Monday is a Bank Holiday in the UK and Memorial Day in the US, so nearly all markets will be closed.
Stocks have moved higher this week and the S&P 500, currently the strongest of the indexes we trade, is closing in on a new all-time high. The past week has also seen the dollar continue its recovery, as well as further strength in numerous commodities.
The S&P 500 remains bullish and in a long-term uptrend. The potential head and shoulders top formation that we wrote about last week was violated by Wednesday’s move above the right shoulder. This week saw a sizeable up move, confirmed by a break above 60 on the RSI, which is bullish. This suggests that a test of the April high is imminent. Volume, however, continues to decline, which indicates that the current rally is lacking sponsorship. However, if we get a break to new highs this can quickly change, and there’s no reason that we can’t see a rally in the S&P from current levels.
The trend remains down for the other three stock indices that we trade at LS Trader, but strength has been seen there too. The Nasdaq 100 traded well through both its 50 and 200-day moving averages and looks set for a test of the April high. If that April high is breached, that will put paid to the possible broadening top formation that we have discussed here in recent weeks, and would shift the weight of the evidence and the long-term trend to bullish.
Soybean Meal made another big move this week, taking our gains on this trade to well over 1000 points since we entered at 297.50 back on the 14th April. However, there are a few signs that are concerning in the short-term for the bull case. Thursday’s long-legged doji, which also closed in the bottom half of the day could have marked the top for now, especially since Friday pushed below Thursday’s low on an intraday basis. The RSI also reached 82.56, which indicates a slight bearish divergence on the daily chart.
However, the trend is unquestionably still up and bullish and as yet there is insufficient evidence to confirm that the trend is over, so we remain long and continue to give the trade a bit more room to breathe. If support is breached and we get stopped out, this trade will still have locked in huge gains and will be the most profitable trade of the year to date.
The energy markets continue to grind higher. Currently, Crude Oil is trading within an 18-week channel that began in the last week of January. The top of this channel has been tested three times in the last two weeks, but as yet, no upside breakout. With the long-term trend being up and the RSI in the bull range, the odds favour a breakout from this channel. If the breakout does occur, we could see further rally towards our next target around 58.00. Brent Crude is in a similar pattern and Thursday’s price printed above $50 for the first time since November last year.
Sugar continues to move higher and has this week reached its highest level since January 2016. The 14-month head and shoulders bottom that is evident on the weekly charts suggests further advance towards the 21.00 area over the coming months.
The dollar’s continued recovery continues to suggest that the low printed on the 3rd May on the dollar index was a key reversal low, and that price will continue to grind higher. The dollar index is now holding above the 5-day moving averaged may test the 200-day, currently at 96.07 this week. The RSI is also testing the 60 level on the RSI. A decisive move through this level would also indicate further strength. For now, the long-term trend remains down for the dollar against all the majors.
Interest rate futures
Interest rate futures continue to consolidate in a 16-week descending triangle pattern, basis the 30 Year T-Bond. For now, the long-term trend remains up, but a breakout from this consolidation should yield a decent move in the direction of the eventual breakout.