Weekly Update 29th June 2014 – LS Trader

The S&P 500 posted a new all time high on Tuesday basis the September e-mini contract but ended the week marginally lower. The range for stocks continues to be extremely tight as it does for the majority of other markets, the exception being a handful of commodities.

The LS Trader long-term trend analysis remains as before, up for stocks and interest rate futures, mixed for commodities (many are strengthening) and down for the dollar.

Stocks

As mentioned above, the S&P 500 rose to new all time highs this week but ended the week lower. The possibility of new highs remains and the trend is still clearly bullish. The Nasdaq 100 was for once stronger than the S&P 500, making a new multi-year high on Friday. The trend here is also bullish and with an RSI reading at 75 may yet head higher.

International indices did not fare so well; the Dax reversed sharply lower following the all time high posted on the 20th June, sufficiently to break through short-term support. The long-term trend is still up and it will be interesting to observe whether the 40 support level on the RSI holds over the coming week or so.

The Nikkei came within a few points of confirming a trend change to up but failed to break through resistance, ending the week considerably lower. Further weakness may be seen and the market may head lower towards the 14,835 support level in the coming days.

Commodities

The metals markets have continued to show signs of strength. Gold, as we alluded to last week has completed a range shift on the RSI to bullish territory, but the move higher has so far fallen just short of breaking key resistance. Should price break through resistance soon, further strength towards 1392 may follow. Silver has also moved higher along with gold, but the latter remains in a long-term downtrend. Here too though the RSI has made a range shift, suggesting further strength.

Copper and palladium have also moved higher, with palladium retracing almost exactly 61.8% of the recent declines so far. Further strength back towards the recent high looks likely. Copper may also continue to rise, but unlike palladium, still remains in a long-term downtrend.

Currencies

The dollar has been weak overall and the dollar index has dropped to its lowest level in just over a month. The long-term trend remains down for the index, as it does against all the majors currently. For the most part the currency markets still remain relatively subdued.

The New Zealand dollar reached new highs basis the back-adjusted continuous contract, but remains just below the all time high print of 8808 posted in August 2011. The commodity currencies all continue to do well, with the Canadian dollar also continuing recent gains, and the Aussie also reached its highest level this year.

Interest rate futures

The long-term trend remains up for interest rate futures. Our 2 long positions in this sector remain intact. The 30-year T bond continues to trade above the shelf of support in a zone just below the recent lows. The focus will be towards higher prices as long as this level holds, but a break and close below this level would be bearish. Both the 5 & 10-year notes are moving higher once more, and the 5 year note looks set for a test of 60 on the RSI. A move above that level would suggest that prices may rise to test the recent highs.

Good trading

Phil Seaton

LS Trader

Weekly Update 22 June 2014 – LS Trader

Friday was triple witching day and saw quarterly stocks roll to the September contract. Friday also saw the S&P 500 and the Dax post new all time highs. The dollar continues to trade in very quiet fashion, with the trading range of the past four weeks on the dollar index contained within a 92 pip range! A volatility breakout looks imminent, particularly should the Euro break through trend defining support, not far below current price levels.

Stocks

As mentioned above, both the Dax and S&P 500 rose to new all time highs this week. The Nasdaq 100 reached its highest level since September 2000. Even the Nikkei 225, by far the weakest of the 4 stock indices that we trade at LS Trader has risen sufficiently to test key support, and may possibly breakout to the upside as early as Monday. The Nikkei’s rise from the May low has been sufficient for the RSI to make a range shift into bull market territory, suggesting further strength ahead.

The VIX fell to its lowest level in 7 years as complacency in the stock markets reaches incredible extremes. A sharp rise in volatility is well overdue.

Commodities

The energy sector has been strong once more, with Brent crude rising to its highest level since September last year. With the exception of natural gas, all the other markets in the sector ended the week higher.

Some large moves were also seen in the metals sector, where silver rallied sharply to reach its highest level since March, and gold its highest level since April. The long-term trend is still down for silver, but continued strength could see that change in the not too distant future. Gold, which narrowly held on to the long-term uptrend, also rose sharply, but was not quite as strong as silver. The RSI has completed a range shift to bull market territory, so a potential upside breakout beckons, with a test of $1393, the March high, the next target.

Feeder cattle posted a new all time high on Tuesday, but has backed off a bit since. The trend is still up but the RSI is rolling over, indicating a decline in momentum and a possible correction ahead. The long-term trend however will remain up for the foreseeable future. This has been an extremely profitable trade so far for the LS Trader system, and the trade remains in progress.

Currencies

The Pound rose through the $1.70 level as anticipated, reaching its highest level since August 2009 in the process. There is however divergence between Thursday’s high and the May high. However, this does not necessarily indicate a reversal, merely a decrease in momentum.

The dollar had quite a volatile week against the Canadian dollar, which saw a spike higher on Wednesday that failed to clear near-term resistance, followed by a break of critical support. The downside break took the dollar to its lowest level against the Canadian dollar since early January, and confirmed a change of trend to down in the process. The RSI fell to 28, which is bear market territory, but it can move lower still.

Interest rate futures

The 30-year T Bond and Euribor continue to hold above support, but not in a convincing manner. The 30-year T bond has a good shelf of support in a zone just below the recent lows and if the uptrend is good, this support zone should hold. The RSI does remain in the bull range and above the 40 support zone. A break of this support zone and the shelf of support on the price chart may lead to weakness back towards 131.

Good trading

Phil Seaton

LS Trader

Weekly Update 15th June 2014 – LS Trader

The past week has seen stocks post new all time highs once again, but then back away from those highs before ending the week lower, and has also seen the dollar rise slightly for the week, even though it ended the week lower against the commodity based currencies and the Pound. Commodity markets continue to show further signs of life as the energy markets broke out of their long-term ranges.

Stocks

The S&P 500 made new all time highs once again, printing the new high on Monday. Trade then went sideways for a couple of days before moving lower. The long-term trend is still very much up with the market still above support that should be provided by the prior highs that should now act as support instead of resistance. The RSI reached 75 this week, but even following some weakness remains at a bullish 62.

The Nasdaq 100 posted its multi-year high on Thursday, 3 days after the S&P 500’s fresh all time highs, at 3806.75 basis the June contract. As with the S&P 500 weakness was also seen. Here once again, prior resistance from the previous highs should now act as support.

The Dax showed considerably more weakness than its U.S. counterparts, but as expected found support from the prior highs. A large hammer pattern was printed on Friday, with the low of the day being almost exactly where prior resistance was. This strong buying on the day shows rejection of the lows, which makes this support level even more important over the coming days. A break of support would suggest considerable further weakness. The LS Trader system remains long and profitable on each of the 3 stock index positions mentioned above.

Commodities

Palladium put in a large one-day reversal on Thursday that encompassed the prior 15 days of trading. This is known as a key reversal day and has brought the uptrend to an end for the time being, although the long-term trend is still very much intact.

Palladium was not the only commodity market to make a big move; the energy sector also produced some large moves. Crude oil broke above a key resistance level and also broke above a trendline that has held firm since 2011. Ideally that trendline should now offer support on any weakness over the coming days. The other markets in the energy complex also broke out of their respective ranges with the exception of natural gas, which continues to trade within a box range that has been in place for nearly 4 months. An upside break from this range would be bullish.

Feeder cattle continue to soar to new all time highs. This has been a highly profitable trade for the LS Trader system so far this year, but with the market in a near parabolic rise, a correction is overdue. Such a correction when it comes will likely be just a pause in the larger uptrend that could have considerably further to go. The RSI reached 83.82 on Monday, which is a high reading.

Currencies

The Australian dollar broke above its April high to reach its highest level this year, but has so far been unable to hold the breakout, closing back below the prior resistance level. The long-term trend is clearly up but a move back above, and ideally a close above resistance will be required for the trend to progress.

The Pound gapped sharply higher on Friday’s open and came within a couple of pips of the May high. Another test of the highs and indeed the $1.70 level looks likely in the coming days. The pound has not traded above $1.70 since August 2009.

Interest rate futures

A few of the shorter-term interest rate futures breached support as we indicated may happen last week, but the 30 year T Bond and Euribor continue to hold above support. The 30 year T bond has a good shelf of support in a zone just below last week’s lows and if the uptrend is good, this support zone should hold. A break of this support zone may lead to weakness back towards 131.

Good trading

Phil Seaton

LS Trader

Weekly Update 8th June 2014 – LS Trader

Stocks have risen to new all time highs once more in spite of supposed seasonal weakness. Complacency is reaching near historic proportions as the VIX has fallen to its lowest level since 2007, as volatility has continued to decline. These levels in the VIX indicate an almost complete absence for fear from stock market participants, and coupled with the rise of the S&P 500 towards major resistance at 2000 discussed below, may be indicative of a major top in stock markets in the coming weeks. For now however the markets are bullish and trending higher, so we will continue to ride those trends until there is evidence to the contrary by a break of key support levels.

Stocks

The S&P 500 made new all time highs once again, as it continues its path higher for a possible test of the major psychological 2000 level. Should the index rise to test that level, massive resistance can be expected.

The Nasdaq 100 posted a new 12-year high at 3800.25 on Friday, closing the week at 3798, and continues to be highly bullish. The RSI has risen to 74.61, which is a good indication of the strength of the recent trend. The March high should now provide support; so higher prices are expected as long as this level holds.

From last week “The Dax easily rose to new highs and looks set to move higher still, as another psychological round number comes in to focus, in this case the 10,000 level.” The Dax reached and exceeded 10,000 as expected, posting a new all time high of 10,017 on Thursday. However, the range of the past 2 weeks has been fairly tight, so the market cannot be classed as being overly impulsive. As with the Nasdaq 100, the horizontal trendline across the double top between the January and May high should now provide support. Things would be amiss on a move and close below that level.

Commodities

The grains markets have been bearish of late, and several markets from the grains sector have seen large declines, particularly rough rice, which effectively fell off a cliff once trend defining critical support was broken. The decline in rice was the largest of the moves from the sector, spanning some 930 spread betting points from Monday’s open to the low on Thursday. A small reversal was seen on Friday, but the trend is very much down.

Palladium rose to slight new highs since August 2011 once again and we continue to target a further rise towards 870.

London cocoa continues to climb and has once again posted new highs since September 2011. As before, we continue to target further strength, possibly to as high as the next level of technical resistance at 2089. A move above 2000 would next bolster this view.

Currencies

The currency markets, which have for the most part been so quiet of late and have been trading at record low levels of volatility, suddenly woke up on Thursday around the time of the ECB announcement. This led to a very volatile trading day in the currency markets, but not one that has as yet influenced or changed the long-term trends, all of which still remain intact.

Interest rate futures

Interest rate futures have continued with weakness that began during the prior week, but have so far just about managed to hold support. The long-term trend remains up across the sector but the short-term trend is coming under pressure and each of the 5 interest rate futures that we trade at LS Trader looks set to test support in the coming days. A breach of support would bring the trends to an end for the near term, but would not alter the longer-term bullish outlook.

Good trading

Phil Seaton

LS Trader

Weekly Update 1st June 2014 – LS Trader

Stocks have risen to new all time highs once more in spite of supposed seasonal weakness. We are now historically in the weakest few months of the year, but that has so far yet to have any negative impact on stocks. The dollar has for the most part moved sideways this week as the long-term trends in the currency markets remain mixed, as they do also in commodities.

Stocks

The S&P 500 rose above the 1900 resistance level and posted new all time highs this past week, and sights will now be set on a continued rise towards the major psychological 2000 level.

The Nasdaq 100 rose to new highs for the current move, and indeed new multi-year highs as we suggested may happen in last week’s update. This past week’s high exceeded the highs posted last month and was the highest level the Nasdaq 100 has reached since October 2000.

From last week “The Dax looks good for another test of all time highs, with 9823.5 basis the back-adjusted continuous contract, printed 21st January as the current all time high.” The Dax easily rose to new highs and looks set to move higher still, as another psychological round number comes in to focus, in this case the 10,000 level

Commodities

Palladium rose to new highs since August 2011 once again and remains on track for further rise to 870. Palladium continues to be by far the strongest of the metals sector as copper, silver and gold all fell this week. Silver in fact fell to new lows since late June last year and a test of multi-year lows at 1832.5 look to be forthcoming. A break of that support level, particularly on a weekly closing basis would be bearish indeed. The RSI fell on gold to 28.89, its lowest level since late June last year.

London cocoa broke through resistance to reach its highest level since September 2009 and may now continue higher to test the 2000 level. The next level of technical resistance comes in at 2089.

Currencies

The dollar index ended the week flat, and for the most part price action in the currency markets has been fairly muted this week. The 80.77 level, basis the June contract could be key for near term price action as a break above that level would suggest further advance towards 81.65 resistance.

The Euro dropped to its lowest level since the 13th February but looks to be attempting at least a short-term reversal from last week’s low. The long-term trend here is still up, but further weakness towards a test of trend-defining support cannot be ruled out.

Interest rate futures

The 30 year T-Bond rose to its highest level in just over a year basis the continuation chart, but did pull back a bit from its high of the week. Both the 5 & 10 year T notes made similar moves and reached similar highs in time duration. The entire sector remains in a long-term uptrend and new high prices are still expected.

Good trading

Phil Seaton

LS Trader