The past week has seen mixed trading in multiple markets, with a change of long-term trend to down being completed in Crude Oil and Brent Crude. Stocks continued their corrective rally and are now at a key price zone. The dollar has resumed recent strength, and interest rate futures remain mixed.
The S&P 500 rallied this week, reaching a 61.8% retracement of the October decline. It is possible that if prices decline back to around the 2700 area and find support, that an inverted head and shoulders pattern could be forming. Such a pattern, if completed, would project a rally back to new all-time highs.
The technical damage done at daily chart level recently cannot be disputed, and it has changed the daily and weekly trend to down, but a check of the monthly chart shows that the bull market is still intact at a higher degree of trend. A complete retracement of the October decline and new all-time highs cannot be ruled out over the coming months, particularly given that we are now in a strong period of the year from a seasonal basis.
The other stock indices have seen similar price action, but the Dax, and then the Nikkei, remain the weakest.
From last week: “A trend change to down is within range for Crude Oil and Brent Crude, and that could be completed within the next couple of weeks.” The energy markets were weak this week, and a change of trend to down was completed for both Crude Oil markets as expected.
It’s possible to label the rally in Gold from the August low to be a bear channel, which is in keeping with the long-term trend being down. A close below 1200 would bolster this view and suggest that prices would retrace the rally from the August low in full and go on to post new lows.
We mentioned a possible head and shoulders bottom in last week’s update but said that even if the pattern completed that the long-term trend would be down. Prices fell well short of the neckline and have turned lower and may now test the right shoulder bottom. If this price is broken (264.25) that would completed a head and shoulders failure pattern and would project prices lower to around the 235 level.
Silver has already completed the head and shoulders failure and may break to new lows this week. The long-term trend remains down for all the metals except Palladium.
The US dollar completed a break out the neckline of a head and shoulders pattern visible on the weekly chart back to July 2017. This breakout, which now has prices at their highest level since May 2017, projects higher to around the 1.1000 area, around 1000 pips higher than current prices.
The dollar index may post new highs for the current move this week.
Interest rate futures
Interest rate futures had a mixed week with the shorter-term markets being weaker than the longer-term. The 30 Year T-Bond began a rally back to the underside of the 5-week flag mentioned last week. If resistance holds, that pattern has a projected downside target in the 130 area.
The long-term trend remains down across the sector.