The past week has been a good week for the dollar, where several key reversals have been seen. It has also seen stocks continue lower. The stock indexes that we trade at LS Trader may resume their long-term downtrends this week. Currently, only the S&P 500 remains in a long-term uptrend. The commodities markets, on the whole, continue to move higher. The CRB index this week reach 409.75, its highest level since July last year, and significantly above its 351.90 low print in January of this year.
The S&P 500 continued lower this week, breaking support and moving briefly below its 50-day moving average. Friday saw a bit of a reversal day, taking the market back above the 50-day MA. The long-term trend is still up, and the RSI is still holding above bull market support at 40. If we see 40 give way on the RSI, then we will likely see further weakness down towards a test of the 200-day moving average.
From last week: “Price has moved below both its 50 and 200-day moving averages. Additionally, the RSI has broken below the 40 level for the first time since February. This all points to lower prices and a resumption of the long-term downtrend over the coming weeks.” Price has seen further weakness this week, and the Nasdaq continued to move lower. A resumption of the downtrend will be confirmed if prices break the next level of support. The possible broadening top formation that we have written about in recent weeks indicates a significant move lower over the coming months to well below the February low.
The Nikkei has consolidated this week, but that may just be a pause before the selling, and the long-term downtrend continues. The RSI is just about holding above bull market support at 40, but a test of the next level of support at the April lows will be expected if the RSI moves below 40, and possibly a test of the February lows to follow.
Silver reached a new high for the current move on Monday but pulled back over the next few days. The long-term trend is still up and even with recent weakness, the RSI is above the 60 level. It’s a bullish sign if the RSI can hold above 60 and as long as that continues we can expect a rally back above last week’s high and possibly higher towards our 1850 target calculated from the breakout from the 16-month wedge and the neckline of an inverted head and shoulders pattern.
Gold has had a mixed week, having first printed a new high for the current move before pulling back. The RSI dipped briefly below the 60 level but has since regained it. As with Silver, we’d like to see the RSI remain above 60, and if it does, we might see further strength towards the 1350 level.
Soybean Meal reached the first of our targets at 349.50 and, in spite of highly volatile trading, remains on course to continue higher towards our next target at 363 further out.
The energy markets were mostly lower this week but stayed within range of a change of long-term trend to up. This could be very significant if completed, as the long-term trend has been down for almost two years, a time when the price was still above the $100 level in the Crude Oil markets.
The dollar index put in a key reversal having found support from just below the critical level that we wrote about last week. This was highlighted by the bullish reversal candle printed on Tuesday, where a long lower shadow is very evident on the daily chart. This move indicates that the bulls took over with a rejection of new lows and strong buying. The index continued higher for the rest of the week but remains in a long-term downtrend. The RSI is also in the bear range.
This dollar strength was also seen against the other majors, which includes the Euro, a near perfect inversion of the dollar index. It was also evident against the Yen but on a smaller scale. Whether this dollar strength continues over the next week or so remains to be seen. The long-term trend is still against the dollar almost across the board.
Interest rate futures
Interest rate futures moved higher this week, having found support on the RSI around the 40 level. The week began with a bullish engulfing pattern completing on Tuesday and strength seen through to Friday until new highs were rejected.
The long-term trend remains up across the sector, and there is a possibility of a resumption of the long-term uptrend with a breakout to the highest price levels seen since the spike high back in February.