The S&P 500 reached a new all time high on Friday, the Nasdaq 100 a new high for the current move and the Dax is within touching distance of new all time highs. In addition, Monday is historically the first day of the Santa Claus rally, which is officially the last 5 trading days of the year and the first 2 of January. Any sort of rally will see the Dax hit new all time highs and a larger rally may see the Nikkei advance to new highs for the year
The S&P 500 found support on the RSI at 45 (in bull markets the RSI often finds support between 40 & 50). The market bounced nicely off the 50 day moving average twice this week and may yet be set for higher prices.
The shelf of support around the 9000 level that we wrote about last week on the Dax held firm, as did the RSI, which also held support in the 40-50 range. This price action and support shelf did prove critical as expected, and a rally followed, taking the market to within range of new all time highs, which may be seen next week. The weekly advance was 4.3% and the weekly chart looks much more bullish than the daily, where the advance occurred with smaller and smaller real bodies (the body is formed by the distance between the open and close, and excludes the high and low of the day), which indicates some loss of momentum at daily chart level. Nonetheless, the strong seasonal period may be sufficient for a new breakout.
The energy sector has had a bullish week with Brent crude advancing 3.19% having found support just below 108. Light crude was not quite as strong but still had a good week and may yet test $100. This week saw Light crude close above the 200 week moving average and the RSI move above bear market resistance, reaching 61.7. The market’s reaction at the psychological $100 level will likely be a factor in determining short-term price action. No leaded gas was the strongest market in the sector, advancing by 5.85% for the week. Natural gas and heating oil also rose.
Gold broke though near term support and almost reached the June low basis the continuous contract, a level that may be tested this week. The RSI remains in bear market territory, so far unable to break above 50 on any advances. Silver remains slightly stronger than gold and is still above its recent lows.
The dollar index fell to its lowest level since late October but had a large indecision day on Wednesday, ending the week back above both the 80 level and the 50-day moving average. Key resistance looks as though it may be tested this week. The 79.06 support level looks as though it will hold for now based on the Euro’s rapid retreat from major resistance. A break above 60 on the RSI for the dollar index would suggest higher levels will be seen near term. The Euro is as ever, almost a perfect mirror image of the dollar index
The dollar rose to new highs for the year against the Yen, and indeed its highest level since 2008, closing above key resistance at the end of the week. The dollar should continue to benefit against the Yen if the Nikkei continues to rise based on the intermarket relationship between the two, where the Yen is inversely correlated to the Nikkei
Interest rate futures
The 30-year T bond was the strongest amongst interest rate futures, managing a small advance for the week. The 5 & 10-year T notes ended lower, as did the 3 month markets. The long-term trend for the sector is still down on balance.