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The S&P 500 rallied to new all time highs for the first time this year. The last all time high print was back on the 29th December. The Dax also reached new all time highs and the Nasdaq 100 new multi-year highs. The stock bull market remains in effect. The dollar continues to consolidate, commodities are showing increasing signs of strength although they still remain very much in downtrend overall, and interest rate futures continue to decline.
This week ahead is a shortened trading week due to U.S. markets being closed for Presidents’ Day on Monday.
From last week: “The U.S. stock indexes continue to consolidate below the recent highs and a breakout is still a possibility, which is also the case for the Nikkei. The stock bull market is therefore still intact, the long-term trends are still up for the sector and each market individually remains in the bull range on the RSI.” That breakout did come on Friday as the S&P 500 rallied to new all time highs and the Nasdaq 100 to a new multi-year high.
In the case of the S&P 500, Friday’s breakout to new highs also coincided with a break above the 60 level on the RSI, which puts the RSI back into the bull range. Perhaps significantly, Friday’s close was above the prior all time high, making it also a new all time high daily and weekly close. Should the breakout be good, the breakout level should provide support and a platform for further advances.
The Dax also printed a new all time high on Friday, but printed an indecision pattern on the daily chart. This does not necessarily indicate a reversal, merely a pause in the trend. The trend here is still very much up and the RSI remains in the bear range.
The energy markets have continued their recent advance and it’s looking increasingly likely that a bottom may be in. This week has seen the RSI break slightly above 60 on Brent crude and no leaded gas, but heating oil is the strongest, with the RSI reaching 66.6. That confirms the shift to the bull range and indicates further strength likely ahead. However, the long-term trend is still very much down for the sector. Crude oil remains the weakest of these four markets, with natural gas still the weakest of the sector.
The current big winner for the LS Trader system from the commodities markets is lean hogs. This market is in a steep downtrend and has dropped some 2342 spread betting points since we entered short back on the 5th December last year. Friday did see a bit of strength, but nothing as yet to indicate that the downtrend is over. The RSI is also still very much in the bear range.
The dollar index continues to consolidate as it has since the multi-year high printed on the 26th January. Support may be tested in the week ahead.
Trading in the currency markets has been quiet; the Euro has traded in a very narrow range and a test of resistance is very much a possibility. The RSI is still however in a bear range and the trend remains down.
Considerably more bullish than the Euro is the British Pound, which has continued to gain ground this week. The 60 level on the RSI was tested on Thursday (60.11 print) but as yet no follow through. The RSI has not been above 60 on the Pound since July last year when the Pound was trading above $1.70, so a decisive break above 60 on the RSI would likely be bullish and would lead to further rally.
Interest rate futures
Interest rate futures have continued to weaken. From last week: “The RSI on the 30-year bond may drop further to test the 40 bull market support level. If the 40 level is decisively broken, that would be the first confirmation that a top may be in for interest rate futures.” The 40 level was tested and broken on Friday, closing the week at 38.02. For now the trend remains up but further weakness is expected. The RSI on both the 5 & 10-year T notes is narrowly holding above 40. If it gives way on these two markets as well, we may see a period of further weakness that may ultimately result in a change of trend to down.