With the exception of the currency markets, where volatility has seen a sharp increase this week, other markets have remained relatively quiet and still for the most part in their respective trading ranges. This means that the long-term trends on the basis of LS Trader‘s proprietary analysis still remain intact, and are up for stocks and interest rate futures, and still mixed for currencies and commodities.
It’s quite probable that the increase in volatility seen in the currency markets is the beginning of an increase in volatility to be seen across the other asset classes. This is exactly what is required to break numerous markets out of their respective ranges and lead to extended trends, instead of the choppy, sideways market conditions that have dominated most markets for much of the year to date.
Comments made in last week’s updates for stocks still apply. The S&P 500 remains the strongest of the stock indices that we trade at LS Trader and we’re still looking for a test of all time highs that were posted on the 4th April at 1892.5. The Dax also remains within range of testing resistance and if successful, subsequently the all time highs posted back in January. The Nikkei is still the weakest of the 4 indices and is still the only index in a long-term downtrend, has fallen in 2 of the last 3 weeks and a test of critical support still looks likely.
Although currencies have seen volatility pick up during the past few days, volatility in stocks remains low and the VIX index remains low, which as we wrote last week indicates continued complacency, as has been the case since 2012. The VIX itself also remains in a narrow range.
Commodities markets have once more been fairly quiet as the majority of commodity markets remain in the middle of trading ranges.
Corn came close to breaking out to new highs for the current move, but found resistance once again around the 524 level. Should this level be cleared, further rally to the next target at 575 may follow. The soybean complex saw some weakness early in the week before a recovery on Thursday and Friday. Soybean meal remains within range of new all time highs on the basis of the back-adjusted continuous contract. Wheat did clear resistance but has so far been unable to close above that key level. Should we see wheat get back above, and close above that level then we can look for further rally towards 775.
The metals markets remain mixed but silver, having been unable to clear near-term resistance at 1993 looks set to test critical support in the coming days, which if successfully broken would likely lead to further declines for gold.
Currencies broke out of their recent trading ranges, but the breakouts were only temporary as volatility picked up. The 2 key levels that had been in play as resistance on the Euro and support on the dollar index both gave way, but only temporarily as the breakouts failed and these 2 markets returned to their respective trading ranges.
The pound reached its highest level since August 2009 but was unable to push on through key resistance and reversed during the latter part of the week in line with most other currencies.
Interest rate futures
The 30-year T bond rose to its highest level in almost a year as the trend for interest rate futures remains up. The 10-year T note came within a point of its March high, which represents key resistance in this market. So far the market has been unable to push beyond this resistance level and Friday saw a doji printed on the daily chart following the failure to breakout. This increases the importance of this level during the week ahead. A breakout would be bullish.
The 5-year T note remains further back in its trading range, but may catch up if the 10-year completes a successful breakout and the long bond continues with recent strength.
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