The past week has seen the dollar weaken and stocks rise, with 2 of the indices we trade at LS Trader reaching new all time highs, the S&P 500 and the German Dax. It has also seen some commodity markets begin pushing higher and interest rate futures rise. The long-term trends are still up for stocks, mostly down for the dollar, down for interest rate futures and still mixed for commodities.
The relief rally that we wrote about in last week’s update did materialize and it took the S&P 500 to new all time highs. This rally was good for a 2.21% advance for the week and meant that the S&P 500 had rallied 100 points in just 2 weeks.
The Nasdaq 100 continues to be the strongest of the indices that we trade at LS Trader on the basis of recent price advance and momentum. This week has seen a large 3.61% advance and has meant that the Nasdaq has advanced some 232 points in just 2 weeks to reach new 13 year highs.
The Dax, still the strongest of the European indices, rose to new all time highs having cleared the previous all time high that was posted on the 19th September at 8779 basis the December contract. This week saw the index post new highs at 8869 on Friday before pausing for breath and closing slightly lower.
Commodities have had a mixed week with some of the sector declining and some markets making decent moves to the upside. There are some early signs that the recent commodity bear market may be taking a pause as some markets are showing signs that they may have bottomed out and may be in the relatively early stages of a decent advance.
Both gold and silver had fallen to new lows for the current move, but both were once again subject to a sharp reversal as the metals sector moved higher. For now the trend is still down across the metals sector but dollar weakness may limit further declines, should the dollar continue with recent weakness.
The U.S. dollar index did test the recent low at 79.72 as expected and indeed fell through that level to reach, by a single tick, its lowest level since November 2011. The trend for the index is clearly down and there is no evidence yet to suggest a bottom is in place, so on the basis of this index alone, lower still looks to be the game.
However, the Euro, which makes up 57% of the index is close to its high of the year posted February 1. Considerable resistance can be expected here, which may put a lid on the dollar’s decline should that resistance level hold. Similarly, the Pound is also close to its local top and not that far away from its high of the year, so there is some overhead resistance for both of these currencies to clear. The dollar index is the invert of the Euro, and with the Pound being highly correlated, resistance on both equates to support for the dollar.
Interest rate futures
Interest rate futures advanced for the week with the 5-year T note crossing the 200 day moving average and exceeding the 61.8% retracement of the sharp decline from May. The longer term 10 and 30 year markets are lagging the 5s, with the 30 year T bond still below the 38.2% retracement of the same move. These rallies are still therefore corrective and the long-term trend is still down in spite of short-term strength.