The markets have returned to a more normal state this week following the extremely volatile price swings seen in numerous markets during the previous week. Volatility remains elevated in many markets, but this week has seen some markets trend better than they have in recent weeks.
The long-term trends are still mixed, but remain mostly down for stocks and commodities, up for interest rate futures, and up for the US dollar.
The S&P 500 was unable to take out recent highs and moved sharply lower this week. The RSI, which has been unable to move above the key 60 level, turned sharply lower and fell through 40, which puts it back in the bear range. Additionally, the index fell below the 200-day moving average, so we may see lower prices again this week.
The Nasdaq 100 also traded lower this week but remains stronger than the S&P 500. This week saw the tech index trade below its 50-day moving average but remain above its 200-day moving average. The RSI has fallen to test bull market support at 40, which is currently holding, but only just.
The Dax fell further this week, keeping the long-term downtrend intact. The Dax has now shed almost 1200 points in the space of two weeks, which is a big move. The RSI has fallen below the 40 level, returning it to the bear range. Lower prices may be ahead, and we may ultimately see a test of the double bottom around 9300.
The energy markets have continued with weakness, with Brent Crude dropping below $40 per barrel for the first time since 2009. Light crude oil remains on target to test its 2009 low, which was at 33.55 basis the futures contracts, printed in February 2009.
Heating oil had a hugely bearish week, declining some 14.66%, which included a 6.49% decline on Friday alone. This has seen the RSI fall to 21.35. Natural gas also had a bearish week, ending lower by 8.97% and printing below the 2.00 level for the first time since April 2012.
Once again, therefore, we see that the energy complex is still the most profitable to trade, as it has been for quite some time, and the LS Trader system is currently sitting on excellent profits by being short four markets in this sector. The exception being the strongest enemy market in the sector, No Lead Gas, where we remain flat. No Lead gas was the only market in the sector that managed a gain this week, having bounced from just above support.
Metals have also seen some weakness with Silver falling to a new low since 2009. The new low in Silver has not been confirmed by Gold. Although resistance held in Gold, the yellow metal remains some $30 above its lows for the year. Regardless, the long-term trend for the metals remains down, as it does for nearly all commodities markets.
The US dollar had an excellent week against the Canadian dollar, where it rallied to its highest level since 2004, having narrowly exceeded the 2009 highs.
Overall, the US dollar has seen further weakness following the large moves seen during the previous week. The dollar index fell below last week’s low and the RSI has fallen to test the key 40 level, which is bull market support. Should we see a decisive move below 40, we may see further weakness towards the 200-day moving average, which currently sits at 96.29. For now, the long-term trend is up for the dollar index, as it is also for the dollar against most of the majors.
Interest rate futures
Interest rate futures have seen some strength this week with the sector rising to its highest level in around six weeks. The long-term trends remain mixed in the sector and are still up for the shorter-term markets but down for the long bond.