The LS Trader system has continued its recent run of excellent performance, clearing the 100% gain level for the year to date, ending the first quarter up by 103.79%*. This leaves the system well on target to post another excellent year, potentially well above the 100% level, particularly with the historically strong fourth quarter ahead.
The long-term trends are still intact, and remain up for stocks, the dollar and interest rate futures, and mostly down for commodities.
The S&P 500 sold off sharply through to the low on Thursday, which took the RSI briefly below the key 40 level. A strong bounce occurred at Thursday’s low with follow through on Friday, with the completed pattern printed being a morning star, which is a bullish reversal pattern. Friday’s high halted at a short-term trendline from the all time high. The long-term trend is still up but last week’s low may be key in the short-term, and if broken along with a break of 40 on the RSI, a move back to the August low at 1882.25 may follow.
The Nasdaq 100 followed a similar path to the S&P 500, but in terms of the RSI, the Nasdaq was slightly stronger, holding above 40, which kept the bull range intact. Whether there is sufficient strength in the U.S. stock markets to muster one more rally back to new highs remains to be seen.
The Nikkei was unable to break through the resistance level that we wrote about last week, which was at the 2014 high. From last week: “This level (2014 high) may act as resistance, particularly if other global stock markets continue their recent declines.” Resistance held firm and the Nikkei sold off quite steeply, shedding almost 1000 points through to Thursday’s low, before a bounce occurred and the week finished with some strength. The long-term trend is up here as it is for 3 of the 4 stock indexes that we trade at LS Trader, the exception being the Dax.
Gold and silver both fell to new lows for the current move. Gold’s low at $1190.3 is just $10 above our long-standing $1180 target, and that level may be seen this week. Gold has not printed this level since the first week of the year and if broken, further downside could be seen. Silver’s low for the week is its lowest print since March 2010. We have long-term targets for silver at 1580. Sentiment in both metals is extremely bearish, with silver bulls coming in at just 4%. This does not guarantee a rally but does show that selling pressure may be running out of steam as presumably virtually everyone who wanted to sell precious metals already has.
Copper confirmed a change of trend to down following a break of major support, which we suggested would happen in last week’s update. This makes the long-term trend down for all 4 metals markets traded by LS Trader. So far there has been limited follow through, but the market did close below the key 300 level.
The dollar index rally continues, this week reaching new 4-year highs. There had been good resistance around the 85.60 to 85.80 level, and this was easily cleared. This level may now act as support should a correction, which seems likely, occur. Longer-term we continue to look for higher prices, but with the current rally in the dollar at near parabolic extremes, and sentiment at levels rarely seen, a correction would not be surprising in the least. There is short-term bear divergence in the RSI as well, but as yet no price evidence to suggest a turn, so we continue to ride the trend.
The dollar continues to advance against all the major currencies and pushed the Pound down to its lowest level since November last year. Euro futures are at their lowest level since August 2012. Weekly RSI on the Euro has dropped to 14.86, a low not seen since 1997. Sentiment is also at bearish extremes for the Euro.
Interest rate futures
Interest rate futures all rose this week but each market failed below resistance levels. The long-term trend is still up across the sector with the 30-year T bond still leading the U.S. markets. A change of long-term trend to down is within range for the 5 & 10-year T notes, as it is also for the 3 month Eurodollar, but lower levels will be required in each case to confirm such a change.
*Past performance is no guarantee of future performance. Future results may be higher or lower than past results.