US stocks have continued to recover from the sell-off earlier this year and show signs of renewed strength. It’s possible that we will see further strength and breakouts to new all-time highs over the coming weeks.
The US stock indices remain in a long-term uptrend and have shown renewed strength this week. The S&P 500 has this week broken out of a large 3-month descending triangle. This breakout has been accompanied by a move above 60 on the RSI, which places the RSI back in the bull range for the first time since February. Volatility is at low levels and is starting to expand again which suggests this market has higher to run to the upside.
The Nasdaq 100 is stronger still and this weeks strength, which has also occurred on expanding volatility from low levels and a return to the bull range on the RSI suggests that further strength and new all-time highs will be seen in the coming months. This week’s price action has also completed the failure of the head and shoulders top, which if correct, projects a rally higher towards 7828, over 800 points higher than current levels.
It’s important to always remember that we trade a market of commodities, not a commodities market. This means that each market must be assessed and traded on its own individual merits and chart structure. Some commodities can move up whilst others can move down.
The energy markets moved sharply lower on Tuesday but recovered to hit new highs for the current move on Thursday and all remain in uptrends. Natural Gas, which has been the laggard in this sector for a long time, is within range of an upside breakout.
Lumber remains a very strong market and has hit new all-time highs again. However, there are some reasons to have one eye on the exit. Sentiment has been and remains extremely high, and there is bearish divergence momentum setup that could potentially trigger this week. However, even if this trade does get stopped out it has been a huge winner for the LS Trader system.
From last week: “The dollar continues to gain ground against many of the majors and we could see changes of the long-term trend against the British Pound and Euro, as well as in the dollar index itself over the next few weeks.” The dollar did complete a change of trend against the Euro, but some strength has been seen since the breakout. There was insufficient strength in the Dollar Index to complete a trend change to up, and the Pound has held up just above the key trend change level. However, if dollar strength resumes this week both trades could get triggered.
Interest rate futures
Interest rate futures moved slightly lower this week having been unable to clear resistance during the prior week. These markets, therefore, all remain in long-term downtrends.