The markets are closed on Monday due to the Bank Holiday in the U.K. and the Memorial Day holiday in the U.S. The week ahead will, therefore, be a shortened trading week.
The past week has seen new all-time highs for the S&P 500 once again, as well as a new 15-year high for the Nikkei. It has also seen a considerable rally for the dollar, which may be sufficient to suggest that the recent dollar correction is at an end and that we may be in the early stages of the next leg higher.
The Nikkei rallied to its highest level in 15 years. The breakout was confirmed by a move back above 60 on the RSI, which is bullish, as is the fact that the market closed above the prior resistance level, which should now act as support. There is plenty of room for a further rally in this market, with the next resistance level some 1500 points above current levels.
The S&P 500 registered yet another all-time high, but as before the advance following the new high has been far from convincing. The rally has not been confirmed by a break above 60 on the RSI, or by a breakout to new multi-year highs by the Nasdaq 100, which still lags below its recent high. However, it’s possible that both of those could change this week and that we could see a further rally.
Commodities markets have been mostly weak over the past few trading days, with some markets dropping to their lowest levels this year, and others coming close to testing major support levels. This is happening coincident to renewed dollar strength. Commodities as a rule move in the opposite direction to the dollar, so if the dollar is in the early stages of its next leg higher, commodities may come under further pressure.
The energy markets have been mixed, with both crude oil markets unable to clear critical resistance so far. RBOB gasoline held short-term support but needs to get back above the high printed earlier this month to get the rally back on track. Natural gas rallied to test resistance formed from the February high and was unable to clear that level, and, therefore, remains in a long-term downtrend.
Gold and silver both reached 3-month highs, but once again have been unable to complete a breakout. Due to the length of time of the current consolidation, once these markets do breakout, we should see a decent move.
Soybeans resumed the long-term downtrend with a break of the recent low, further acceleration lower and a break of the 2014 low, which has the market currently at its lowest since April 2013. The RSI has moved lower to 27.67, which is very much in the bear range and suggest further weakness ahead.
Coffee has had a volatile week having initially broken above short-term resistance only to reverse then sharply lower, and take out the prior lows in the process. This move took coffee down to its lowest level since November 2013.
Last week we wrote that sentiment had become extremely negative for the dollar and that the last time we saw such bearishness, a strong rally followed in the index. The same held true this week. Once sentiment had fallen to only 9% bulls, which matched the same levels seen previously, the dollar index rallied just over 300 pips. As before the long-term trend remains up. The RSI, however, is still in the bear range, so further strength will be required for that to change. A move back above 60 on the RSI would suggest that a rally back to the 100.785 top printed in March would lie ahead.
Interest rate futures
The 30-year T-bond ended the week lower, but it was another very choppy week. As before, support is coming in at the lows, as evidenced by the long lower shadows on the weekly charts, which have been seen in each of the last three weeks.
The long-term trend is up for the interest rate futures sector with the exception of the 30-year T-bond. Obviously bigger moves are likely to be seen when all the trends are aligned.