Stocks were unable to push on and reach new highs but the trend remains up. The major indices remain between all time highs and near-term support and one of these levels will give way in the not too distant future.
The long-term trends are still up for stocks and the dollar and down for commodities and bonds. However the recent dollar weakness has pushed several of the currency markets to within range of confirming a change of trend. Whether we do actually see moves sufficient to give a confirmation of a change of trend remains to be seen. Price action over the next couple of weeks will answer that question.
The S&P 500 came within a third of a point from new all time highs but was unable to break through. We may see another attempt at new highs during the coming week. The trend is clearly up and it will take quite a decent-sized sell-off for that to change.
The Nasdaq 100 has traded in similar fashion to the S&P 500, as is the norm. This index also is within touching distance of its highs for the year. The major difference between these two indices as that one is near multi-year highs but a long way from its all time highs, and the other is near all time highs.
The Nikkei 225 remains the weakest of the indices we trade at LS Trader, following its sharp decline from the end of May. That large decline was subsequently retraced by a little over 61.8% but the index has been trading gradually lower over since. The Nikkei will almost certainly be the first of the indices we trade to break lower and give a change of trend to down, but further weakness is required before that happens and for now the trend here remains up, as it does for the other indices
Grains markets have continued with long-term weakness and as before only soybeans and soybean meal remain in a long-term uptrend. The latter two grains markets have had a volatile week during which the moved sharply lower and then recovered. The extent of long-term weakness in other markets in this sector suggests that these two markets will break down to give a change of trend during the coming weeks.
The energy sector has seen some volatile moves this week with most markets moving sharply lower during the first half of the week and then putting in a decent recovery. The trends remain mixed for the sector at present, but are mostly down, the crude markets being the exception.
Cotton made an explosive 3-day move to the upside to bring the market to within a whisker of the year’s highs. A small corrective move was seen on Friday but we may see the year’s high tested and exceeded soon.
The long-term trend has been up for the dollar index and for the dollar for the majority of the year to date, and it still is. However, recent dollar weakness has now extended for several weeks and this weakness has brought a change of trend to down for the dollar against several of the majors to within range, so much so that we could see a change of trend confirmed in some currency markets this week.
The Euro once again fell short of reaching critical resistance, which remains in place at $1.3423, but did come close and that level may be tested this week. If it is, we will likely see a test of support for the dollar index due to the near perfect inversion of these two markets. Other markets, such as the Swiss Franc and British Pound are also within range of changing trend in the next week or so, should dollar weakness persist.
Interest rate futures
Interest rate futures crept marginally higher over the course of the week but the trend is still down across the sector. The 5 year T-notes crossed above the 50 day moving average this week and are the first market from this sector excluding the 3-month markets to do so. The 10-year note could test the 50 MA this week but the 30-year T-bond will require a break above medium-term resistance to do so. With the long-term trends still down, the odds slightly favour lower prices and a resumption of the downtrend over an extended rise.