The past week has seen stocks push on to new highs but then pull back slightly into the weekend. Nevertheless, stocks still ended up having their best first quarter in 14 years, with large gains being seen in the S&P 500, Nasdaq 100 and the Nikkei 225.
Elsewhere we have seen continued short-term weakness for the US dollar, which has continued to decline against most of the majors, but commodities have remained mixed. The long-term trends are still up for stocks but mixed for the dollar and commodities.
The S&P 500 did manage another week of gains but did pull back in the latter part of the week having earlier hit new highs. The trend is still very much up and the index has just about managed to close north of the 1400 level. We wrote last week that a close back above 1400 would be bullish and that is what we have seen last week but the market has so far been unable to push on from there.
Typically, the start of new quarters and new months end up being bullish for the first couple of trading days so we may see another go at last week’s highs in the next few days. Additionally, there are some fairly long lower shadows on some of the daily candles and this indicates that the lows are being rejected and that buyers are still stepping in at the lows. On a seasonal basis April is a good month but as ever price and trend is far more important than any seasonal indicator or tendency.
Gold ended the week higher by 0.42% but having had a brief look above the 200 day moving average on Tuesday, where it ran into the $1700 level, ended back below the 200 day MA. The long-term trend is still down and conditions bearish as long as $1700 resistance holds.
Crude has fallen to its lowest level in six weeks and has taken out the $104 level on a closing basis that has been acting as support recently. The long term trend is still up but aside for support from the psychological $100 level, there is little in the way of support until the 200 day moving average, which currently sits around the $97 level.
Coffee put in its first up week in eleven weeks but the trend is still clearly down, although a test of the $1.90 resistance area looks likely again in the near future.
The dollar index ended the week lower for a third straight week and may continue further down. 7950 was taken out, as was the 7932 level that we wrote about last week so we may now see a test of the February low at 7842 (June contract).
The British Pound has continued with short-term strength and is now looking to break out of the box range that it has been in for the past couple of months to the upside and is now on the verge of a change of long-term trend to up.
Interest rate futures
Interest rate futures rose for the second straight week, continuing higher from the morning star reversal patterns that formed a couple of weeks ago, which continue to provide support. The long-term trend is still up across the sector, and with the expectation increasing that “Helicopter Ben” will start the printing press running again with more QE3 in the not too distant future, yields may continue their recent decline, sending prices higher once more.
However, should the market eventually break the low of the morning star pattern, which is now a key support area, there could be some large moves lower.