The past week was a shortened trading week due to the Good Friday holiday. Monday is a Bank Holiday in the UK, but U.S. markets will be open.
There are several markets that are at or near what may turn out to be very key levels. Whether these markets can break through the relevant support or resistance levels remains to be seen. For now the long-term trends remain unchanged and continue to favour the dollar, stocks and interest rate futures, all of which are still in long-term uptrends. The commodities markets remain mostly in long-term downtrends, as they have for much of the past year or so.
The S&P 500 continues to hold at a key support level around 2030. The RSI is also holding above 40 even though that level has been tested a few times recently. The long-term trend remains up and the focus will remain on higher prices as long as those two levels hold. However, a break of either of both would suggest further weakness towards critical trend defining support at the December low.
On a seasonal basis, April is a strong month, and in fact April is the best month for the Dow, dating back to 1950. There may therefore be seasonal support for U.S. stocks for this month before we enter the period of ‘sell in May and go away’. It should however be noted that seasonality is not a reliable indicator, and is only a tendency. Seasonality should never be used in isolation without another trigger.
The Dax remains as the sole long stock index position that we have open at LS Trader. For a second consecutive week, new all time highs were not seen, but support from the prior week’s low did hold. The long-term trend is clearly still up, and with the RSI at 59.67, the market remains bullish. However, should other global indexes roll over, which is a possibility, such moves would weigh on the Dax.
The trend remains down for Crude Oil, and we continue to look lower and for a test of the $44.03 low seen a couple of weeks back. The February 2009 low at $33.55 basis the continuous contract remains a good target. It will take a decisive move above 60 on the RSI to put that into question. Interestingly the RSI has remained below 60 since the end of June. At that time the price of crude was still north of $100.
Commodities for the most part continue to consolidate as the markets digest the recent large moves. There are very few markets making anything other than corrective moves in this sector at present. However, once the corrective phase is over, the long-term downtrend in many markets should resume
Sugar, which has been one of the best trending markets for the past few weeks, fell to its lowest level since July 2010 this week before putting in a decent 2-day rally. We will likely see resistance tested in the coming days.
The long-term trend continues to favour the dollar in spite of further weakness this week in the dollar index. However, the RSI is heading down for a test of bull market support on the RSI. You have to go back to early July 2014 for the last time the dollar index was below 40 on the RSI, so a move below that level may indicate further weakness ahead. However, considerable further decline would still be required for a change of trend.
The Australian dollar broke to new lows for the current move briefly this past week, falling to its lowest level in almost 5 years. If the market can move back below last week’s low, there is plenty of room for further weakness, as the next level of structural support is some 400 pips lower. Whether we see such a move will to a very large extent depend on whether the dollar resumes its long-term uptrend against the other majors.
Interest rate futures
Interest rate futures rallied this week, and the 5 year T note broke above resistance to post a new high for the year on Friday. This move happened with a clear break above 60 on the RSI, so further strength may yet be seen. That however may be dependent on the 10 year note and long bond catching up and also breaking to new highs. The long bond came within a few points of its high for the year before pulling back. There will undoubtedly be resistance at this level. As before, much of what happens in this sector will be dependent on what happens to U.S. stocks over the coming days and weeks.