Stock indices have continued their recent corrective rally, but all remain in long-term downtrends. Commodities remain weak overall, while the dollar uptrend remains intact. Interest rate futures remain in a long-term downtrend but continue to gain strength, with a possible change of trend to up on the horizon.
From last week: “This is a bullish time of year seasonally, but the current technical picture takes precedent, especially the primary trend.” Stocks continued their corrective rally this week, and the Nasdaq 100 broke resistance late on Friday night. December is a strong month seasonally for stocks, but the long-term trend is still clearly down.
The energy markets continue to get destroyed, but there are signs that the aggressive downtrend may be about to take a pause, as momentum is slowing, there is bullish divergence between price and RSI, and volatility has remained at elevated levels. However, the long-term trend remains down for all markets in the sector except for Natural Gas.
The uptrend for the dollar remains intact. The Dollar Index may rally to test recent highs this week. There are also possible breakouts for the dollar against a handful of majors, which includes GBP/USD. GBP/USD closed on Friday just above a critical support level. The long-term trend is down, and the RSI is in the bear range, where it has been for the past several months. Interestingly, volatility in GBP/USD is at a low level, something that is likely to change over the coming week or so.
Interest rate futures
Interest rate futures continue to show signs that they have bottomed. As we have written several times over the past few months, commercials hold a huge net long position, based on COT data, which means they continue to position for lower, not higher, interest rates (interest rate futures move inversely to rates). For now, the long-term trend remains down, but upside breakouts and changes of trend for a few markets in the sector are within range.