The past week was another volatile week in many markets and also was the week of the much-anticipated 2-day FOMC where many expected to see the Fed raise interest rates for the first time in nine years. The Fed did not raise rates. As often occurs on and around the Fed meeting, there was significant short-term volatility. Next week may see a return to more normal, stable markets now that the meeting is out of the way.
The long-term trends have not been affected by the recent volatility, so we will likely see many of these trends resume over the next few weeks
The S&P 500 made a spike high on Thursday and took out short-term resistance. The spike high coincided almost exactly with the resistance level formed at the level that had previously provided support for the market for several months. As before, as long as that major resistance level holds we can look for lower prices. Both the long-term trend and the RSI remain bearish.
The Nasdaq 100 has of course been more bullish, having already moved back above the aforementioned resistance level. The Nasdaq 100 may rally higher to test the underside of the trendline up from the October 2014 low, which currently dissects that market at 4510.
The Dax ended the week lower following a large down day on Friday, which took the Dax to its lowest level this month. With the long-term trend remaining down and the RSI still in the bear range, further weakness towards the key low on the 24th August may be seen. Ultimately, we should see significant new lows below that key low.
The Nikkei also reversed on Thursday and Friday, and it too looks as though it will fall to at least test its 24th August low. If that low is broken, we may see a swift 600-odd point decline down to the next level of structural support around the late- 2014 lows.
Both gold and silver rallied this week, with the latter breaking the trendline that we have mentioned recently. For now the long-term trend in both precious metals remains down but we could see further strength in the near-term. The 60 level on the RSI could be tested this week, and a decisive break would suggest that the counter-trend rally was not yet done. Conversely, if 60 holds we may see a turnaround bank to new lows.
Cotton made a big move lower this week which resulted in a change of long-term trend to down. We may now see further declines towards the January low around 58.67.
Rough Rice also made a bullish move, rallying for four straight days this week to reach its highest level since January. The RSI broke easily through the 60 level, and there is little in the way of resistance on the chart between current prices and the 13.50 area.
The currency markets have been choppy of late, and the trends remain mixed. The three commodity-based currencies that have been very weak of late all gained ground this week. The long-term trends are however unaffected, and we may yet see moves to new lows for each of these three currencies.
The dollar index has drifted lower again and remains in a long-term downtrend and with the RSI in the bear range. We may yet see further weakness, but Friday’s candle indicates indecision in the short-term
Interest rate futures
As is usually the case on FOMC meeting days, the interest rate futures markets experienced some volatility. This was particularly the case in the 3 month Eurodollar, which having tested support on Wednesday, put in a large two-day rally and almost recovered to test the August 24th high. Similar moves were seen in other markets in the sector, all of which shot higher on Thursday and Friday. The 30-Year T-Bond had dropped to its lowest level since July before the meeting but then rallied higher. The long-term trends remain mixed in the sector.