The past week has seen the dollar recover from recent short-term weakness and resume the longer-term uptrend, which included pushing the Euro down to 2 year lows. Commodities remain mixed although the long-term trend overall remains down for commodities. Much of the initial strength in commodities markets wore off before the end of the week, with the most bullish moves coming in the grains sector, which continue to benefit from the recent drought. The trend remains mixed for the stock indexes with the U.S. indexes still the strongest.
The S&P 500 initially header higher but stalled at 1375 before moving lower again. The index ended the week lower by just 0.34% and the trend is still up. The market may well continue down towards the 1330 area, where the 50-day moving average currently sits. The 1330 area also represen ts a key area, which previously had provided resistance and may now provide support should the index decline that far.
We wrote last week that the Nasdaq 100 may move higher towards resistance at 2626 and that did happen, with a new high for the current move posted at 2656. A doji was formed here which represents indecision, and this was followed by a long black candle on Friday, which completes a 3 day evening star reversal pattern, which suggests that weakness may continue in the short term, although the trend is still bullish. Support may be found roughly mid way through the tall white candle formed on the 29th June, which is approximately at the same level as the 50 day moving average.
Gold initially continued with last week’s bullishness but fell just short of the $1640 level that we highlighted last week. From there gold reversed, and may now head lower towards $1547. T he long-term trend remains down.
Crude and the other energy markets also initially continued with the prior week’s bullishness, before retracing much of those gains. The trend still remains down across the sector.The most bullish sector of all at present continues to be the grains, all of which made sharp gains throughout the first half of the week before running out of steam on Friday. The bullishness of the sector from a technical perspective is highlighted by the gaps higher seen on a few of the grains charts.
The dollar had a strong 2-day rally to close out the week, advancing from 8189 to 8356 in just 2 days, which is a significant move for the index. This culminated in the highest weekly close for the current move and suggests a test of the 8400 level in the not too distant future. The support area that we highlighted last week may be key was not quite tested and support should still be found around 8140 should the index reverse again.
The British Pound, currently the only major still in a long-term uptrend against the dollar according to our proprietary long-term trend indicators was rejected at the 200-day moving average, which we suggested last week may be tested. From there the Pound headed lower and may now decline towards the recent lows posted on the 1st June, a break of which would give a change of trend to down.
The Euro opened the week higher but then spent pretty much the rest of the week moving lower, ultimately taking out the recent low and falling to its lowest level in 2 years against the dollar. This move opens the door once again to our longer-term downside target at $1.18.
Overall the long-term trend still favours the dollar against all the majors with the exception of the British Pound.
Interest rate futures
Interest rat e futures advanced once again as the seemingly never-ending long-term uptrend continues. The markets continue to hold above the 50 day moving averages and short-term support levels and as long as that remains the case there is a good probability that the recent all time highs in these markets will be tested once again. There is however a limit as to how high these markets can go with yields moving once again back towards all time lows. There will come a point if the uptrend continues where the risk/reward for long positions is not there and that may lead to an unravelling of longs.