The 2-day FOMC meeting came and went this past week, with relatively little impact on the market. Overall market conditions remain very quiet, with volatility in numerous markets near historically low levels, particularly in the currency markets. This is likely to change in the coming weeks for at least 2 reasons, firstly, volatility rarely remains low for a continuous extended period, and secondly, volume tends to decrease in the summer months.
There are key levels to watch out for in the markets this week, resistance in the Euro at the recent highs, resistance at all time highs for the S&P 500, and major support for the dollar index. The success or failure of the markets at these levels may have an impact on market direction over the coming weeks.
The long-term trends based on LS Trader’s proprietary analysis are still mixed for stocks, currencies and commodities, but up for interest rate futures.
The S&P 500 remains the strongest of the stock indices that we trade at LS Trader and came close once again to testing all time highs that were posted on the 4th April at 1892.5. Due to the proximity of the market to all time highs, it’s reasonable to expect another test of these levels in the coming days.
The Nasdaq 100 rose for the week and is almost exactly in the middle of the range between the multi-year high posted earlier this year, and trend defining support at the matching lows of the year posted in February and April
The Dax remains within range of testing the all time highs, posted back in January, but continues to run into resistance. The Nikkei is still the weakest of the 4 indices and is still the only index in a long-term downtrend, and a test of critical support is still within range.
Volatility in stocks remains low and the VIX index remains low, as it has since 2012, indicating continued complacency.
As is the case in currencies and stocks, volatility is on the low side in the majority of commodities markets as well and range-bound trading is still present in numerous commodity sectors.
Silver dropped briefly to its lowest level since June last year, but only briefly. The sharp intra-day fall on the 1st May was mostly reversed by the end of that trading day, printing a hammer on the daily chart which had follow through to the upside on Friday. However, the long-term trend is still down and new lows cannot be ruled out at this stage.
Palladium rallied to new highs for the current move, which was also the highest level seen in this market since July 2011. The 870 level is the next target, particularly as long as near-term support at 794.5 holds.
Feeder cattle is another commodity market still on the move, which this week reached new all time highs. This market has been in a continuous, steady uptrend for just over a year from the lows posted in April last year. New highs may still be seen, but with the RSI rising to 83, there may be a correction in the not too distant future.
Key levels are still in play in the currency markets and we may once more see these levels tested. The two markets of particular importance are the dollar index, which rests narrowly above critical support, and the Euro, which is just below key resistance.
The British Pound remains the only currency that has broken through major support or resistance, and this week reached its highest level since August 2009. $1.7043, the 2009 high basis the continuous futures contract remains long-term resistance. Should that level eventually be cleared, there would be little in the way of technical resistance to prevent an extended rise.
Interest rate futures
The long bond reached its highest level since July last year and the long-term trend remains up for this market, as it does also for the entire sector. The 10-year T note is still the next strongest but remains in a box range that has been in place since last year. Friday saw a large range day in this market, but a test of resistance still looks likely, and a breakout would confirm the 30-year Bond’s rally. The 5-year note remains weaker and is back in the middle of its range.