The past week has seen the S&P 500 print a new all-time high (Wednesday) but fail to press higher. The dollar has also moved lower against several of the majors, and the dollar index is now testing support.
From last week: “the continued lack and decline of volume do not bode well for continued advances. The trend remains up but buying volume needs to materialise soon, or this market is likely to be subject to a correction.”
The S&P 500 made a light new all-time high on Wednesday but was unable to move higher. The two down days had above average volume and price has fallen to test the prior resistance level (2184), which should now act as support of the trend is good. A break and close below 2184 would suggest that the market was going to continue to correct lower, at least to the 50-day moving average (currently at 2160).
The Nasdaq 100, having failed once again to make a new high, provides further bearish non-confirmation. A test of the 200-day MA may follow.
Also from last week: “The Dax continues to trade within a 4-month long box range. However, continued failure to break the resistance area could result in a break to the downside. If a market cannot move one way, it is likely to move the other.”
The Dax did break out of the narrow range to the downside as expected and may test its 200-day MA this week. Much may depend on the outcome of the votes in Italy and Australia, and a volatile week can be expected in the Dax this week.
It’s possible that we may have seen a short-term top in the dollar, or are close to seeing one. If that proves to be the case, dollar weakness would be supportive of commodity strength. There are signs that some commodity downtrends, such as in precious metals, are late in the trend.
Gold continues to drift to new lows, but weakness has not been confirmed by Silver, which is failing to post new lows. This is bullish non-confirmation, suggesting that the down move may be getting mature. The trend for both precious metals remains down.
Soybean Oil has advanced since completing the head and shoulders pattern, which gives a measured target in the region of the 46.00 level, still some 800+ points above current levels.
The energy markets have had extremely bullish moves this week, led by Heating Oil, which was the first in the complex to complete a breakout. Both Crude Oil markets and RBOB Gasoline could test major resistance this week, with the potential for breakouts. Crude Oil had a 200% volume trading on Wednesday, followed by above average days on Thursday and Friday. The RSI has also broken above 60. The trend for the complex remains up.
The dollar index has pulled back in price and momentum, as we had suggested may happen in last week’s update. Volatility has also declined, and price is mean-reverting back to fair value. We will likely see support tested this week.
The Euro has edged higher having found support at the recent lows and continues to trade within a box range that has been in place since early 2015. As before, there is a strong zone of support that includes the 2015 double bottom between 1.0473 and 1.0490.
The British Pound has made a short-term breakout to the upside from an extremely narrow trading range and low volatility environment. The rally has been supported by a break above 60 on the RSI and a couple of above average volume days. Price has also made two consecutive closes above the 50-day moving average. All these factors combined suggest that we may see further strength for the Pound in the near term, possibly to as high as the 200-day MA (currently at 1.3394)over the coming weeks, but the long-term trend remains down.
Interest rate futures
Interest rate futures moved lower this week, falling below the bullish reversal candle that was printed on the prior Friday. The trend for the sector remains down, but with volatility starting to decline, price may mean revert higher.