Stocks began the week in bullish fashion but were unable to continue to push higher after initial strength. The dollar saw the inverse of that move and recovered well after initial weakness at the start of the week. The dollar formed a few morning star/evening star reversal patterns which are short-term bullish for the dollar and for the most part the long-term trend still favours the dollar.
Commodities markets remain in a long-term downtrend with energies and metals showing continued weakness.
The S&P 500 cleared the 1340 area resistance level and pushed higher initially before running in to resistance around 1360. The index then pushed lower from there and fell back through the prior 1340 resistance level which due to change of polarity should really have acted as support if the market was solid in the short term. This led to a move down to 1317.5 before support was found. The S&P 500 then formed a bullish harami pattern on Friday that suggests that the selling may have run out of momentum. The pre-market futures will give a clearer picture of short-term direction if last week’s lows hold firm. The trend is still up for the S&P 500 and we may yet see a move potentially up to the highs of the year around 1408.
Both the Nasdaq 100 and S&P 500 are still in long-term up-trends. The trend for the Nikkei and Dax is still down, the latter being held down this week by the 50 day moving average.
Gold failed once again to clear resistance around $1650 and moved lower. The long-term trend is still down and we may now see a test of the recent lows formed in May at $1529.3 on the August contract. Silver is also approaching a key long-term support level, a break of which may lead to a decent downside move.
US Crude oil fell through support at $81 that we wrote about last week and almost reached our $77 downside target but found some support at $77.56. The trend is still down and $81 may now provide some short-term resistance. Brent Crude has also fallen to 18-month lows as the downtrend for the energy sector continues.
It’s been a better week for the dollar following the short-term weakness that has been evident in the couple of prior weeks. This week has seen the dollar index regain the 8200 level having formed a morning star bullish reversal pattern from support at just below 8150. These lows should now provide support and may form a base for the index to move back towards the recent highs at 8400 on the September contract.
Other major currencies have also seen similar reversal patterns, with an evening star forming on the Australian dollar, which took the Aussie back below the 200-day moving average. The long-term trend is still down and last week’s highs should now provide resistance.
The dollar came within a few pips of an upside breakout against the Yen and we may see such a move this week. It seems that the seemingly ever-present threat of the Bank of Japan stepping in to weaken the Yen is supporting the market. The British Pound is also pressing higher against the Yen.
The Euro hit a wall of resistance early in the week and has moved lower during the course of the week and may now move further lower to test the recent lows, the downtrend remaining intact.
Interest rate futures
The long-term trend is still up across the interest rate futures sector and the longer term markets are still holding above short-term support. The 10 year T-note and the 30 year T Bond remain the most bullish but we may see a test of support again this week and a test of the 50 day moving average, which is now coming in to range.