The stock markets are at potentially a critical juncture. New all-time highs were printed on Friday, completing the break of the neckline of the massive head and shoulders continuation pattern, which now has price projections over 3600.
At the same time, there is a potential bearish ending diagonal evident in multiple timeframes, which, if completed, can lead to a sharp and swift reversal lower.
Sentiment is moving towards a bullish extreme in stocks, so there are mixed signals. The long-term trend remains up, and the RSI is in the bull range, and therefore, the weight of the evidence is towards higher prices until we see evidence to the contrary.
The commodities markets remain mixed. Weakness has been seen in the metals markets, but for now, only Copper is in a long-term downtrend.
It’s been a strong week for the dollar, with the Dollar Index moving higher, and the dollar advancing against the majors. The long-term trends remain mixed.
Interest rate futures
Interest rate futures broke support but remain in long-term uptrends for now. A change of trend to down is coming into range, but considerable further weakness will be required to complete a change of trend. The RSI is testing bull market support, which is just about holding.
The inverse relationship between stocks and bonds will be interesting to follow over the coming week. If stocks continue to rally, then bonds will likely see further weakness. Conversely, a turn higher in bonds (weakness in stocks) could also be seen. This position is likely to be resolved one way or the other during the week ahead.