It’s been an active week in the market and one that has seen large swings in price in stocks, currencies and interest rate futures. From all of these large swings seen in these three sectors, only one market, the 30 year T-bond, had completed a change of trend. The long-term trends, therefore, remain up for stocks and the dollar, and still mostly up for interest rate futures. Commodities markets remain mixed.
Stocks have had a very mixed week, which saw quite aggressive selling into the lows on Thursday, followed by a turnaround to end the week on a much more bullish note. The FTSE 100, which is not a market we trade at LS Trader, put in a very strong rally from the lows on Thursday, breaching the 7000 level once again and adding 2.32% on Friday. The Dax had similar price moves over the two days and added some 567 points from Thursday’s low.
U.S. stocks displayed similar price action, but the S&P 500 was considerably stronger, rallying to within a few points of its all-time high posted towards the end of April. All four of the stock indexes that we trade at LS Trader remain in long-term uptrends, and the RSI is in the bull range in all four. These combined still suggest new highs will be seen.
The energy markets continued their recovery through to the middle of last week, where some weakness was seen. The rally has so far been sufficient to complete changes of the long-term trend in heating oil and no leaded gas. Both Brent and Light Crude are within range of a trend change, which could be completed this coming week if strength returns to the sector.
We also saw a change of long-term trend in copper, but as yet have not seen any follow through. Palladium also had a good week and may be set to rally further to test major resistance around the 830 level. Both gold and silver continue to consolidate, trading sideways in large triangle patterns. This pattern suggests a large move is building up, but as yet the direction of the breakout is unclear.
Coffee dropped to new lows for the current move, which was the lowest level for coffee since December 2013 basis the continuation chart. The target is now 125.30, which is the 2013 low.
The Pound had a very bullish week, but most of the gains came late in the week as sterling was buoyed by the surprising outcome of the General Election. The rally took the Pound to within touching distance of key resistance, but it has so far been unable to break through. Whether we see the Pound rally further to complete a trend change may be dependent on what happens to the dollar against the other majors.
The dollar index fell to its lowest level since January before recovering slightly later in the week. The RSI has dropped into the bear range, but weakness seen so far is not sufficient to trigger a trend change to down. For now there is a shelf of support that appears to be holding the index up, and it’s possible that we may see renewed strength from current levels. The dollar remains in a long-term uptrend against all of the majors, and therefore we continue to view recent dollar weakness as a correction in a larger bull market.
Interest rate futures
The 30-year T-bond sold-off once again this week and fell below the trend-defining 155 level that we mentioned last week. Further selling was seen following the breakout, followed by a recovery rally. The initial breakout also broke through a long-standing trendline that had been intact from the January 2014 low. It is common to see valid long-term trendlines tested again once they have been broken, and if that is going to happen, we should see prices turn lower from not much above last week’s recovery rally high.
The long-term trend is now down for the long bond, the first market in the sector to complete a change of trend to down.