Weekly Update 30 November 2014 – LS Trader

It’s been another excellent week for the LS Trader system, which continues to perform extremely well. The system has risen to new highs for the current year, with gains at well over the 100% level year to date. Additionally, the system is also at new all time highs based on the computer model that stretches back to 1983. Gains have been largely driven from strong trending markets, which have been evident in several sectors so far this year, particularly currencies, commodities and stock indexes.

Once again U.S. stock markets printed new all time highs. The S&P 500 printed a new high at 2075.25 basis the December e-mini contract on the 26th November, the day before the markets were closed in the U.S. for thanksgiving. The dollar continued its recovery from the recent correction, and energy markets collapsed. Long-term trends remain intact, up for stocks, the dollar and interest rate futures, and down for commodities.

Stocks

As written above, the S&P 500 has reached new all time highs once again. The RSI rose to a bullish 75.08 on Wednesday, the day of the latest in a long series of new all time highs. The Nasdaq 100 was stronger still and rallied throughout the week. The RSI on the Nasdaq 100 now stands at 77.32, it’s highest level since early July. With the trend in both markets clearly up and no signs of waning momentum we can continue to look higher until there is evidence to the contrary.

From last week on the Dax “..the RSI crossed above the 60 level for the first time since September. This is a bullish move and suggests further strength will be seen and possibly a test of the all time high that was printed earlier in the year.” The Dax rallied for the week and is now within touching distance of its all time high. The RSI is up to 75.2 but whether there is enough momentum left in this market for a move to new all time highs remains to be seen.

Commodities

The energy markets, which were already in well established downtrends, effectively collapsed this week leading to further windfall gains for the LS Trader system, which remains short crude oil, Brent crude, no leaded gas and heating oil. Each of these markets dropped sharply this week and the moves, which although are overextended, may not yet be over. The RSI on crude oil is down to its lowest level at 20.72 since mid-2012 where it dropped to 16, such is the extent of the recent collapse.

The metals sector has also seem some decent moves, particularly copper. This week saw a break of key support and the lowest print since mid-2010. Copper is known as Dr Copper for its supposed predictive qualities of economic health, so weakness in copper suggests a weakening economy. It’s possibly premature to say that at this stage but with price moving below a key support shelf that has held for over 4 years, there is now potential for an extended move lower.

Gold and silver also turned over and may be set for a test of the recent low. We have covered in recent updates that the rally seen from the November low was corrective and that the longer-term trends were still very much down. The inability of the RSI to get above the 50-60 on both markets so far goes to bolster that view.

Currencies

The dollar continues to recover from the recent corrections that were seen against several of the major currencies and we may see the dollar break to new highs against each of the remaining majors over the coming week or so. The dollar index remains just pips below the recent high, and the Euro which dropped to within a few pips of its recent low may also break out this week. A Euro at new lows and a dollar index at new highs would both confirm the other’s move and would suggest further dollar strength.

Interest rate futures

From last week “This price action still appears to be a consolidation and may be a build up to further rally and a test of the local top. The RSI has so far found support in the 40-50 range, which it typically does in bull markets.” Interest rate futures finally broke out of the weeks long sideways consolidation and rallied strongly throughout the week. The RSI has risen to 70.48 on the long bond, which is bullish and suggests that last week’s comments are on target and that further rally will be seen.

Good trading

Phil Seaton

LS Trader

 

Weekly Update 23 November 2014 – LS Trader

U.S. stock markets rallied to new all time highs at the open on Friday. The S&P 500’s new high was 2072.25 basis the December e-mini contract. Both markets (Dow and S&P 500) dropped back from those highs but stocks remain in very bullish territory. Friday was in fact a wild day in many markets and some large moves were also seen in other markets, particularly currencies.

Stocks

As written above, the S&P 500 printed new all time highs on Friday before settling lower. The RSI has edged above 70 for the first time since July, but the price advance, which although not overly convincing, leaves little doubt that the trend remains firmly up at present.

The Nasdaq 100 also reached new multi-year highs early on Friday but here the reversal seen by the end of the day was a bit more pronounced, as the close was some 35 points off the high of the day.

Overseas markets have also been strong but not to the extent of U.S markets. The Nikkei again printed a new multi-year high but ended lower in what was quite a choppy weak. We continue to see bear divergence between price and RSI as the market consolidates beneath the recent high.

The Dax had the strongest day on Friday of the 4 indices that we trade and the RSI crossed above the 60 level for the first time since September. This is a bullish move and suggests further strength will be seen and possibly a test of the all time high that was printed earlier in the year. Whether sufficient strength remains for new all time highs remains to be seen.

Commodities

Silver continued to advance this week and may be in the early stages of a rally higher having pierced through a trendline that has remained intact since August. However, the rallies seen in both gold and silver over the past few weeks are still viewed as corrective as the long-term trend in both cases remains firmly down, something that is unlikely to change this year at a minimum, so further lows cannot as yet be ruled out irrespective of how negative sentiment has become towards the precious metals over the past few weeks.

The 4 energy markets that the LS Trader system has open positions in, both crude markets, heating oil and no leaded gas, have all seen counter trend moves this week. However, in spite of these corrections the system currently shows a combined 6665 points profit from these trades and the trends in each remains intact. Natural gas, which is the only energy market where we are currently flat has had a wild week. Gas is, in terms of our proprietary trend indicator, by far the most bullish of the energy markets and the only one that is within range of a change of trend to up, which could be seen in the coming weeks. However, for now the long-term trend remain down across the board.

Currencies

The dollar index carried to new highs this week and perhaps significantly, made a new high close not just on a daily basis, but also at weekly level too. This is the highest print for the index since June 2010. If prices can get decisively above last week’s high, we may be set for an assault on the 90 level although this will in no small part be dependent on whether the dollar can push the Euro to new lows. The Euro itself has had a large reversal, with Friday’s bar closing below the prior 9 days’ lows. This, coupled with the RSI’s inability to exceed 50 argues for new lows early next week.

The USD/JPY continues to rack up excellent profits for the LS Trader system as price action this week saw the dollar rise to new multi-year highs against the Yen. Some weakness was seen later in the week but the trend still very much favours the dollar and has so far produced 769 pips profit for the LS Trader system.

Interest rate futures

The longer-term interest rate futures markets all roll from December, which expires this week, to March. That aside there is relatively little happening in this sector at present, which has gone sideways for the most part for the last few weeks. This price action still appears to be a consolidation and may be a build up to further rally and a test of the local top. The RSI has so far found support in the 40-50 range, which it typically does in bull markets. There is little doubt that interest rate futures are still in bull market conditions on a longer-term view.

Good trading

Phil Seaton

LS Trader

 

Weekly Update 17 November 2014 – LS Trader

The S&P 500 printed new all time highs on Thursday at 2043.75 basis the December e-mini contract. The dollar index also printed a new high for the current move on Friday before reversing. We also saw a few corrections in other markets, which we had indicated would likely happen in last week’s update where we wrote: “Some of these moves may be reaching extreme levels in the short-term and some corrections could be due.” We also added that the longer-term trends in all instances still likely have longer to run, which still holds true.

Stocks

The S&P 500 made a new all time high of 2043.75 on Friday basis the December e-mini contract. However, the rise over the past week has been anything but impulsive and a fair description would be that the market is rising in agony! The RSI remains bullish and did in fact move slightly higher, ending the week at 67.43 but the daily chart does show a slowing and a general rolling over of price action. However, we’re still in bull market territory and both the long and short-term trends remain up.

The Nasdaq 100 posted new multi-year highs once again this week. From last week’s update “In both the Nasdaq 100 and the S&P 500, if these trends are good, prior resistance formed at the September highs should now become support.” In both markets these levels have held and they remain the key levels for both markets in the days ahead.

The Nikkei held the prior week’s low and support there provided the platform for a 5-day rally back to new 7-year highs. Here though we have clear bear divergence on the RSI but the RSI is back above 70 so is still bullish. The trend is clearly still up and with the Yen still falling the rally could still have further to run.

Commodities

Gold and silver both continued with short-term strength from the reversal that we had pointed out in last week’s update. The rally was sufficient to bring the trend to an end for gold for now, but has not as yet been sufficient to terminate silver’s downtrend. Continued strength however may change that early next week. It’s possible that both of these corrections have further to run over the next week or so but ultimately the long-term downtrends remain intact and we may yet see new lows.

The energy markets continue to provide the biggest trends at present, with the most profitable energy trade for the LS Trader system being the short Brent crude trade. We’ve been short Brent crude since the 14th August and currently have 2545 spread betting points profit on the trade. Crude oil and no leaded gas have also been excellent trades, with 1286 and 3109 points profit respectively as at Friday’s close. Each of these markets did put in a sizable one-day reversal on Friday but nothing that would be considered to dent their respective downtrends. Even following this one-day reversal, the RSI on Brent has only risen to 29.23, still very much in the bear range. Further correction may be seen over the coming week but the long-term trend remains down across the board.

Currencies

The Yen weakened to levels not seen since October 2007, which correlates almost exactly to the Nikkei, which has risen to levels not seen since the same period. As we have written many times before, these two markets are almost a perfect inverse correlation, so Yen weakness equals Nikkei strength. Both markets could still have further to run having already reached 7 year+ extremes.

USD/JPY is by far the most profitable of the current open currency trades for the LS Trader system, with some 613 pips profit since we entered the trade back on the 31st October.

Interest rate futures

Interest rate futures remain in a long-term uptrend. The decline from the spike high in October still looks corrective. The RSI has remained in the bull market range and strength over the coming weeks to test the October high may yet be seen. As yet there has been no confirming price action but the long-term trend is up and the RSI remains in the bull range for all 5 interest rate futures that we trade at LS Trader.

Good trading

Phil Seaton

LS Trader

Weekly Update 9 November 2014 – LS Trader

The past week has seen new all time highs for U.S. stocks, new multi-year highs for the dollar index as well as for the dollar against several majors, new multi-year lows for gold and silver and the Euro. Some of these moves may be reaching extreme levels in the short-term and some corrections could be due. However, the longer-term trends in all instances still likely have longer to run.

Stocks

The S&P 500 made a new all time high of 2033.5 on Friday basis the December e-mini contract before closing a few points lower at 2026. Quite incredibly this rally has gone 201.5 points since the 15th October low. That’s a touch over 12% in just 3 ½ weeks. To say that a correction is due would be putting it mildly and it’s not surprising to see a decline in momentum, signified by an indecision pattern on Friday’s candle and a lower RSI. However, the trend is still very much up and with a market at all time highs it would take a brave man to call a top. Also to consider is that on a historical seasonal basis, we’re now in the best 6 months of the year for the S&P 500 and it won’t be all that long before talk of the Santa Clause rally will be heard, a phenomenon that seems to arrive earlier each year. Time will of course tell, but it’s possible also if selling gets underway that this market could unravel pretty quickly.

The Nasdaq 100 had similar price action to the S&P 500 on Friday, closing lower having posted a new multi-year high earlier in the day. The Nasdaq overall though has spent the week going sideways, holding just above support formed from prior highs. In both the Nasdaq 100 and the S&P 500, if these trends are good, prior resistance formed at the September highs should now become support.

The momentum that began for the Nikkei during the prior week continued on Monday with a move higher to 17480, a level not seen since October 2007. Here we saw the RSI reach 77 on Tuesday, which for now marks the top. That RSI reading has not been seen since May 2013, which interestingly enough marked the May 22nd high before a 3775 point fall to the June 6th low! An equivalent decline would see a move back to the major shelf of support around 13865.

Commodities

Gold and silver both dropped to new multi-year lows on Friday, having declined throughout the week. A strong reversal was then seen, which in candlestick parlance was a morning star pattern, which typically suggests a short-term reversal. However, the strength of the downtrend suggests that these moves will ultimately prove to be corrective in a larger downtrend and we may not yet have seen the lows in either of the precious metals markets. How much further these corrections last for remains to be seen. On Thursday the RSI on gold had fallen to 20, a level not seen since April 2013.

Currencies

From last week: “…in the coming days the dollar looks set to test key levels and possibly breakout against a few more of the major currencies.” This call turned out to be right on the money as the dollar broke out against all the remaining majors, which included a break to new highs for the dollar index to levels not seen since June 2010. There is however considerable bear divergence on the RSI between Friday’s high and the RSI high from early October. This does not mean that a reversal is imminent merely that momentum is waning.

From an inverted perspective, it’s the same story for the Euro, which on Friday made its lowest print since August 2012. Here, bull divergence is evident on the RSI.

The Yen also weakened as the dollar rallied to levels not seen since October 2007. It’s noticeable that the Yen, which is highly inversely correlated to the Nikkei, was weaker but the Nikkei also dropped. This suggests that one of these moves is out of sync in the near term.

Overall the dollar bull market is well underway, and from a multi-year perspective still likely in its early stages. Corrections will be seen along the way for sure.

Interest rate futures

The long-term trends are still up for the entire interest rate futures sector both in terms of price and RSI. The RSI has drifted to the lower end of the bull range but remains above 40, which is typically where bull market support is found. Friday’s price action was bullish with the daily candle engulfing several prior days’ real bodies. This suggests we may see short-term strength in the sector, possibly for 5-7 days at least, but there’s a long way to go yet to reach last month’s highs.

Good trading

Phil Seaton

LS Trader

Weekly Update 2 November 2014 – LS Trader

This past week saw several big moves; new all time highs for the S&P 500, a new multi-year high for the Nasdaq, huge moves in the Nikkei and Yen, as well as a collapse to multi-year lows for gold and silver.

From last week: “The bullish uptrend for the dollar remains intact and up across the board and a break to new highs for the dollar index and the dollar against several of the majors looks likely in the coming days. This coming week may be key as to whether stocks continue to rally to new highs. Watch for the RSI as it approaches 60. If it breaks through 60 decisively, further rally would be likely.”

Stocks

The RSI on the S&P 500 and Nasdaq 100 both moved above 60 as both markets moved to new highs. In the case of the S&P 500, this rally completed an incredible reversal from the low printed on the 15th October which has seen the S&P 500 rally over 200 points from1813 to Friday’s new all time high of 2016.75 basis the December e-mini contract.

In last week’s update we noted that the rally from the 15th October had retraced over 61.8% of the decline from the all time high at 2014.5 and that it was approaching the 78.6% retracement level and stated that typically when a market corrects much beyond 78.6% level it goes on to test the prior high. This turned out to be correct. We also wrote that The Nasdaq 100 was the strongest of the stock indices that we trade at LS Trader and that it would likely be the first to test its recent high. This also turned out to be correct.

The biggest move in our 4 stock indices however came from the Nikkei which shot higher as the BOJ made a surprise announcement, which also had the impact of severely weakening the Yen. Long-term readers will be aware that the Nikkei and Yen are very highly inversely correlated. This move however was caught by the LS Trader system and generated a quick 604 points profit for the system, and we still remain in the trade. This is the highest level in the Nikkei since 2007.

Commodities

The commodities markets brought us several large moves over the past week, not least of which was a large and swift move in rough rice which enabled us to take advantage of one of our proprietary rules to bank a quick 879 points in the space of just three hours on Tuesday morning. Rice broke sharply early on Tuesday morning, falling some 9.21% before bottoming out. Our “Take windfall profits” rule was triggered as conditions reached certain parameters that suggested a reversal was likely to be as swift and forceful as the decline, which turned out to be spot on. We exited the trade near the low of the move and then sat back as the market retraced the decline over the following 24 hours.

Gold and silver both collapsed through critical support levels to resume their respective long-term downtrends having both fallen to levels not seen in over 4 years.

We also wrote last week that the soybean markets were showing signs of life, this also turned out to be spot on as soybean meal rallied 15.3% in the space of 4 days. Soybeans also rallied but not quite to the same extent. A change of trend to up for these markets is coming within range, but for now the trend remains down.

Currencies

From last week: “The RSI on the dollar index found support just below 50 and therefore remains in the bull range. The long-term trend is still up and new highs above 86.87 look likely. Such a move would also see the Euro fall below its early October low and go below 1.25 for the first time since August 2012.” Both moves came to pass as expected but as yet there has been no follow through. This may follow in the coming days as the dollar looks set to test key levels and possibly breakout against a few more of the major currencies.

Interest rate futures

Continued weakness has been seen in the interest rate futures sector where the uptrends have all come to an end, at least for the near-term, with the exception of the 3 month Eurodollar. Currently the long-term trends are still up for the entire sector.

Good trading

Phil Seaton

LS Trader