The past week has seen mixed trading in many markets. The dollar has seen some weakness as have metals and energies. US stocks remain long-term bullish, and interest rates continue their counter-trend advance that is now approaching the point of a change of long-term trend to up.
From last week: “The S&P 500 is still in the large triangle pattern that has been in place for four months. This pattern could resolve itself in either direction, but with the long-term trend still up for US stocks, the odds favour an upside resolution. In other words, the bull market in US stocks is still intact.” Last week’s comments still apply. Support has been found at the bottom of the triangle, accompanied by the RSI holding and moving higher from bull market support. The triangle points to an upside breakout and rally to new all-time highs in the coming weeks for the S&P 500. The Nasdaq 100 also looks set for a test of all-time highs.
Global stocks are in a different position with the long-term trend currently down for both the Dax and the Nikkei, although strength this week in the Dax points to a test of resistance this week.
Copper broke support and remains in a long-term downtrend, as do the other metals. Copper’s low print this week was the lowest print in almost a year.
Also from last week on Gold: “However, sentiment is very negative, and volatility is reaching extreme levels, so a counter-trend rally could be seen soon.” Gold fell to a new low for the move at 1238.8 before putting in the expected rally. Sentiment remains negative, and we may see further short-term strength, but the long-term trend remains down.
Crude rallied again this week, printing new 3 1/2 year highs but did see some weakness. The $84 target remains a possibility. Brent and the other energies have so far fallen short of a breakout, so the rally in Crude remains unconfirmed by other markets in the sector.
From last week on the currencies: “Typically, when sentiment gets this low, a short-term reversal, correcting the prior trend is not too far away. We have seen some of that this week with several majors bouncing higher from their recent lows.”
The dollar has seen continued weakness this week as sentiment recovers from very low levels for the majors against the dollar. The Dollar Index itself had reached extremely high bullish sentiment readings and is pulling back. However, the long-term trend continues to favour the dollar across the board.
Interest rate futures
In last week’s update, we wrote about the enormous commercial long positioning as reported in the COT report and made a case for a more significant counter-trend rally and possible change of long-term trend in this sector, which would catch many out and have them positioned on the wrong side of the market.
We also noted that there was a potential test of the neckline on a head and shoulders bottom on the 30 Year T-Bond, and further out the 10 Year T-Note. The 30 Year T-Bond did briefly break the neckline and came within a point of a change of trend, which will possibly be complete this week.