From last week: “Markets could continue to rally further, and the adage of don’t fight the Fed is often prudent.” Stocks continued their recent corrective rally. Strength has been impressive, certainly in the Nasdaq 100, which has easily exceeded the 61.8% retracement level from the all-time high, falling just short of the 78.6% retracement level.
Friday’s bar turned lower, and that may be the end of the rally. However, history tells us that when 78.6% retracement levels are exceeded, markets tend to complete the retracement and go on to make new highs. That would have seemed inconceivable a few weeks ago, and it still seems unlikely, but possible.
Gold reached new seven-year highs on Tuesday but ended the week lower. The long-term trend remains up. Silver continues to correct, and the correlation between silver and several other markets, including the commodity-based currencies, is evident. If stocks do resume the downtrend, other correlated instruments will follow.
The dollar remains in the middle of the recent range but is still in an uptrend against the majors. As above, the commodity-based currencies remain weak, and a resumption of the downtrend is within range.
Interest rate futures
From last week: “There are arguable head and shoulders continuation patterns forming on the 30 Year T-Bond and 10 Year T-Notes. A break of the neckline would suggest new highs and possibly negative interest rates in the US.”
Interest rate futures tested the neckline but have so far been unable to break above resistance. The trend remains up for the sector, which the 5-year T-Notes and 3 Month Eurodollars remain strong.