Volatility has been at unprecedented levels in many markets in recent weeks. Volatility remains high in most markets but is undergoing compression in most markets as it declines from the recent peak. This suggests that markets that are undergoing volatility compression are correcting against the primary trend. Therefore, we can expect the resumption of most trends over the coming weeks.
Stocks continue to find resistance around the 38.2% retracement level of the decline from the all-time high. The rally from the lows last month are counter-trend and corrective, but the corrections may not be completed yet. The trend structure appears to be incomplete to the downside, so new lows, perhaps to much lower levels, remain a possibility.
From last week “The energy markets appear to be trying to bottom. RBOB Gasoline leads the way to the upside, and we exited our short position this week, for the biggest winning trade of the year to date.”
The energy markets continued their rally from the prior week, with massive upside moves being seen on Thursday and Friday. We exited two more highly profitable short trades on Brent and Light Crude. The long-term trend remain down but it’s looking increasingly probable that the lows are in for the foreseeable future.
The Dollar Index found support at the prior week’s lows and rallied for most of the week, keeping the dollar uptrend intact. In spite of the weakness seen during the preceding week, the dollar remains strong against the majors and is in current uptrends against the Canadian Dollar and the British Pound.
Interest rate futures
Interest rate futures remain in long-term uptrends, with the shorter-term markets remaining stronger than the 30 Year T-Bond. The trend remains up across the sector, and we may yet see new highs.