The stock markets have continued their recent recovery, but all remain in long-term downtrends at present. The dollar has continued to weaken and looks like it could be set to resume its downtrend against some of the majors in the coming weeks.
Commodities remain mixed, with strength being seen in the metals sector, but weakness persists elsewhere, such as the energy sector.
From last week: “If the S&P 500 moves decisively above this 2015-2020 area, further strength may be seen over the coming weeks, possibly back towards the all-time highs posted earlier in the year.” This week has seen further rally in the S&P 500 and the market is now right back at this key level. The RSI has also moved above 60 for the first time since March. Should we see continued strength this week, confirmed by a higher RSI, we may see a move higher to test the double top.
The Nasdaq 100 is in a similar position but has been stronger than the S&P 500, already moving above the key prior support level. The RSI here has also moved above 60, indicating further strength near-term.
The Dax and Nikkei both remain weaker than their U.S. counterparts and as before look the most likely to break to the downside in the event of renewed weakness. The long-term trend remains down for global stock indices.
Both Gold and Silver have continued their recent rallies, and both metals continue to move higher towards key change of long-term trend levels. Gold at present is the leader and could complete the upside breakout in the next week or so. The RSI suggests that further strength lies ahead, and the trend could change for the first time since January.
The energy markets have resumed weakness following their corrective rally of the past month or so and could test key support levels in the next few days. Should these support levels be broken, it is likely that we will see a test of the August lows and quite possibly lower levels still. The technical structure of these markets suggests that we have not seen the bottom in any of these markets yet.
Natural Gas, currently the weakest market in the energy sector, looks set to test its recent low, which if broken will see the market make its lowest print since June 2012. The long-term trend remains down across the board in the energy sector.
Sugar was unable to take out the key level recovery high this week but looks likely to do so this week. Should the breakout be successful, a change of long-term trend to up will be completed.
The dollar fell to test a short-term support level against the Yen almost to the pip but reversed higher. This market, as we have mentioned previously, has been a key factor in keeping the currency markets in a tight range. Should last week’s low be taken out we will likely see further weakness to test the August 24th low at a minimum. The RSI remains in the bear range, but a decisive move has yet to be seen.
It’s possible that we could see several currencies breakout against the dollar in the coming week or so, with the dollar index, Yen and Euro all close to testing key levels. Should these levels be broken, then we could be in the early stages of the next leg down for the dollar.
Interest rate futures
The 3 Month Eurodollar, basis the September 2016 contract, rose to a new all-time high on Wednesday but gave back some of its gains by Friday’s close. The long-term trend is clearly up, but short-term support is not much lower than current price levels. Friday’s low tested a very short-term trendline that has so far held.
The long-term trend remains up for all markets in this sector with the exception of the long bond, which continues to lag. However, key levels in this market could be reached if we see strength return to the sector.