovering from the sell-off on the previous Friday to reach new highs. Soybean Meal is the stronger of the two, and we’re targeting the next level of resistance at 349.50 and possibly 363 further out.
The dollar’s long-term weakness resumed this week, and the dollar index has fallen to a precarious position just above the next level of critical long-term support at the August low. If this level is decisively broken on a closing basis, we could see an acceleration lower as any remaining longs are likely to capitulate. The RSI sliced through the 40 level this week and remains in the bear range, with the long-term trend still down.
Dollar index weakness always correlates inversely with EUR/USD strength. The Euro has, therefore, risen right up to test key resistance and we could see a breakout this week in EUR/USD, which would be a resumption of the long-term uptrend.
Interest rate futures
Interest rate futures continue to trade around the 50-day moving average. The RSI briefly dipped below the 40 level but did not break it decisively, which just about keeps the RSI in the bull range. The long-term trend remains up for the sector, but price is effectively range-bound as it has been for the past couple of months since the spike high in the middle of February.