The S&P 500 ended the week lower for the third straight week. However, the lows were sharply rejected, and a huge buying tail is evident on the weekly charts. The long-term trend remains up, with new highs within range. Similar price action is evident on the Nasdaq 100 and Nikkei 225, with the Dax being the weakest of the four indices.
Gold dropped below the key level last week, completing a potential head and shoulders top, but reversed sharply, closing back above the neckline. A further rally above the right shoulder would give a failed pattern and suggest new highs may follow. The long-term trend remains up.
From last week: “There are some possible bullish factors for the Euro, which may lead to a bounce in addition to sentiment, and these are momentum divergence between price and RSI, and heightened volatility.” The Euro dropped to new lows on Tuesday but then put in a sharp rally through the rest of the week. The Dollar Index made the inverse move. However, the long-term trend continues to favour the dollar.
Interest rate futures
From last week: “The RSI is now back to testing the 60 level having held at bull market support at the 40 level at the September the 13th lows. A decisive move above 60 on the RSI would suggest further strength towards recent highs.”
Interest rate futures saw the RSI exceed the 60 level and price rally to test the recent highs as expected. Friday saw a spinning top indecision candle print on the 5-year note following a test almost to the tick of the recent high. A successful breakout could be seen this week.