It’s been a reasonably quiet week in the markets which is to be expected as we come towards the end of light summer trading. Monday is a Bank Holiday in the UK, and the following Monday (4th September) is the Labour Day Holiday in the US. This should, therefore, be the last week of low volume trading as traders return to their desks on the 5th September.
The S&P 500 fell to new lows since the 11th July on Monday but found support, printing a 4-bar morning reversal pattern, which will now be key short-term support. The rally seen this week has taken the market back to closing right on the 50-day moving average, with price roughly in the middle of the range of the past three months. Last week’s low and further below that the 2395 levels look to be the key support points and the market must be viewed as bullish above those levels. The Nasdaq 100 shows a very similar setup, with key short-term support at 5752.5. 5560 looks to be the critical support level at present.
In spite of recent weakness, it should not be forgotten that price in both US markets is still very close to new all-time highs. Also to be considered is the historical weakness that is often seen in September, which is still the biggest losing month in percentage terms since 1950. One way or the other, the recent low volatility period is likely to come to an end over the next month or so.
Copper has had a bullish week and printed a very bullish candle on the weekly chart which also took prices to their highest level since November 2014. Volatility is elevated on the weekly chart where we have seen seven consecutive up weeks. Friday’s doji suggests indecision, so we may see some sideways/corrective action early next week, but the long-term trend remains intact with targets at 330 later this year.
Palladium made another new high print since March 2001 this week and continued to move higher, although the price action this week has been a little less convincing with most of this week’s candles having small real bodies. This suggests that the market may be getting a little tired and there is divergence between price and RSI. However, the long-term trend remains, and we continue to look for further rally towards all-time highs (1090) later this year.
The Euro rallied to a new high late on Friday before dipping back to close below resistance. The Dollar Index also had a nibble at recent support on Friday but was unable to break through. The long-term trend remains down for the dollar and the week ahead could be interesting. Volatility in the dollar index has fallen to very low levels so a sizeable move could be on the horizon.
Interest rate futures
Interest rate futures continue to edge higher. We wrote in last week’s update that a decisive move above 60 on the RSI would likely lead to an upside breakout. The RSI continues to hug the 60 level and has yet to decisively clear it, but price action suggests that it might. There’s a decent probability of upside breakouts this week above the June highs and a resumption of the long-term uptrend. The surge in volume on Friday was due to the September contract rolling forward to December.