The dollar has regained some of its recent declines against the majors following an extended period of dollar weakness that has resulted in high volatility readings in several current markets, including the dollar index and the Euro.
Stocks have pulled back since the latest all-time highs printed on the 27th July and are trading in a narrow range just above short-term support.
The long-term trends remain unchanged and are still up for stocks and interest rate futures, down for the dollar, where a corrective rally is expected, and mixed for commodities.
Both the S&P 500 and the Nasdaq 100 failed to make new all-time highs this week, and both are undergoing volatility compression and are trading in a narrow range. August has been the worst month of the year for the S&P 500 since 1988 and given the extent of the recent rally and lack of volume and volatility; a correction is well overdue. However, the long-term trend is unquestionably up, and the market remains above short-term support.
The Dax found support at last week’s lows and pushed higher on Friday as the Euro declined. The index remains between its 50 and 200-day moving averages and may recover further if Euro weakness persists. For now, the long-term trend remains up, but this index remains the most likely of the four we trade at LS Trader to complete a trend change to down.
The rally in the energy markets since the lows printed back in late June appears to have paused, with resistance found at the 200-day MA. The RSI has moved above the 60 level but has been unable to push on decisively. Therefore, with the long-term trend remaining down, there is considerable resistance at Monday’s highs and the 200-day MA.
Natural Gas remains the weakest by far of the energy sector, and Friday’s low was the lowest print for NG since early March.
Gold’s rally ran out of steam this week with the market unable to clear the $1280 level. Some weakness has been seen in all the metals as Copper, Palladium and Silver have also pulled back. With the exception of Silver, the long-term trend remains up for the metals.
The dollar’s weakness may have run its course for now as we have seen the dollar gain almost across the board this week. The Euro reached its highest level since January 2015 but has seen a fairly aggressive pullback since the high on Wednesday. This has resulted in a bearish shooting star on the weekly chart as well as extreme high volatility readings on the daily and weekly charts.
The dollar index has, of course, done the opposite, and also has extreme volatility readings at daily and weekly level. This suggests that we can expect further dollar rally over the next week or so as we get some mean reversion against the primary trend.
Interest rate futures
Interest rate futures continue to undergo volatility compression and remain range-bound. The long-term trend remains up for all markets in the sector, but a breakout above the July highs is required before these markets will be of any interest.