The past week was a shortened trading week due to Good Friday, and Thursday’s close also saw the end of the first trading quarter of the year. The first quarter has been far more volatile in many markets than recent quarters but has also been profitable to trade in spite of some large swings in the markets. That volatility is expected to continue for the foreseeable future and should bring with it plenty of large moves and profitable trading conditions.
The long-term trends remain mostly as before, mixed for stocks, up for commodities (with a few exceptions), down for the dollar, and down for interest rate futures.
From last week on the Nasdaq 100: “Additionally, sentiment has become extremely negative with only 10% bulls. The last time sentiment was this low was the end of the early February sell-off. A substantial rally followed.” Stocks bounced this week as suggested in last week’s update from extremely negative sentiment readings.
The long-term trend for US stocks is still up at monthly and weekly chart level but is turning negative on the daily timeframe. However, a change of trend to down for either the S&P 500 or the Nasdaq 100 has yet to be completed.
The Dax fell to new lows for the current move but reversed higher. However, the trend remains down, and the market is below resistance. The Nikkei also rallied and was strong enough to take out short-term resistance. The long-term trend remains down for the Dax and Nikkei but still up for the Nasdaq 100 and S&P 500.
Brent Crude completed its highest monthly close in almost three years in spite of a bit of a pullback this week. The long-term trend remains up for both Crude markets, and new multi-year high monthly closes are not bearish.
After a few weeks of selling, some of the grains markets had extremely bullish days on Friday, namely Corn, Soybeans and Soybean Meal. This may indicate that the correction in these markets is over and the local top may be tested, with possible breakouts this week.
One important observation in the commodities markets is commercial buying of many commodities markets as reported in the COT data (Commitments of Traders Reports). This indicates that commercials are expecting inflation and higher prices and a likely bull market in commodities. Commercials are often early, so we have to wait for trend confirmation and buy triggers, but once these moves get going, they are likely to be big.
The currency markets continue to consolidate, much as they have since the middle of January. The long-term trend remains against the dollar.
Interest rate futures
Interest rate futures have continued their short-term counter-trend rally this week and are now approaching levels that could provide resistance and a possible turn lower to resume the long-term downtrend.
The long bond is now in the zone between the 38.2 and 50% retracement levels of the decline from the December high, which is about the level that normally sees a correction of this degree fizzle out. The 50% retracement level is at 147.37.