Global stock markets remain bullish. US stock indexes made new all-time highs this week once again. The Dax also made a new all-time high. The dollar continues to rebound from the steep sell-off which has been in place since the beginning of the year and may correct higher against the prevailing long-term downtrend.
From last week on the Dax: “All-time highs are in range and a change of trend and break out to new highs could be seen this week.” The Dax did breakout and printed new all-time highs, but price action has so far seen little in the way of follow though and is not entirely convincing. Volume remains below average.
Also from last week: “The Nasdaq 100 dropped below its 50-day MA on Monday but recovered that level by Wednesday and may now have another go at all-time highs.” The Nasdaq 100 completed the recovery and made new all-time highs as expected. The current formation is a rising wedge, but a breakout through the top would be bullish and complete a running wedge with targets around 300 points higher to circa 6400.
The S&P 500 continues to lead the way higher, making new all-time highs daily until Friday saw a small inside day. The Nikkei reached its highest level in over two years.
Gold has seen continued weakness through to Friday. The market had fallen below its 200-day moving average on Monday but recovered to close just above it on Friday. The long-term trend is still up for Gold, but the RSI has turned bearish this week after a breach of bull market support at 40.
From last week on Lumber: “Friday’s candle showed some weakness, but if the market can shrug that off early next week we may see a test of the April 2017 high.” Lumber did shrug off short-term weakness and came very close to the April high. The trend remains up.
The dollar has continued its recent recovery since the low in early September. The long-term trend, for now, remains against the dollar but there are some signs that may be changing. The dollar index has had a daily close every day this week above its 50-day MA, and the average is starting to slope slightly higher. The RSI has also broken above the 60 level for the first time since March, although with a read of 61.44 this is not decisive enough to call it a range shift to bullish.
The New Zealand dollar, which crossed and closed below its 200-day MA this week, has been the first to complete a downside breakout and change of trend. The RSI also declined back below the 40 level.
The Japanese Yen has also seen considerable weakness in recent weeks and could also complete a change of long-term trend soon.
Interest rate futures
Interest rate futures weakness continues, and the longer-term markets are heading down towards support. There is a potential massive head and shoulders top pattern forming on the weekly chart of the 30-Year T-Bond. This pattern will require a close below the neckline. The height of this pattern is approximately 30, measuring from 170 to 140. This would result in downside targets from the eventual breakdown point, currently around 147, down to 117, a huge move.
However, it’s hugely important to wait for the confirmation as the neckline can often act as support. What’s interesting here is that level coincides with LS Trader’s proprietary long-term trend filter where a breakout would also complete a change of long-term trend to down.