Stocks briefly hit new highs this week but have been unable to decisively move higher on the back of low volume and volatility. These low volume conditions are quite typical of summer trading, which should see an increase in volume as traders and fund managers return to their trading desks at the beginning of September.
The S&P 500 hit a new all-time high again this week but closed just one and a half points up for the week on Friday. Volatility is low, as is volume, but the trend remains bullish until proven otherwise.
The Nasdaq 100 hit an all-time high as well basis the cash index but has yet to hit the same high on the basis of the continuous futures contract. Price action in the tech index is very similar to that of the S&P 500, low volatility and volume. The long-term trend remains very much up in both indexes.
The long-term trend is also up in the Dax, but having moved above 10800 for the first time this year, gave back the recent gains, falling back to the breakout level. This level should act as support, which it has so far on a closing basis. Further below that there is also potential support should we get a retest of the trend line from the April 2015 high. If both of those levels give way, then we will likely see further decline down towards the 50-day moving average, but for now, the trend is up.
The energy markets have continued their recent recovery, and some of the markets in the sector are on the verge of breakouts to the upside. This includes a potential head and shoulders bottom evident on the weekly Crude Oil continuous chart, which if completed would indicate significantly higher prices for Crude and the sector overall. The long-term trend is up for four of the five energy markets that we trade at LS Trader, the exception being RBOB Gasoline.
The grains markets continued their recovery as we indicated could be the case in last week’s update. A few markets in the sector had put in short-term reversal patterns, and we got confirmation of that in Wheat and Rough Rice this week.
Soybean Oil has been extremely bullish since printing the low back at the end of July and has now rallied to within range of a change of long-term trend to up. There is some weakness on the last two daily candles, known as a hanging man. This shows that the market is using up its buying power just to stay flat, and no real advance has been made. There could be some short-term weakness before this market launches further upwards to test trend-defining resistance.
The currency markets, for the most part, are continuing their consolidation with very little in the way of trending conditions evident in any currency market at present. The dollar index fell to an eight-week low but has yet to breakout of the current consolidation pattern. Once it does, there will likely be some explosive moves, not just in the dollar index, but in other currencies as well.
The Euro remains in a consolidation that has now been in effect for 19 months, dating back to February 2015. Once this market breaks out, the resulting move could be huge.
Interest rate futures
The long-term trend remains up for all markets in the sector with the exception of the three-month Eurodollar. The longer-term interest rate futures markets are all trading around their 50-day moving averages in a fairly narrow range with low volatility. A volatility expansion, which should trigger an increase in all the key metrics, volume, momentum and price should result in a breakout from the range and a new trending phase over the next few weeks.