A mixture of volatility, trend accelerations and sideways ranges was seen in most of the assets in the financial markets last week. In contrast to the previous uncertain week, which showed mixed technical sentiment for global stock indices, this trading cycle was definitely bullish for equities around the world. Japanese Nikkei benchmark charted a bullish engulfing on the weekly timeframe, adding 2.79% to its value. European stocks also gained strength with quite impressive results: German DAX 30 +3.60%; French CAC 40 +3.86%; British FTSE 100 +2.34%. And of course, that bullish price action was traditionally led by US stock indices: S&P 500 soared for 2.59%, breaking through important psychological resistance of 2750.0 points; NASDAQ 100 was more modest in its gains (+2.08%), while Dow Jones Industrial Average surged for 3.09% this past week, printing the highest weekly close in 14 weeks.
Although global equities were moving in one direction, the foreign exchange market was not so definite in its intentions. The US dollar index measuring the strength of the world's reserve currency versus the volume weighted basket of its six major peers charted modest gains of 0.30% but the long shadow on the weekly candlestick raised questions about the sustainability of those bullish efforts and underlined the importance of technical resistance at the range of 97.00/37. The weekly close was highest in 8 weeks but the momentum is getting exhausted and that might cause greenback's sharp sell-off next week.
The distribution of the dollar's strength was also mixed. On one side, the single European currency had tested 20-month lows and even closed the trading week below 1.1300. However, EUR/USD bounced off the weekly low at 1.1234, showing that bulls will keep fighting. The British pound was also weakening by 0.46% versus the greenback but GBP/JPY cross-rate was generally positive (+0.23%). USD/CHF added 0.53%, while USD/JPY gained 0.64%, testing significant resistance above 111.00 yen per dollar. In contrast, the US dollar was much weaker versus commodity currencies. USD/CAD printed moderate losses of -0.27%, the Australian dollar appreciated 0.73%, while the New Zealand dollar was the strongest currency among 6 majors, soaring an impressive 1.77% versus the greenback and 2.42% versus the yen.
It’s also worth noticing that WTI Crude oil had finally breached important technical resistance of $55.37, finishing the trading week at $55.75 per barrel (+5.83%). Precious metals were bid as well. Gold added 0.53%, closing the week at $1321.12 per ounce for the first time since May 2018. Silver pared most of its mid-week losses ($15.758, -0.39%).
S&P 500: Bullish.
The Bulls struggled to overcome important resistance range of 2750.0/60.0 with several failed attempts which caused an indecisive price action on Wednesday and Thursday last week. The lack of buying pressure caused a bearish divergence formed on the H4 intraday chart. Higher highs of the price came together with lower highs on Relative Strength Index. The divergence had been worked out with a bounce toward 2729.2 (Thursday's low) and 34-bar exponential moving average. It's worth noticing that modified RSI with the period of 21 (instead of the default parameter of 14) bounced off the 50% level after the divergence worked out. That's a definitely strong bullish signal (green arrows), which affected the S&P 500 to edge higher and break through the resistance range mentioned above. Next targets are seen on a larger timeframe, daily highs at 2813.0 from December 04 represent the nearest barrier for the bears to defend. Once the index closed the day above that level, the road to 2900.0 will be opened. The buy-and-hold trading strategy is preferable with possible add-ons on bearish retracements in the upcoming days. In the long-term perspective, S&P500 is on the track to recover previous losses and even potentially chart all-time highs as the overall momentum remains bullish.
The most popular currency pair in the foreign exchange market printed new 3-month lows, breaching the bottom support line of the ascending channel that we used to show several times in our previous technical outlooks. Although the bearish momentum continued weighing on the single European currency throughout the previous trading week, there are some signs that the bulls would fight more aggressively, using the buy-dips strategy and here is why. First, EUR/USD failed to reach the horizontal static support line at 1.1214, charting the weekly low at 1.1234. Second, the bearish momentum has been exhausted and the pace of decline was completely different from the previous week's price action. Several bounces and retracement were charted on the H4 intraday time frame. Third, the 34-bars simple moving average has been tested three times recently, adding chances to break the descending curve in the nearest future. Fourth, and more importantly, a serial bullish divergence has been noticed on both MACD and RSI indicators. Three consecutive lower lows on the chart were coming together with three consecutive higher lows in indicators' value. That's a strong bullish reversal signal and it hasn't worked out yet as MACD lines did not cross the zero level yet. Although RSI (period of 21 bars) failed to cross the 50% level on Tuesday, the likelihood of a deeper upside retracement is still on the table. It's not recommended to stand against such a strong bullish divergence with new fresh short positions. Moreover, taking profits has to be considered by those traders who were still holding mid-term shorts. We would not be surprised to see EUR/USD bouncing North toward 1.1400 round figure next week as oscillators have to be reloaded in order to continue the overall downtrend. Buying the pair is also dangerous as the general technical sentiment is weak, so we would use the wait-and-see approach, staying squared so far.
WTI Crude Oil: Bullish.
The price of black gold had finally breached crucial technical resistance this past week. The daily chart below shows why the range of $55.24/33 is so important for the general outlook. First, it represents the lowest daily close price printed on November 13, after which the price charted 4-days bullish retracement. Second, the latest uptrend was limited by $55.33, the highest daily close on February 1. Third, the 61.8% Fibonacci retracement level of the downtrend started in October last year (we showed it several times) was coming exactly in this range. Fourth, the Bollinger Bands indicator has a strong bullish continuation breakout signal. Thanks to the recent weekly close of $55.75, that bearish defensive barrier has been cracked and the resistance will work as support now. The 34-days simple moving average worked as a perfect retracement depth, holding prices from further slide South so that ascending curve has to be considered as the best indicator to enter the market, using the buy-dips trading strategy. Those traders who still hold longs should continue doing so as bulls had opened the road toward $60.00 per barrel (psychological round-figure resistance) and $66.10 (lowest close printed in August 2018) in extension.