The dollar has continued its recent rally and looks set to move higher over the coming weeks. Stocks have also corrected some of their recent decline but whether there is sufficient strength left to test the recent all time highs remains to be seen. Commodities have continued to press lower as expected. There is potential for some large moves in several markets over the coming weeks and months so plenty of profitable trading looks to be ahead to add to what has already been a profitable year.
The past week has seen stocks move higher, correcting some of their recent declines. How much of that was due to “window dressing” by funds to position themselves at the end of the first half of the year is debatable. For now the long term trend is still up with the highs on May 22 as the target.
The S&P 500 has twice tested its 50-day moving average from below on the last two trading days. The trend remains up but this level may provide some short term resistance early next week. If this near term resistance can be broken it’s possible that we will see a move higher towards 1650 and possibly higher. However, lower prices in the short term look slightly more likely. The trend for now remains up with near term support at 1550 basis the September contract and critical support at 1525.
The support level that we have been mentioning in the last two weekly updates on the Nikkei at 12420 continues to hold and this has led to a sideways range being formed, which may lead to an upward resolution and a move that will further correct the recent sharp declines. The trend remains up.
Gold and silver’s recent collapse has continued this week and the move to the downside is beginning to look a bit over extended in the short-term. This does not however detract from the long term downtrend so although prices may put in a decent bounce over the next few sessions, a considerable move will be required to really put a dent in the downtrend and the expectation of lower prices. Sentiment has however reached an extreme to such an extent that there are hardly any gold bulls, normally a sign that prices will move higher short term.
August Brent crude looks did test the 100 level as expected and having pierced that level briefly intra day, moved higher again. As before a clear break of 100 will likely lead to a move lower towards the April lows below 97.
Grains prices have come under considerable pressure this week in line with the long-term downtrend and our outlook for lower prices in this sector for much of the remainder of this year. Plenty of further downside potential remains, with moves below the 2012 lows as minimum expcectations.
The dollar has continued with strength seen in the previous week, which is in fact in line with the longer-term uptrend. The dollar index itself moved back above the 50 day moving average for the first time since early June and may now be headed back to the highs of the year with the possibility of an extended advance over the coming months.
The commodity-based currencies have all been under pressure, all three falling to new lows against the dollar. If the commodity sector continues to decline over the coming months these currencies will continue to suffer.
The Euro and the Pound have also declined over the past couple of weeks, with the latter looking set to resume the long-term downtrend soon and the former potentially moving toward a change of long term trend to down.
Interest rate futures
Interest rate futures bounced marginally higher in a corrective move but the long term trend remains down, with the prospect of lower prices ahead. As we have written before, there is plenty of potential and room for an extended decline over the coming months and indeed years, although there will clearly be some corrective moves along the way. Markets never move up or down in straight lines. The trend for the sector looks to be down for the foreseeable future and considerable strength would be required for that to change anytime soon.