The past week has seen stocks stall from below their recent all-time highs and turn lower but remain in very established long-term uptrends. The dollar has resumed its long-term uptrend as expected, with multiple breakouts this week. Commodities remain weak, and interest rate futures could be building up for a further rally and a potential change of long-term trend.
The S&P 500 reached its highest level since the January all-time high the week before weakness appeared during the second half of the week.
The Nasdaq 100 began the week with strength but fell just short of testing the recent all-time high, before moving lower on Friday. The long-term trend remains up, with the RSI in the bull range. New highs may yet be seen in both US indices.
The Dax has seen continued weakness this week and may be headed lower to test the June lows. The RSI has been unable to get above the 60 level and remains in the bear range.
The metals remain in long-term downtrends, but there has been a lack of progress to the downside over the past few weeks, which suggests that the trend is stalling and possibly bottoming. However, the long-term trend is firmly down, three of the four metals are trading well below resistance, and the RSI remains in the bear range, and the rallies have seen the RSI unable to clear even the 40-50 level.
From last week: “The dollar has seen a resumption of strength this week against several majors and is within range of breakouts in the Dollar Index, Euro, Australian and New Zealand Dollars. Sentiment remains extremely high in favour of the dollar.”
The dollar did breakout as expected in the Dollar Index, Euro, Australian and New Zealand Dollars. The long-term trend now appears to be back on track and favouring the dollar.
Also from last week: “The British Pound remains the weakest currency of the majors at present and the only one in an ongoing trend. The July 19th lows are likely to be tested this week.” The July 19th lows were tested and exceeded on Monday as the Pound fell out of bed against the dollar. This week’s 1.8% decline took the Pound down to its lowest level since June last year against the dollar.
Interest rate futures
From last week on interest rate futures: “…the possibility of a sharp rally increases as time goes on.” Interest rate futures rallied this week as expected and there was a sharp rally on Friday. This looks to be consistent with a low being in for now and could be the right shoulder of the previously mentioned head and shoulders pattern rallying towards the neckline.
The COT report has commercials at a record net long position again, and this provides a tailwind for rallies. There’s a good chance that we will see further strength in these markets and a test of the neckline at a minimum, with a change of long-term trend to up likely to follow.