The past week has seen U.S. stocks display considerable weakness and the dollar continue to consolidate. Still no change in the long-term trends for stocks or the dollar, both of which remain up. The long-term trend for interest rate futures also remains up, and commodities remain mixed.
The S&P 500 failed at prior resistance and dropped like a stone through to Thursday’s low before mounting a minor recovery. The long-term trend is however still up, and the RSI remains in the bull range. The 40 level on the RSI could be key, as could an RSI print below 38.64 and a price move below 2030.50. If those key levels are taken out, a move back to test support at the December low could be ahead.
Having been higher for 10 straight weeks, the Dax finally failed to make a new all time high and had a down week. The trend however remains up and the RSI is also in the bull range. No sign of either changing at present.
The Nikkei printed new highs for the current move this week but also ended lower. As with the Dax, both the trend and RSI remain bullish. However, a move below last week’s low would indicate further weakness near term
Gold’s recent rally stalled on Thursday. Perhaps crucially the RSI tested and failed to move above 60. If it had that would have put the RSI back into the bull range for the first time since January. Gold is now roughly in the middle of a larger trading range.
Silver has been stronger than gold and this week saw the RSI remain above 60, confirming that it was now in the bull range. This suggests higher prices in the short-term, but price action will have to fight against the long-term trend, which remains down.
Crude oil rallied through to Thursday’s high, moving above short-term resistance in the process, before turning lower on Friday. Again here, the RSI has been unable to move above, or even reach 60, and the long-term trend remains down. COT data continues to show large speculators holding a near record net long position, which would normally coincide with a market top. The fact that this position is present with a market in a long-term bear market and near the lows shows that many fund managers have been trying to catch a falling knife and have been buying a falling market. The prospect of forced liquidation remains, which would lead to considerably lower prices levels, potentially well below the $44 low seen a couple of weeks back. The February 2009 low at $33.55 basis the continuous contract remains a good target.
The big question in the currency markets is ‘has the dollar topped?’ So far the answer is ‘no’ based on a number of factors. The current chart structure is consistent with a correction, but the long-term trend remains up and the RSI is still in the bull range. This suggests that new highs may yet be seen, but a move below 94 concurrent with a break below 40 on the RSI would put that into question.
Short the British Pound remains our current sole currency position. Cable remains weak and finished lower this week. The long-term trend is down and the RSI is in the bear range. A move below the recent low still looks a possibility.
Interest rate futures
Interest rate futures remain in a long-term uptrend across the board. The RSI remains in the bull range, but momentum is waning. It’s impossible to say yet whether we will see a breakout to new highs in this sector. Much will depend on what happens to U.S. stocks over the coming days and weeks.