The week ahead is a shortened trading week due to the Bank Holiday in the UK and the Memorial Day Holiday in the US. The coming week promises to be an interesting one as there are a couple of key levels to be tested that could lead to a reaction one way or the other. The dollar has resumed long term weakness and this has been to the benefit of commodities.
Typically the 2 days following Memorial Day are quite bullish for stocks. The S&P 500 is heading for fourth test of downward sloping trendline from the highs on the 2nd May. Sloping trendlines are not as reliable as horizontal ones but this is an interesting short-term pattern. If The S&P 500 can break above the trendline then it may continue higher towards the May 2nd highs. Conversely, another failure to break the trendline may lead to aggressive selling. Currently the market is forming lower highs and lower lows, which is a bear market set up but a break above the trendline will break that.
We are however now entering into a seasonally weak period for stocks. June brings an end to the best 8 months of the year for the Nasdaq.
The weakest of the indexes is still the Nikkei and this index remains the most likely to break down first. Last week saw a decline into the support zone between 9335 and 9400 but the lower end of support has so far held firm.
The long term trendline that has been supporting Gold of late continues to hold and still applies to the August contract, which we rolled into last week. Gold also pushed through short term resistance at $1526.80 that we wrote about last week and may now continue towards recent all time highs.
Crude continues to hold support around $95 and closed above the $100 level on the August contract after a gain of 0.68% for the week. The long lower shadows on the bottom of several of the daily candles are still in evidence and are also present on the weekly candles. This continues to show that the lower are being rejected and that buyers are returning to the markets at the lower levels just above $95. The long term trend remains up.
The recent rally for the dollar appears to have fizzled out, at least for now and the past week saw the dollar index decline.
initially continued higher, moving above 7600 for a second time but once again being unable to stay above that level. If the index can regain and close above 7600 the next target will be resistance from the shooting star pattern formed on 1st April.
We wrote last week that the Swiss Franc and the New Zealand dollar had been holding up better than the other currencies as this continued to be the case over that past week. The Franc continued its recent long-term uptrend against the dollar hit new all time highs on Friday while the New Zealand dollar also continued its recent bullrun and cleared the highs of the year at 8100.
Interest rate futures
The Interest rate futures sector continues to be bullish with yields falling to new lows for the year and prices hitting new highs. The long-term trend remains up across the sector.