This week sees the FOMC meeting on Tuesday and Wednesday where the Fed is widely expected to cut rates. The question is, how much will they cut by and will it be enough as perceived by the market? Expect volatility around the time of the announcement on Wednesday at 7 pm BST.
Both the S&P 500 and the Nasdaq 100 made new all-time highs this week.
The Dax rallied to test the high printed earlier this month but reversed sharply on Thursday with a big down day.
The Nikkei also rested resistance but also failed to breakout. Resistance was also found at the 60 level on the RSI. If both levels can be decisively broken, we could see a rally to the next level of resistance around 2250.
Gold continues to trade in volatile fashion but remains in a long-term uptrend and above support.
Silver rallied to its highest level since June last year but is finding resistance at the 200-week MA.
The dollar has seen strength return this week, with the Dollar Index rallying higher for six days, making a breakout on the back-adjusted continuous chart to its highest level since March 2013. This move also saw the dollar push the Euro to new lows for the current move. The British Pound also fell to a new low since April 2017.
Interest rate futures
Interest rate futures continue to consolidate in a range not far below recent highs. These markets could see volatile swings this week due to the FOMC meeting. The long-term trend is up for these markets, and considerable weakness will be required before that changes.
The only market in the sector in a current active uptrend is the UK Long Gilt, which this week came close to its all-time high, printed back in August 2016.
Both the Nasdaq 100 and the S&P 500 made new all-time highs this week, but both corrected lower to end the week down.
The RSI has dipped below the 60 level but remains very much in the bull range, and the long-term trend remains up. However, the close below the April high, which should have held firm due to change of polarity, does put a question mark against the current trend.
Gold broke out to the upside from the triangle to print its highest price in 6 years. Silver also had a strong week, rallying to its highest level in over a year.
Palladium, which has been the strongest of the metals of late, and the only one to hit new all-time highs this year, had a corrective week and saw prices break below short-term support.
The dollar has had a mixed week. The Dollar Index ended the week slightly higher but remains within a trading range. Some of the majors have shown some strength against the dollar, with both the Australian and New Zealand dollars reaching their highest levels since April.
Meanwhile, at the other end of the scale, the British Pound fell to its lowest level since April 2017 before posting a mild recovery. As with the Pound, the Euro remains in a long-term downtrend but is currently in a trading range.
Interest rate futures
The trend for interest rate futures remains up, and some strength has been seen this week. The current technical picture suggests that the rally is not done and that we will see new highs above the highs printed at the start of the month.
Both the S&P 500 and Nasdaq 100 made new all-time highs this week, as well as all-time high weekly closes. The bull market remains intact, and the long-term trend is indisputably up. The RSI remains in the bull range. As expected during this time of year, volume has declined as the rally has persisted, and volatility is waning. If these markets can hold above the breakout levels on a closing basis, that may form a platform for considerable further rally.
Palladium made new all-time highs again this week but did come off slightly by Friday’s close. Gold continues to consolidate above support. The energy markets have continued to rally.
Coffee had shown signs that a new bull market may have been starting, but that has stalled. The market has tested support multiple times this week, which so far has held firm.
The dollar has seen weakness this week across the board. The long-term trend continues to favour the dollar overall but is weakest and in a downtrend against the Canadian dollar.
The British Pound fell to its lowest level since December during mid-week but has put in a decent bounce since. The trend, for now, remains down.
Interest rate futures
From last week: “Interest rate futures made new highs on Friday but made a key reversal day. Price action on the 10 Year T-Note engulfed the real bodies of the last 11 days, which suggests that further weakness lies ahead and that support will be broken on both the 5 & 10 Year Notes this week.”
Interest rate futures saw the expected weakness this week, and we exited both the 5 & 10 Year T-note long positions for decent profits. Weakness has been seen across the board in the sector, with only the UK Long Gilt in a current long position. Gilts will likely at least test support this week.
From last week: “The S&P 500 is leading the way to the upside but failed to clear the prior week’s high and is grappling with a clear resistance zone. A decisive breakout above this resistance would be bullish.”
This week saw the decisive breakout and a new all-time high weekly close on the S&P 500. The Nasdaq 100 also made a slight new all-time high intraday but closed lower back below prior resistance.
The Dax gapped higher at the start of the week and rallied to its highest level since August last year. Only the Nikkei is currently in a long-term downtrend. All the other stock indices are in a bull market.
Gold has seen some wild daily price swings this week but continues to hold above support, and the trend remains up. The trend is also up for Palladium, which made an all-time high weekly close.
The Dollar had a strong week, which held off the potential change of trend to down and remains in a long-term uptrend. The British Pound fell to its lowest level since the 1st week of the year. UK Gilt prices are indicating rate cuts on the horizon, which is putting pressure on the Pound.
Interest rate futures
From last week: “However, there has been a bearish divergence between price and RSI, as mentioned last week, as well as volatility contraction, and declining volume. The trend remains up, but weakness towards a test of support looks likely.”
Interest rate futures made new highs on Friday but made a key reversal day. Price action on the 10 Year T-Note engulfed the real bodies of the last 11 days, which suggests that further weakness lies ahead and that support will be broken on both the 5 & 10 Year Notes this week.