The week ahead will be a shortened trading week due to the US Thanksgiving Holiday on Thursday.
The last week has seen mixed trading in many sectors as the markets consolidate the recent moves. An increase in volatility has been seen in several markets with weakness during the first half of the week being mostly recovered by the end of the week. Such moves have been seen in the energy and stock markets in particular.
From last week: “…This can be clearly seen on the Dax and the Nikkei, and the uptrend is certainly under pressure this week in the Dax.” The Dax broke support this week and also fell below the June high which we have mentioned in previous updates. Prior resistance becomes support due to change of polarity. However, on a closing basis, that prior resistance level has held, so we can’t count this as decisively broken as yet, although there has been some chart damage done over the past couple of weeks.
The Nikkei narrowly held support and recovered sharply with a rally from Wednesday’s low, but selling returned on Friday. Support could be tested again this week, but for now, the trend remains up.
The S&P 500 also broke support this week but also reversed higher from Wednesday’s lows and may yet breakout to new all-time highs.
The energy markets declined considerably during most of the week but reversed sharply on Friday. Brent crude printed a bull sash reverse pattern on Friday, and Light Crude had a bullish engulfing pattern, which kept both uptrends intact from not far above short-term support. Heating Oil was stronger still and recovered a shallower correction to almost get back to the recent high.
Sugar broke the upper boundary of the near five-month ascending triangle this week. As per previous updates, Sugar has a bullish COT profile due to a recent rare record net long position of commercial hedgers. 16.59 is the next target.
Orange Juice rallied to its highest level since March this year. Interestingly, commercials have also recently had a net long position, accumulating large long positions between June and September.
The dollar index’s inverted head and shoulders bottom interpretation was invalidated this week as the market broke back below the neckline. Failed patterns often give stronger signals than successful patterns. The prior breakout above the neckline, which ultimately failed, did not rally sufficiently to give a change of trend for the index, so the index remains in a long-term downtrend.
EUR/USD, which moves inversely to the dollar index, naturally also failed the head and shoulders top with a decisive move back above the neckline. In classical terms, the failure will be confirmed with a close above the right shoulder at 1.1921.
The Australian Dollar completed a change of trend to down this week with a decisive break of support. The New Zealand dollar fell to its lowest level since June 2016 as the long-term downtrend continues.
The British Pound continues to consolidate at a critical level, finding support at the upward sloping trend line from the March low. A decisive break of this line could lead to a change of trend to down and would give an initial target of 1.2662 and possibly all the way back to the March low around 1.2211 further out.
Interest rate futures
Interest rate futures have consolidated this week but remain in long-term downtrends. The shower-term interest rate markets are the weakest, and we remain short.