It’s been a mixed week for the markets, which has seen further rally from the energy markets, continued correction for the dollar overall, and consolidation from the stock markets. Interest rate futures all ended the week lower following quite a sharp drop on Friday that has put an end to the uptrends for the near-term, although the long-term uptrends still remain intact across the sector.
The long-term trends by sector are still intact, up for stocks, the dollar and interest rate futures, and still mostly down for commodities.
The Dax rose to new all time highs on Tuesday, printing the new high at 10989.5 basis the March contract. A small pullback has been seen since but the trend remains firmly up. Sentiment still remains very bullish for the Dax, but lower than the extreme bullish reading of 95% bulls seen recently.
The U.S. stock indexes continue to consolidate below the recent highs and a breakout is still a possibility, which is also the case for the Nikkei. The stock bull market is therefore still intact, the long-term trends are still up for the sector and each market individually remains in the bull range on the RSI.
The metals markets have been mixed; both gold and silver dropped sharply this week, particularly on Friday, where gold dropped below key support at $1250. Silver also dropped through short-term support and this suggests further weakness near-term for the precious metals. Copper on the other hand has recovered to within range of testing resistance. Although the trend here is still very much down, a break of resistance may be seen in the next few days. Palladium remains range-bound, as it has for the best part of 5 months. This suggests that the eventual breakout, either up or down, may yield a decent move.
The CRB commodity index has recovered a bit over the past couple of weeks, due largely to the rally in energies, but the index has still been very much battered since reaching 569 back in May last year. Having printed a new low 2 weeks ago at 423.40, the index has rallied to 434. Commodities are therefore still very much in downtrends from a longer-term view.
As expected, we exited crude oil this week for further excellent profits. We’d followed the trend down for 4 months from our original entry at 8942, and exited at 4940 for 4002 points profit. We now remain short just natural gas from the energy sector.
In last week’s update we suggested that the first signs that a bottom may be in on the energy markets would be a decisive break of 60 on the RSI. A couple of the markets poked very slightly above 60 but then pulled back, so for now we continue to view that as being in the bear range, so whether we have seen a final bottom is a question that is as yet unanswered, but I certainly don’t think we can rule out new lows as yet.
The dollar index ended the week very slightly lower, but had been considerably lower earlier in the week before a strong recovery on Friday.
The British pound produced quite a strong 3-day rally to break short-term resistance and end the downtrend for now. However, the long-term trend is still down and the RSI was unable to push above 60, so new lows cannot as yet be ruled out.
The Euro also benefitted from some strength midweek, but also dropped on Friday, which keeps the downtrend alive. The Euro is considerably more bearish in terms of RSI, which has so far been unable to move above the 40 level. New lows look a possibility still. Sentiment is still very bearish on the Euro, but not quite to the bearish extremes seen in recent weeks.
Interest rate futures
Interest rate futures reversed sharply lower, bringing the trends to an end for now. The 30-year bond had come to within a few points of last week’s high, but was unable to break through. The RSI on the 30-year bond has fallen to 46.41 and may drop further to test the 40 bull market support level. If the 40 level is decisively broken, that would be the first confirmation that a top may be in for interest rate futures.