The past week has seen stocks continue to head south, and all but the Nasdaq 100 are now below the 50 day moving average, so the short term trend is down. The long-term trend is still up however for all the stock indexes but further short term weakness may follow this week.
The dollar has remained mixed but may be setting up for a breakout to the upside. To an extent what happens in stocks will impact the dollar as the long term inverse relationship is still intact. The trends for commodities still remain mixed.
Stocks declined for another week and as mentioned above, all but the Nasdaq 100 have moved below the 50 day MA. This is an area where we can normally expect some sort of support and the past 4 days action on the S&P 500 has been chopping above and below the average. The 1380 area, which had previously been providing short term support has now switched to resistance due to change of polarity and having recovered the week’s earlier losses the S&P 500 failed at that level and pushed lower. It is quite likely that we will see a test of last week’s lows again this week. However, the long-term trend is still very much up and if viewed from a longer term perspective, the correction seen is very small. A glance at the weekly chart of the Nasdaq 100 puts this very nicely into perspective, as the market had gone almost straight up from the middle of December.
As we have written many times before markets don’t go straight up or straight down and there are always corrections along the way. The question is, how long and how deep will the correction last? That remains to be seen and we’ll have to let the market tell us. On the S&P 500 a good support point is around 1330-1340 and that is an area that has a good chance of being tested. For now, this correction is counter t o the long-term trend so the best place to be is on the sidelines until we get some confirmation one way or the other. April is still seasonally a good month but that does run into seasonal weakness in May.
Gold ended the week higher by 1.85% but had been higher until a reversal on Friday. The market still remains below the 200 day moving average and the key $1700 level.
Crude ended the week lower by 0.49% but there is still evidence of strong buying from just above the $101 level. In the past week alone there has been a hammer and a bullish engulfing pattern from the support area so there is clearly strong interest at those levels. It is likely then that the $100-101 area will continue to provide good support and possibly lead to a move higher to next resistance around $106. However, should the support give way it would likely lead to a move lower to around $97, approximatel y where the 200 day MA currently is and the next level of support.
The dollar index moved back above the 50 day MA with a very bullish candle pattern on Friday and will likely test short-term resistance this week. A break of this resistance will likely lead to a resumption of the long-term uptrend and a move to at least 8116 and possibly the highs of the year further out. The opposite of the dollar index is the Euro, which once again looks to be declining to test key support around $1.30. A break of $1.30 would likely see a test of the February lows and failure there may open the way for a move further down towards $1.2640. The trend remains down.
Interest rate futures
Interest rate futures have continued to press higher this past week and are continuing their recovery since printing morning star revers al patterns around a month ago. This narrowly kept the long-term trend to up and since then the short term trend is also up. Whether we see a continuation higher to the highs of this year set back in February remains to be seen but that is looking like a good possibility at present.