The stock markets rallied to new all-time highs again since breaking the neckline of the massive head and shoulders continuation pattern, which has price projections over 3600.
A bearish wedge/ending diagonal pattern is still evident on both the S&P 500 and the Nasdaq 100, but for now, the bulls are in control and the trend is up. The RSI on the S&P 500 is at its highest level since January 2018 when the market nosedived.
The commodities markets remain quiet, and there is not much action in most markets in the sector. Brent Crude is the leader in the energy sector. Gold potentially printed a low for the move this week and still looks poised to move higher and test the September high over the coming months. Whether Tuesday’s low proves to be the corrective low or we see another new low before strength returns remains to be seen. The RSI is just about holding at bull range support.
The currency markets remain mixed. USD/JPY is our sole currency trade at present, and support held this week, keeping the uptrend intact. The long-term trends narrowly favour the dollar at present against the majors.
Interest rate futures
The inverse relationship between stocks and bonds remains at a critical juncture and was not decided last week. As before, if stocks continue to rally, then bonds will likely see further weakness. Conversely, a turn higher in bonds (weakness in stocks) could also be seen. This position is likely to be resolved one way or the other during the week ahead.
The stock markets are at potentially a critical juncture. New all-time highs were printed on Friday, completing the break of the neckline of the massive head and shoulders continuation pattern, which now has price projections over 3600.
At the same time, there is a potential bearish ending diagonal evident in multiple timeframes, which, if completed, can lead to a sharp and swift reversal lower.
Sentiment is moving towards a bullish extreme in stocks, so there are mixed signals. The long-term trend remains up, and the RSI is in the bull range, and therefore, the weight of the evidence is towards higher prices until we see evidence to the contrary.
The commodities markets remain mixed. Weakness has been seen in the metals markets, but for now, only Copper is in a long-term downtrend.
It’s been a strong week for the dollar, with the Dollar Index moving higher, and the dollar advancing against the majors. The long-term trends remain mixed.
Interest rate futures
Interest rate futures broke support but remain in long-term uptrends for now. A change of trend to down is coming into range, but considerable further weakness will be required to complete a change of trend. The RSI is testing bull market support, which is just about holding.
The inverse relationship between stocks and bonds will be interesting to follow over the coming week. If stocks continue to rally, then bonds will likely see further weakness. Conversely, a turn higher in bonds (weakness in stocks) could also be seen. This position is likely to be resolved one way or the other during the week ahead.
From last week: “There is a massive inverted head and shoulders continuation pattern forming on the S&P 500, which if completed, has extremely bullish implications, with price projections over 3600. It’s possible that we could see new all-time highs in both US indexes this week.” Both markets rallied to new all-time highs this week with potential to move considerably higher still.
The Dax and the Nikkei also both rallied to new highs for the current move again this week.
Palladium printed new all-time highs once again, remaining by far the strongest metal and commodity. Gold and Silver ended the week higher but continue to consolidate.
The energy markets remain rangebound despite a bullish day on Friday. The long-term trend remains down for the sector, except for Natural Gas.
The dollar has seen some weakness this week against the majors. The Dollar Index declined and will likely test short-term support this week. The New Zealand dollar may complete a head and shoulders bottom this week.
The British Pound moved higher throughout the week and may test the 1.3037 high printed on the 21st October this week. The Pound has the potential to move much higher over the coming months if Brexit gets resolved. Commercials remain net long.
The dollar did breakout against the Yen this week, completing a change of long-term trend, but reversed sharply, narrowly holding support.
Interest rate futures
Interest rate futures held support and ended the week higher. The long-term trend remains up for interest rate futures.