The past week has seen the dollar reverse lower following the US Federal Reserve meeting and has seen the S&P 500 make a new all-time high, but also continue to trade in a very tight range. Commodities markets have been mixed, and interest rate futures have moved higher. The long-term trends remain as before across all market sectors.
The S&P 500 has traded within a very narrow range this week. Trading for the past two weeks has been contained within a very tight 21.5 point range, which historically is around the average daily range in this market. Trading within such a narrow range will not continue for long, and we will likely see a breakout in one direction or the other and an increase in volume soon. The long-term trend is clearly up, with the market holding just below all-time highs, but also just above short-term support. One of these barriers will likely give way this week.
From a seasonal perspective, August has been the worst month of the year for the S&P 500 and the Dow 30 between 1988 and 2014.
By contrast, the Nasdaq 100 rallied almost 70 points this week, exceeding our target of last year’s high at 4716.5 in the process. The market closed the week above this key level, which is typically bullish. The RSI has also risen to 72.62 very much in the bull range. The two negatives are that volume remains below average, and that volatility has reached a level not seen since March 2015.
The Dax managed to break the 60 level on the RSI for the first time in a few months, but there has been no follow through in price, which remains below key resistance. This keeps the long-term trend down for now.
The Nikkei turned lower, falling through the 50-day moving average and remaining in the bear range on the RSI. The long-term trend remains down.
Further weakness has been seen in the energy markets, which, with the exception of a very bullish Natural Gas, have continued to decline this week. So far, only RBOB Gasoline is in a long-term downtrend, but other markets in the sector could soon follow suit.
Natural Gas shot higher on Thursday, taking price back above its 200-day moving average, and the September contract now looks poised to break its early July high, and should continue north of the 3.000 level.
Silver, which has been consolidating since its spike high printed back on the 5th July, rallied this week from just above support. This strength keeps the focus higher in the short-term. The RSI fell to test the 60 level and bounced higher, which is typically bullish and suggests 2122.5 will be taken out.
The currency markets have had quite a volatile week this week, particularly from midweek onwards, where both the US Federal Reserve and the Bank Of Japan had their respective meetings. Following the meetings, the dollar was mostly weaker. The Yen advanced as the latest round of easing from the BOJ fell short of market expectations.
Dollar weakness this week has seen the dollar index turn lower below levels that would have confirmed a change of long-term trend to up. The long-term trend, therefore, remains down for the dollar index.
The inverse of the dollar index is the Euro, and Dollar weakness resulted in Euro strength this week. The Euro rallied to take out the 50-day moving average and should test the 200-day moving average this week. The long-term trend remains up for the Euro.
Interest rate futures
Interest rate futures moved higher this week, and all markets in the sector have moved or stayed above their respective 50-day moving averages. This keeps the short to medium-term focus higher. All five interest rate futures markets that we trade at LS Trader are all also well above their 200-day moving averages, and the long-term trend remains up across the board.