The past week has seen the Nasdaq 100 print new-all time highs and has seen some volatility in the currency markets, as is often the case during the week of the FOMC meeting. The volatility resolved itself in favour of the Dollar, which is in line with the current long-term trend.
The Nasdaq 100 rallied for most of the week and printed new all-time highs once again. There was some weakness on Friday, but the lows of the day bounced right off the former resistance line, which is now acting as support. The long-term trend remains up, and there is further room for this market to run. Volatility has expanded into the sweet spot for trend continuation. The one negative is that there is a bearish divergence between price and RSI, which indicates a slight weakening of momentum.
The S&P 500 has effectively gone nowhere this week, trading in a very narrow range. Small range bars such as this on the weekly chart accompanied by low volatility suggest that a more significant move is imminent.
Copper failed to complete the potential upside breakout that we wrote about last week and turned sharply lower, keeping the long-term downtrend intact. This has taken the market back to the middle of this year’s trading range and has both upside and downside breakouts within range. The Commitment Of Traders (COT) profile has large speculators at a record net long position, so with the market being unable to breakout to the upside this week we may see a further unwind of long positions and continued weakness.
We have written in recent weeks about the narrow range in Gold and suggested that a breakout of that range would likely result in a decent move in the direction of the breakout, particularly if the breakout came to the downside, in the direction of the long-term trend. The market tested resistance on Thursday, was unable to push through and reversed sharply, gapping lower on Friday morning and printing a wide-bodied bar to the downside, trading well through support. This weakness took Gold to its lowest level this year.
Except for Natural Gas, the energy markets have seen continued weakness this week as the record net long large speculation position continues to be unwound. The RSI is testing bull market support on Brent Crude, and a decisive move below that level would also point to continued weakness against the prevailing long-term trend.
From last week on the Dollar Index: “The pullback has taken the market back to fair value, so we may see strength return over the next week or so. The long-term trend continues to favour the Dollar Index, as it also favours the Dollar against all the majors except for the Japanese Yen.” The Dollar reversed higher right on cue and is now moving higher across with board, with multiple breakouts in range this week, even against the Japanese Yen, where the long-term trend has been against the Dollar.
Interest rate futures
Interest rate futures remain rangebound near the recent lows, and the long-term trend remains in a long-term downtrend. As before, commercials remain near a record net long position with large specs near a record net short position. This COT profile continues to suggest the potential for an additional counter-trend rally, but for now, the long-term trend remains down