Monday is Martin Luther King Jr. Day in the US, so most US markets will be closed. We’re at a fascinating juncture in multiple markets where we could be at or near a turning point ahead of potentially resuming the prevailing long-term trends.
Stocks have continued to rally this week. The S&P 500 has rallied to just shy of the 61.8% retracement of the decline from the 21st September all-time high. The RSI is testing bear market resistance at the 60 level, so this could be a critical resistance level for stocks. This rally is still viewed as corrective at this stage but if it continues towards the 78.6% retracement levels that would suggest we could see a complete retracement. For now, the odds favour a turn lower and a test of the recent lows.
Palladium rallied to a new all-time high this week but has pulled back from Thursday’s high, where an extremely high bullish sentiment had been printed. It’s possible that we may see more short-term weakness, but the trend remains bullish, and the market is well above support.
The energy markets have continued their corrective rallies and have now retraced 38.2% of the decline from the October high.
The grains markets are starting to show some signs of life, and we could be seeing a massive bottom forming in this sector, with some potential upside breakouts and changes of the long-term trend to up in the offing.
The Dollar Index has rallied from the recent low. The RSI never broke the 40 level and therefore remains in the bull range, and the long-term trend is up.
EUR/USD has fallen for seven consecutive trading days and is now moving towards the lower end of the January range. As per previous updates, we’re on the lookout to see if the January effect holds this year with the high or low for the year being printed this month.
Interest rate futures
Interest rate futures markets declined this week and broke support in the process, bringing an end to the recent uptrend. The long-term trend remains up for the sector, but we could see bull market support at 40 on the RSI tested this week.