It’s been a mixed week in the markets with some pretty decent swings seen in several different markets as volatility continues to increase from very low levels. This was as expected as the light volume period of summer trading is now behind us. We can expect a further uptick in volume and volatility over the coming years as we enter what is often the best trading conditions period of the year.
This Friday is quarterly stock and currency expiration, so these contracts will roll forward from September to December this week.
Stocks have shown some weakness this week, and we’re now in what is historically the weakest month of the year for stocks. The Nasdaq 100 began the week lower and closed down for the week, but remains above its 50-day moving average and still clearly in a long-term uptrend. The same can be said for the S&P 500.
The Dax continued its recovery and regained the 50-day MA this week for the first time since July. The long-term trend remains down, and the RSI is in the bear range.
The Nikkei, which has already rolled to the December contract, continues to find support at its 200-day MA. The RSI closed the week slightly below the 40 level. A price close below the 200-day MA, and more importantly, below the August low, would likely have bearish implications.
Gold has continued to advance and is now well above the down sloping trend line from the 2011 all-time high. Volatility is getting a bit elevated, and Friday’s candle is an indecision pattern that suggests a pause in the advance. However, the long-term trend is up.
Copper and Palladium both made new highs for the current move before a sharp reversal followed, taking both markets back towards support. The trend for Copper is very likely over for now due to Friday’s long down candle. An almost immediate turn higher when the markets reopen on Sunday night will be required to keep these two trends intact.
These comments refer to the September contract, which rolls to December this week. The Dollar Index fell to a new low for the current move on Friday and made its lowest print since January 2015. Friday’s weekly close was the first close below the box range that has been in place for 33 months. This has very bearish longer-term implications for the dollar and gives target projections over 1000 pips below current levels. However, volatility at weekly chart level is at elevated levels, although less so at the daily level, so we may see a bit of a corrective bounce before the long-term downtrend resumes.
Friday did see some bearish one-day candle patterns on a few of the major currencies, including the dollar index. The Australian dollar printed a shooting star with a large upper shadow, which shows the highs being rejected. However, one day does not change a trend, and it was still a closing high for the move. We saw a similarly weak candle in the Euro, but less extreme than the print in the Aussie. The Canadian dollar also gave back some of its gains. However, all the weekly candles were bullish and the long-term trend, which is what we are most concerned with, remains firmly against the dollar.
Interest rate futures
Interest rate futures held above support and went on to rally to new highs for the current move, reaching their highest levels this year. The long-term trend is up across the sector.