The Nasdaq 100 printed a new all-time high this week, but the S&P 500 did not. The S&P 500 has not made a new high since the 1st of March. The dollar put in a substantial reversal to keep the long term bull trend intact, and interest rate futures remain at a pivotal juncture.
The S&P 500 fell to its lowest level since the middle of February on Monday before finding support in the region of the 50-day moving average and printing a bullish hammer reversal. Price continued higher through to Friday. As per our comments last week, Tuesday the wide range bar on the 21st was the largest daily bar of the year to date. This bar also fell on significant volume. This will leave a high-volume resistance blueprint on the chart. If the high of that bar, 2378.75, is exceeded, all-time highs will likely be tested once again. The long-term trend is still up.
The Nasdaq 100, as has been the case recently, was stronger than the S&P 500 and did print new all-time highs on Thursday and Friday. Although new all-time highs must always be considered bullish, two indecision candles on Thursday and Friday do put a dampener on the new highs, as does the below average volume. However, we must continue to follow the trend until it is broken.
The Dax also had a bullish week, with five straight up closes. This brings the Dax to within range of our long-standing target at 12429.5, which is the all-time high for the Dax printed two years ago in April 2015.
The energy markets have had a bullish week and remain in long-term uptrends. Crude Oil’s rally has retraced just a few ticks shy of its 38.2% retracement of the decline from the December high and looks set to test its 50-day MA this week, currently at 51.43.
Sugar broke the sloping neckline of an arguable head and shoulders top pattern this week on the weekly chart. Sloping neckline patterns are less reliable that horizontal necklines, but nonetheless, the standard measuring method suggests that Sugar has potentially much further to fall. The LS Trader system already has nice profits locked in on this trade since we entered back on the 7th March at 19.02, with potentially much further to go.
The Soybeans complex is also heading south. We wrote a few weeks back that a potentially significant move was building up in Soybean Meal and that a volatility expansion and price breakout was highly likely to occur. That move has since started to materialise, and the price trend has been confirmed by volatility and volume expansion. Regarding chart structure, the September 2016 low at 294.10 represents a possible target. The move in Soybeans is more mature than the move in meal, and volatility is reaching elevated levels already. Support can be expected around 934.
In last week’s update, we wrote about keyword support and resistance levels on the Dollar Index and Euro respectively. Both levels were tested and exceeded on an intraday basis, but both levels effectively held and big reversals followed, keeping the long-term trend in favour of the dollar.
Interest rate futures
Interest rate futures have consolidated this week. The long bond remains in a range between its 50 and 200-day MAs and is holding just below a key resistance area. The Commitments of Traders Data (COT) has shown a near record short position for speculators and hedge funds in recent weeks. If we get a rally above resistance that would catch many on the wrong side of the market and could lead to a massive wave of short covering and a rally.
The vast majority of market participants continue to think that we are in an environment of higher rates (futures prices move inversely to rates) and are positioned accordingly. This set up presents a potentially excellent opportunity on the long side if resistance is decisively broken. The 200-day MA is within range in all markets in the sector, and that will be the first target should resistance be taken out.