The week ahead will be a shortened trading week due to the US Thanksgiving Holiday on Thursday. US markets are closed on Thursday and Friday is a shortened trading Day.
Last week we wrote that many markets were in trading ranges are were approaching support/resistance levels and that there could be several breakouts, and we saw that this past week and the same still applies for the week ahead as more key levels look set to be tested.
The long-term trends remain in place, and are down for stocks and commodities, and up for the dollar and interest rate futures.
We wrote last week about the triangle that the S&P 500 had formed as well as the wider trading range between approximately 1200 support and 1300 resistance and said that those levels would be the levels to watch for a breakout. Over the past week t he S&P 500 broke out of the triangle to the downside, in the direction of the long-term trend but has yet to breakout of the wider range. This range now spans to the lows of last week, which if taken out would suggest a move to 1180. Below 1180 there is a lot of room as the next key support area would be all the way back to 1068, the October lows. Therefore last week’s lows and 1180 are the areas to focus on in the week ahead.
Last week we also wrote that the Nasdaq 100 was forming a rounding top, which could even be considered to be a mini head and shoulders top. The market since went on to break the neckline of this pattern and this may lead to a move lower towards 2150.
One thing to be considered is that the week in the build up to Thanksgiving is normally bullish, although I don’t think seasonality is never a strong enough reason by itself to either take or not take positions. It’s far more important to follow the trend and the chart structure.
Gold has shown some signs of weakness this past week and has pulled back from the $1800 level, which it was unable to clear. The yellow metal remains the only market in the sector to be in a long- term uptrend but is now showing signs of short-term weakness.
Crude shot higher earlier in the week, pushing well through the $100 level. January Crude actually hot $103.37 but then sold off late on Thursday and Friday, moving back below $100. The trend remains up but the market may continue to pull back towards the $94 support area.
The long-term inverse relationship between stocks, commodities and the dollar still remains intact. This past week saw the dollar index, which is a basket of currencies against the dollar; continue its recent advance, adding 1.46% for the week. We wrote last week that a break above 7850 for the index would be bullish and that level was tested last week but so far the index has not pushed on to the next target around 8000. The long-term trend remains up for the dollar index as it does for the dollar against most of the majors.
Interest rate futures
Interest rate futures were higher for the week with the exception of the short term 3 month Eurodollars, which continued their decline this week. Longer-term markets pushed higher, with the most strength being seen in the 30 year T bond. The long term trend still remains up in this sector but as before with yields very near to all time lows there may be a limit as to how much higher these markets can go.