The past week has seen stocks post new all time highs once again, but then back away from those highs before ending the week lower, and has also seen the dollar rise slightly for the week, even though it ended the week lower against the commodity based currencies and the Pound. Commodity markets continue to show further signs of life as the energy markets broke out of their long-term ranges.
The S&P 500 made new all time highs once again, printing the new high on Monday. Trade then went sideways for a couple of days before moving lower. The long-term trend is still very much up with the market still above support that should be provided by the prior highs that should now act as support instead of resistance. The RSI reached 75 this week, but even following some weakness remains at a bullish 62.
The Nasdaq 100 posted its multi-year high on Thursday, 3 days after the S&P 500’s fresh all time highs, at 3806.75 basis the June contract. As with the S&P 500 weakness was also seen. Here once again, prior resistance from the previous highs should now act as support.
The Dax showed considerably more weakness than its U.S. counterparts, but as expected found support from the prior highs. A large hammer pattern was printed on Friday, with the low of the day being almost exactly where prior resistance was. This strong buying on the day shows rejection of the lows, which makes this support level even more important over the coming days. A break of support would suggest considerable further weakness. The LS Trader system remains long and profitable on each of the 3 stock index positions mentioned above.
Palladium put in a large one-day reversal on Thursday that encompassed the prior 15 days of trading. This is known as a key reversal day and has brought the uptrend to an end for the time being, although the long-term trend is still very much intact.
Palladium was not the only commodity market to make a big move; the energy sector also produced some large moves. Crude oil broke above a key resistance level and also broke above a trendline that has held firm since 2011. Ideally that trendline should now offer support on any weakness over the coming days. The other markets in the energy complex also broke out of their respective ranges with the exception of natural gas, which continues to trade within a box range that has been in place for nearly 4 months. An upside break from this range would be bullish.
Feeder cattle continue to soar to new all time highs. This has been a highly profitable trade for the LS Trader system so far this year, but with the market in a near parabolic rise, a correction is overdue. Such a correction when it comes will likely be just a pause in the larger uptrend that could have considerably further to go. The RSI reached 83.82 on Monday, which is a high reading.
The Australian dollar broke above its April high to reach its highest level this year, but has so far been unable to hold the breakout, closing back below the prior resistance level. The long-term trend is clearly up but a move back above, and ideally a close above resistance will be required for the trend to progress.
The Pound gapped sharply higher on Friday’s open and came within a couple of pips of the May high. Another test of the highs and indeed the $1.70 level looks likely in the coming days. The pound has not traded above $1.70 since August 2009.
Interest rate futures
A few of the shorter-term interest rate futures breached support as we indicated may happen last week, but the 30 year T Bond and Euribor continue to hold above support. The 30 year T bond has a good shelf of support in a zone just below last week’s lows and if the uptrend is good, this support zone should hold. A break of this support zone may lead to weakness back towards 131.