In last week’s update we wrote that stock indices looked set for further weakness and that we may say a sharp decline. We saw both initially last week but stocks did put in a partial recovery late in the week. The trend for now is still up for stocks but whether we see the highs posted on the 22nd May tested or exceeded remains to be seen. The dollar has also seen further short term weakness but the longer term trend still favours the dollar.
Stocks did test support as expected, and not unsurprisingly did break support, bringing the current uptrend to an end in the near term. The longer term trends remain up for all four stock indices that we trade at LS Trader in spite of short term weakness. Whether that remains the case for much longer will be purely down to price action. If last week’s lows are broken that would suggest lower prices near term.
The S&P 500 did test and break short term support as anticipated in last week’s update, and also tested the 50 day moving average. The market fell almost exactly to the 1600 support level before putting in a decent 2 day rally. Whether this rally continues next week back up to test the highs formed on the 22nd May remains to be seen.
Gold edged higher this week to test key resistance but was unable to break through and reversed on Friday. The trend remains down for gold as it does for silver. Silver posted its lowest close on Friday since the highs around $50 back in April 2011. Both markets have been a bit unclear on trend in the near term as both have at times looked like they were going to break higher. So far all attempts to move higher have been met with resistance and the trends remain down. The odds therefore narrowly continue to favour lower prices ahead.
Coffee has continued to trend lower over the past few weeks but has begun to trade in a narrow range over the past ten or so sessions, suggesting a breakout of this range is imminent. Resistance is in place around 130 with support at the recent lows. If the recent lows can be taken out we can look for a continuation lower, possibly to around the 107 area.
The grains markets are still mixed, with the long term trend up for approximately half of the sector and down for the remainder. Leading the way still are soybeans and soybean meal, both of which posted new highs for the current move, and oats, which has just put in a powerful 7 day rally, keeping the uptrend intact. Oats will now be targeting critical resistance at the September 12 highs, which are not far above last week’s highs. Not far beyond that are the 2011 highs, which if broken would really change the long term outlook to significantly higher in this market.
The dollar has had another week of mixed to mostly lower price action. The longer term trends however are still up almost across the board for the dollar.
The dollar index has seen considerable weakness this week which is as expected in the face of the Euro’s rally. The Euro makes up 57% of the dollar index, so moves higher for the Euro translate to dollar index weakness. However, the trend for the index is still up in spote of it’s decline to its lowest level since February. To maintain the uptrend, the index needs to hold above the lows of the year, currently around 79.
Last week we wrote about the considerable weakness seen in the commodity currencies, particularly in the Australian and New Zealand dollars Both markets have continued lower and there remains plenty of room for lower prices over the coming weeks and months.
This Friday is quarterly currency expiration so June contracts roll forward to September.
Interest rate futures
Interest rate futures have seen some choppy price action over the past week or so. The trend is down for the sector and lower prices may be ahead, particularly if last week’s lows are taken out early in the week ahead.