The current global macro picture is aligned with current market trends, which suggests stocks, Gold and interest rates will continue to move higher. However, the dollar could breakout to the upside this week, which conflicts with that view. As ever, the markets will go where they are going to go, so we follow along for the ride.
Stocks closed the week higher than the prior Friday’s close, but flat to slightly down from Monday’s open, which had gapped higher. The trend remains up for all four stock indices that we trade at LS Trader except for the Nikkei, which remains in a downtrend, trading just below short-term resistance.
From last week: “Gold put in a strong rally this week and broke through resistance, and now looks set to test the February high. Gold has been in a sideways range for six years and continues to build what could be a massive head and shoulders bottom. If the market can get above the 1400 level, we could see a rally back towards the all-time high at 1923.7 printed back in 2011.”
Gold rallied further this week, in spite of dollar strength. However, Friday’s candle was ugly, as the market tested and rejected the February high. This may indicate some short-term weakness this week, but the trend remains up, and the market is well above support.
The dollar reversed this week, with the Dollar Index finding support from above the prior week’s low. Wednesday and Friday had strong buying days, accompanied by heavy volume, which suggests further strength this week. Several major currencies are set to test critical levels this week, and if dollar strength continues, we could see multiple breakouts and a resumption of dollar strength.
Interest rate futures
Interest rate futures have had a mixed week. The long-term trend remains up across the sector, but there has been some short-term weakness in some markets. The shorter-term futures remain the strongest, and these either tested or made new highs for the current move this week.