Monday is Presidents’ Day in the U.S. so many markets will be closed, and it will, therefore, be a shortened trading week.
The stock markets remain bullish, with U.S. indices printing new all-time highs again. Currencies and interest rate futures remain in consolidations, and commodities remain mixed.
From last week: “prices at all-time highs are not a bearish characteristic!”. The S&P 500 printed new all-time highs again this week. Seven consecutive up closes ended on Thursday with a slightly down day after the new high at 2351.5 was printed on Wednesday. Volume remains below average, but there was an increase in volume on the weekly chart this week. As noted last week, with the exception of low volume, the technical picture remains bullish at this time.
The Nasdaq 100 has been stronger still, and following a small down day on Thursday printed its own new all-time high on Friday. The Nasdaq 100’s volatility has expanded to its highest reading since August last year according to our proprietary measures. This is not yet at an extreme level, but it’s getting close.
The energy markets continue to undergo volatility compression, and volatility has been in decline in the Crude markets since mid-November. Price has stayed within a tight $2.50 box range since the first week of the year. This narrow range, low volatility environment is unlikely to persist too much longer, and we can expect a large move once we get an eventual breakout, whether that is to the upside or downside.
Gold has consolidated this week and continues to trade in the vicinity of a flat 200-day moving average. There is also below average volume in the market and declining volatility, so the recent rally from the mid-December low is not as compelling as many are making out. Further strength is required before a change of long-term trend to up comes within range.
The currency markets remain without direction, and rather unusually, we remain flat all the currency markets as there are no trends to be found in the short-term. The long-term trend continues to favour the dollar, but not by much against many currencies. The technicals remain supportive of the dollar uptrend, but not by much.
EUR/USD, which moves inversely to the dollar index, fell to its lowest level in over a month before printing a bullish reversal candle on Wednesday, followed by a bullish candle on Thursday. This took the market back to a test of the 50-day MA, but weakness returned on Friday. I have no interest in trading this market until we get a decisive breakout in either direction. As it stands, the odds still favour that breakout being to the downside. A change of trend breakout to the upside remains out of range.
Interest rate futures
Interest rate futures continue to consolidate around the 50-day MA and above the recent lows. The RSI remains in a range between the 40 and 60 levels, and there is nothing doing in this sector at present. We continue to favour an eventual resolution of this consolidation to the downside, with new lows to follow.