On a two-year rising path
The bull market in the US may be mature, but these indices show it is still intact
The Bloomberg industrial metals index tracks the movements in the futures contracts of four industrial metals: aluminium, copper, nickel and zinc.
The index reflects the underlying commodity futures price movements only, and is quoted in US dollars. It is a useful index to follow in the context of diversified mining stocks and the general direction for industrial metals prices.
The chart has been exhibiting bullish characteristics for the past two years. A clear upward trend is evident, with successively higher lows as well as higher highs. The trend has been tested five times over the past two years, and on each of those occasions buyers have emerged to support the price and push it higher.
So far in 2018 the index has been tracking sideways, with the level of 142 offering stiff overhead resistance. One could argue that there is an inverted head-and-shoulders pattern that has formed since January, with the neckline at that 142 level. A break above 142 on the index is likely to see the price rise further towards a measured target of 155.
The weekly stochastic oscillator recently formed positive reverse divergence. This occurs in an uptrend when the price makes a higher high but the oscillator makes a lower high. It indicates that the oscillator is more oversold on a current pullback than on the previous pullback, and yet the price is at a higher level. It typically precedes a price increase.
Also interesting is that the relative-strength index maintains a reading above 50 in a strong upward trend. On this chart the relative strength index has held above 50 since the rising trend began in early 2016. The technical setup therefore remains bullish on multiple metrics here.
While the S&P 500 and the Dow Jones industrial average are the two most commonly followed US equity indices, the Russell 2000 small cap index should not be ignored.
This is where the bulk of small and mid-sized American businesses are listed. Unlike the aforementioned indices, which feature huge multinational conglomerates, the Russell 2000 has companies that are arguably a better reflection of the health of the US stock market at a domestic US level.
The Russell 2000 is trading at a record high. From a technical perspective the upward trend, which has been intact since early 2016, cannot be faulted. Each time the index has pulled back to the rising trend line it has been met with buying interest, and the price has continued higher.
Recently the index consolidated into a triangle pattern. The break above 1,600 validated that pattern, which pushed the price to new highs and points to a projected target of