Overall it’s been a relatively quiet week for most markets. Stocks have once again failed to reach new all time highs, continuing to trade in quite a narrow range, especially in the case of the S&P 500. The dollar index was little changed, but overall the dollar fared slightly better against the major currencies.
The long-term trends remain as before, and are up for stocks, up for interest rate futures and mixed for the dollar and commodities.
The S&P 500 has been unable to post new all time highs for the third consecutive week, so the all time high at 1880.25 basis the June e-mini contract continues to hold. However, support has also remained intact, so the long-term uptrend and current long trade remain in place. There is support at 1823.5 and the RSI also remains in the bull market range, with a move below 40 on the RSI required to change that. The trading range for the S&P 500 however is quite narrow, so a break from the range in either direction is due.
The Nasdaq 100 has been considerably weaker and has continued lower since breaking support earlier in the month. Structurally, a move lower to 3405 support may follow. Here, the RSI has moved below 40, reaching a low of 37.85 on Thursday, suggesting further weakness may follow.
The Dax and the Nikkei have both continued to outperform the U.S. indices over the past couple of weeks, with the Dax showing considerable strength following the break of key support and the subsequent sharp reversal. The Dax has in fact retraced move than 78.6% of the decline from 9759 from the 24th February, suggesting that this level, and possibly the all time highs posted in January will be tested once more.
Last week we wrote on Lean Hogs and said “although we may see a drop short-term, longer-term could still see considerably more rally over the coming weeks and months.” We did see a drop for lean highs during the middle of the week, but the market then rallied to new highs basis the April contract, which goes off the board on Monday as we roll forward to June. This remains the most profitable trade to date this year for the LS Trader system, with currently 2659 spread betting points profit on the open position.
Gold has continued to decline since posting the $1392.2 high on the 17th March, and silver has also continued to drop. Gold’s rally as mentioned in previous updates was not confirmed by silver, which itself never rallied sufficiently to change the trend to up, Silver therefore remains in a long-term downtrend and may be headed lower to test the January and possibly 31st December lows.
The dollar index ended the week slightly higher as the Euro fell for the second straight week. There are 2 key levels in the currency markets to focus on, the 13966 high for the Euro basis the June contract, and the key low for the dollar index at 7937 for the same contract month. In order to see a sustained period of dollar weakness, both these levels must be broken, with a break of one confirming a break of the other. If both of these levels continue to hold over the coming weeks, it could be that we have seen a bottom for the dollar for the time being, at which point we could see further rally for the index, and potentially a steep decline for the Euro.
The British pound had a good week, printing a bullish engulfing pattern on the weekly chart, which keeps the chances of new highs for the current move intact. The long-term trend remains up for cable.
Interest rate futures
The 3 month Eurodollar did test support as we suggested may happen in last week’s update, and support was found, keeping the long-term uptrend intact. The long bond also broke through resistance as expected but has so far been unable to push higher, but instead dropped back below prior resistance. The long-term trend remains up for all 5 interest rate futures markets that we trade at LS Trader.