The past week has seen the Nasdaq 100 make new all-time highs and has seen the Dollar Index drop to its lowest level this year. The Dollar remains mixed with strength in some markets and weakness in others. Strength is being seen in the stock markets and we could see the S&P 500 make a new all-time high this week.
In last week’s update, we wrote on the Nasdaq 100: “Friday’s close was the highest weekly closing price of all time. All time weekly closing highs are not a bearish characteristic!”. The Nasdaq 100 continues to make new all-time highs but the technical picture is not fully supportive of further strength. On the plus side, volatility and momentum are expanding, which is what we like to see in a trending market, but volume is not materialising.
The S&P 500 came within a few points of a new all-time high but failed at resistance. The technical picture for the S&P 500 is similar to the Nasdaq, but the S&P is weaker.
The energy markets continued with anticipated weakness, but so far only RBOB Gasoline has made the downside breakout, which confirmed a change of trend to down. Both Crude markets have declined to levels not far above trend-defining support. A change of trend to down could be completed in the next week or so if weakness persists.
Silver declined sharply this week having fallen below its 200-day MA on Monday. This has taken the RSI into the bear range and suggests a test of the swing low at 1690.6 may follow.
Gold was also lower this week and continues to consolidate around fair value. Volume and volatility have declined in concert with price, which suggests that weakness seen over the past two weeks is corrective.
Palladium is currently the strongest from the metals complex and this week reached its highest level since March 2015. If resistance can be cleared, the focus will shift higher towards 913, the 104 high.
Sugar fell to its lowest level in over a year, but printed a three-day bullish reversal pattern at the end of the week, and also a bullish hammer on the weekly chart. This suggests that we may see some additional short-term strength, but the trend remains down and the market is below resistance.
The currency markets have shown some signs of life this week with a few breakouts being seen. As yet, there has been little in the way of follow through. The currency markets do remain mixed, with dollar strength being seen in some markets and weakness in others. The long-term trend picture is also mixed.
The British Pound has reached its highest level since late September and is pressing gradually higher on slightly above average volume. The RSI has reached 72.6, a level not seen in almost two years.
The Canadian dollar fell through clearly defined support and dropped to its lowest level since February 2016. There is a lot of room for further weakness in this pair (strength in USD/CAD).
The Kiwi also fell to its lowest level this year and looks set to test the December low, which, if broken, could open the way to significant further declines.
The dollar index dropped to its lowest level this year but has since regained the prior support level. The index is at a critical juncture, the resolution of which may determine the overall direction for the dollar for months to come.
Interest rate futures
Interest rate futures have had a mixed week, with weakness seen during the first half of the week. Long lower shadows are evident on the daily candles, which shows that buyers are entering the markets at these levels, which is just about keeping some of these trends intact. The long-term trend is up across the sector and strength may yet resume.