Monday is the Labour Day Holiday in the US so the week ahead will be a shortened trading week. The past week was a very active week as multiple markets broke out from trading ranges. This resulted in the LS Trader System entering 14 trades this week, which is far more than average. This is further indication that the markets are awakening from a long period of random rotational sideways trading action. This is likely to continue to be the case as US Traders and fund managers return to their trading desks this week following the summer break. Exciting times ahead!
The Nasdaq 100 made a new all-time high on Friday as well as an all-time weekly closing high. Of some concern to the bulls is the doji printed on Friday and the close slightly back below prior resistance. However, the RSI has moved back above the 60 level again, and the trend is unmistakably still up. All time highs are not a bearish characteristic
The S&P 500 lags the Nasdaq 100 but has recovered most of its recent declines with this four-day rally that commenced from just above support. The RSI has ended the week bang on the 60 level, so there are two key hurdles for the market to clear this week.
The Dax is the first and only stock index to complete a change of trend to down so far. However, the break below support was fleeting, and a sharp reversal and rally followed. The market has closed right on fair value, so the week ahead will likely determine whether the market is going to continue its recovery or turn lower from between current levels and the 50-day moving average, which is currently 116 points above Friday’s close.
There were several large moves in the commodities markets this week as the energy markets, particularly RBOB Gasoline soared higher, gaining 13.44% for the week in spite of a 1.76% decline on Friday. Heating Oil saw a similar, but not quite so impressive advance.
Metals have also seen some decent moves. Gold completed the upside breakout this week, moving decisively above the double top around 1300 and the long-term downtrend from the July 2011 all-time high. The next target is 1403. Copper continues to grind higher towards our target of 330. Palladium shot higher on Friday with a big 4.81% move and continues to work towards all-time highs at 1090 later this year.
The dollar has had a mixed week. The Dollar Index fell to new lows for the current move before reversing higher but remains below resistance. The Euro saw similar, but inverted price action. Thursday and Friday both saw dips back to fair value, but that level is likely to be tested again this week if new dollar strength persists.
Recent dollar weakness has not been evident against the New Zealand Dollar, where dollar strength has set up a head and shoulders top pattern. The neckline was briefly broken last week, and price also dipped below the 200-day MA on Thursday. A break below last week’s lows, particulate on a closing basis would see the pattern and a change of trend to down complete, giving a downside target of 6829.
Interest rate futures
Interest rate futures broke out to the upside on Tuesday but have so far been unable to hold the breakout. The RSI broke above the 60 level but has also dipped back below that key level. This keeps the uptrends under pressure in the near term, but the long-term trend remains up across the board.