The past week has seen stocks unable to reach new all time highs and has also seen some further dollar weakness. Commodities have remained mixed, but are mostly trending lower as before. The long term trends still remain intact, which are currently up for stocks and the dollar and mostly down for commodities.
The S&P 500 fell short of hitting all time highs once again and as we wrote in last week’s update, this continues to be bearish divergence from the Dow, which has hit all time highs recently and basis the June futures contract, came within 5 ticks of doing so again this week. Basis the cash S&P 500, the market is some 20 points away from all time highs of 1576.09 on 11 October 2007. It still remains unclear as to whether we will see those all time highs reached in this market.
The all time highs on the Dow have also been unconfirmed by the Nasdaq 100, which is obviously a long way from all time highs, but the Nasdaq also remains below its 2012 high. 2815 on the June contract remains the key resistance level on this market.
The Nikkei hit new 4 ½ year highs this week but ended the week up by just 0.08% following a decline late in the week. The long term trend is still very much up and this will continue to be the case for the foreseeable future, due to the extent and duration of the recent rise, which as we wrote about last week has so far generated in excess of 3150 spread betting points profit for the LS Trader system, and the trade is still in progress.
Gold and silver are historically highly correlated so when we see moves such as we have in the past week where gold has risen and silver has declined, this usually precedes a trend reversal. The divergence between these 2 highly correlated metals will not likely continue for much longer and it could be that the bear sash pattern printed on silver’s daily chart on Friday, may take both metals back down towards the critical support shelf that we wrote about last week. If these markets do head down further towards support, a break of key support could open the door for a larger decline, but if support holds, we may get a further bounce for gold, followed by silver. The longer term trend remains down for both markets.
As we suggested may happen last week, Crude Oil did test and break short term resistance in what was quite a volatile week for the black stuff. The 200 day moving average appears to have provided support and Friday saw a bullish engulfing pattern printed on the daily charts which suggests upside momentum may continue next week and that we may see a test of $95 on the May contract.
The recent highs at 140.30 on orange juice appear to be critical as the market has been unable to clear that level following several attempts. This may pressure the market lower if further attempts fail. Major resistance stands at 144.15, the December 2012 high, which remains for now the upside target.
Last week we wrote about our target of 136.16 on April Feeder cattle and suggested that if that level was reached and subsequently broken, we may see an extended decline. This week saw feeders continue to decline and fall as far as 136.78 so that scenario remains intact.
Coffee also continued lower having resumed the long term downtrend and we still have initial targets at 130, and may see a move as low as 123 further out.
The dollar has seen a continuation of short term, counter trend weakness against most of the majors during the past week. Critical resistance at 83.48 on the June dollar index is still holding and that level needs to be cleared in fairly short order for the uptrend to continue in the near term. The longer term uptrend still remains intact for now.
The British pound trend ended this week following a continuation of short term strength in GBP/USD but this was still a nice profitable downtrend, netting the LS Trader system just shy of 600 pips profit.
Interest rate futures
Interest rate futures have edged higher for a second week with only the 3 month Eurodollars ending lower. Eurodollars have been in a long term uptrend for what seems like forever but there are signs that this could be changing soon. This week saw quite a decent uptick in volatility in this market and a fairly decent drop in prices that took the market lower than it has been in 7 weeks.
The long term trend is still up for Eurodollars and 5 year T-notes, but remains down for the 10 year and 30 year markets.