Weekly Update 22 February 2015 – LS Trader

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Stocks rose to new all time highs once again as both the Dax and the S&P 500 made new all time high prints on Friday. The Nasdaq is also at its highest level from a monthly chart perspective since its all time high was printed nearly 15 years ago. The dollar continues to consolidate and interest rates continue to decline. Commodities remain mixed

Stocks

From last week “Friday’s close was above the prior all time high, making it also a new all time high daily and weekly close. Should the breakout be good, the breakout level should provide support and a platform for further advances.” The prior resistance did act as support on a closing basis and should continue to do so if the trend is to remain good. A move much below the December high would possibly be the beginning of a reversal. However, for now the market has closed at a new all time high close and also closed near the top of Friday’s and the week’s bar, both of which are bullish.

We have a similar set up in the Nasdaq 100, which also continues to pull away from support. Here too we can look for that level to support the advance. The Nasdaq 100 is now really beginning to look like it may test the all time high printed in March 2000 at 4884. Whether it does it in this current move or later in the year remains to be seen, but it seems likely that having come this far that the all time high will be tested again at some point.

One thing that is of particular interest in the Nasdaq 100 is that sentiment is very neutral. Often when a market is at multi-year highs or is approaching a top, sentiment would be very bullish, suggesting that most traders who want to be on board the trend already are. In this case though there seems to be plenty still on the sidelines with the bullish sentiment only at 46% bulls, so potential further buying power remains to fuel a move to test the all time highs.

Commodities

Precious metals have continued recent weakness and this week has seen the RSI on gold and silver drop below the 40-bull market support level, which means that the RSI is now bearish. The long-term trend is still up for gold, but remains down for silver as it has since it last changed trend to down 2 years ago, in February 2013.

Crude oil’s corrective rally appears to have run out of steam. Interestingly, the RSI has so far been unable to push above 60 and therefore remains in the bear range. Unless this changes it could well be that we have not yet seen the low in this market and new lows could yet be ahead. The other energies appear to be more bullish, with heating oil being by far the most bullish of all, rising to its highest level since early December and the RSI reaching a bullish 73.36. For now the long-term trend is still down here as it is for the entire energy sector.

Currencies

The dollar index continues to consolidate but remains in a sideways range, possibly a triangle pattern between the January high and short-term support. The range is tightening so we can look for a breakout in either direction soon, which will either be a break of support or a breakout of the top of the triangle; the latter of which would be bullish and suggest that the rally was not complete and that new highs were ahead.

Interest rate futures

Interest rate futures continued recent weakness and with the exception of the 3-month markets, fell to new lows for the year. The RSI has moved lower on the 30 Year T bond, confirming its switch to the bear range, but for now the trend remains up. Both the 5 & 10 year T notes also dropped below 40, so these markets are moving together at present and it continues to look like a top may be in. Further weakness is required before we get price confirmation of a change of trend.

Good trading

Phil Seaton

LS Trader

Weekly Update 15 February 2015 – LS Trader

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The S&P 500 rallied to new all time highs for the first time this year. The last all time high print was back on the 29th December. The Dax also reached new all time highs and the Nasdaq 100 new multi-year highs. The stock bull market remains in effect. The dollar continues to consolidate, commodities are showing increasing signs of strength although they still remain very much in downtrend overall, and interest rate futures continue to decline.

This week ahead is a shortened trading week due to U.S. markets being closed for Presidents’ Day on Monday.

Stocks

From last week: “The U.S. stock indexes continue to consolidate below the recent highs and a breakout is still a possibility, which is also the case for the Nikkei. The stock bull market is therefore still intact, the long-term trends are still up for the sector and each market individually remains in the bull range on the RSI.” That breakout did come on Friday as the S&P 500 rallied to new all time highs and the Nasdaq 100 to a new multi-year high.

In the case of the S&P 500, Friday’s breakout to new highs also coincided with a break above the 60 level on the RSI, which puts the RSI back into the bull range. Perhaps significantly, Friday’s close was above the prior all time high, making it also a new all time high daily and weekly close. Should the breakout be good, the breakout level should provide support and a platform for further advances.

The Dax also printed a new all time high on Friday, but printed an indecision pattern on the daily chart. This does not necessarily indicate a reversal, merely a pause in the trend. The trend here is still very much up and the RSI remains in the bear range.

Commodities

The energy markets have continued their recent advance and it’s looking increasingly likely that a bottom may be in. This week has seen the RSI break slightly above 60 on Brent crude and no leaded gas, but heating oil is the strongest, with the RSI reaching 66.6. That confirms the shift to the bull range and indicates further strength likely ahead. However, the long-term trend is still very much down for the sector. Crude oil remains the weakest of these four markets, with natural gas still the weakest of the sector.

The current big winner for the LS Trader system from the commodities markets is lean hogs. This market is in a steep downtrend and has dropped some 2342 spread betting points since we entered short back on the 5th December last year. Friday did see a bit of strength, but nothing as yet to indicate that the downtrend is over. The RSI is also still very much in the bear range.

Currencies

The dollar index continues to consolidate as it has since the multi-year high printed on the 26th January. Support may be tested in the week ahead.

Trading in the currency markets has been quiet; the Euro has traded in a very narrow range and a test of resistance is very much a possibility. The RSI is still however in a bear range and the trend remains down.

Considerably more bullish than the Euro is the British Pound, which has continued to gain ground this week. The 60 level on the RSI was tested on Thursday (60.11 print) but as yet no follow through. The RSI has not been above 60 on the Pound since July last year when the Pound was trading above $1.70, so a decisive break above 60 on the RSI would likely be bullish and would lead to further rally.

Interest rate futures

Interest rate futures have continued to weaken. From last week: “The RSI on the 30-year bond may drop further to test the 40 bull market support level. If the 40 level is decisively broken, that would be the first confirmation that a top may be in for interest rate futures.” The 40 level was tested and broken on Friday, closing the week at 38.02. For now the trend remains up but further weakness is expected. The RSI on both the 5 & 10-year T notes is narrowly holding above 40. If it gives way on these two markets as well, we may see a period of further weakness that may ultimately result in a change of trend to down.

Good trading

Phil Seaton

LS Trader

Weekly Update 8 February 2015 – LS Trader

It’s been a mixed week for the markets, which has seen further rally from the energy markets, continued correction for the dollar overall, and consolidation from the stock markets. Interest rate futures all ended the week lower following quite a sharp drop on Friday that has put an end to the uptrends for the near-term, although the long-term uptrends still remain intact across the sector.

The long-term trends by sector are still intact, up for stocks, the dollar and interest rate futures, and still mostly down for commodities.

Stocks

The Dax rose to new all time highs on Tuesday, printing the new high at 10989.5 basis the March contract. A small pullback has been seen since but the trend remains firmly up. Sentiment still remains very bullish for the Dax, but lower than the extreme bullish reading of 95% bulls seen recently.

The U.S. stock indexes continue to consolidate below the recent highs and a breakout is still a possibility, which is also the case for the Nikkei. The stock bull market is therefore still intact, the long-term trends are still up for the sector and each market individually remains in the bull range on the RSI.

The metals markets have been mixed; both gold and silver dropped sharply this week, particularly on Friday, where gold dropped below key support at $1250. Silver also dropped through short-term support and this suggests further weakness near-term for the precious metals. Copper on the other hand has recovered to within range of testing resistance. Although the trend here is still very much down, a break of resistance may be seen in the next few days. Palladium remains range-bound, as it has for the best part of 5 months. This suggests that the eventual breakout, either up or down, may yield a decent move.

Commodities

The CRB commodity index has recovered a bit over the past couple of weeks, due largely to the rally in energies, but the index has still been very much battered since reaching 569 back in May last year. Having printed a new low 2 weeks ago at 423.40, the index has rallied to 434. Commodities are therefore still very much in downtrends from a longer-term view.

As expected, we exited crude oil this week for further excellent profits. We’d followed the trend down for 4 months from our original entry at 8942, and exited at 4940 for 4002 points profit. We now remain short just natural gas from the energy sector.

In last week’s update we suggested that the first signs that a bottom may be in on the energy markets would be a decisive break of 60 on the RSI. A couple of the markets poked very slightly above 60 but then pulled back, so for now we continue to view that as being in the bear range, so whether we have seen a final bottom is a question that is as yet unanswered, but I certainly don’t think we can rule out new lows as yet.

Currencies

The dollar index ended the week very slightly lower, but had been considerably lower earlier in the week before a strong recovery on Friday.

The British pound produced quite a strong 3-day rally to break short-term resistance and end the downtrend for now. However, the long-term trend is still down and the RSI was unable to push above 60, so new lows cannot as yet be ruled out.

The Euro also benefitted from some strength midweek, but also dropped on Friday, which keeps the downtrend alive. The Euro is considerably more bearish in terms of RSI, which has so far been unable to move above the 40 level. New lows look a possibility still. Sentiment is still very bearish on the Euro, but not quite to the bearish extremes seen in recent weeks.

Interest rate futures

Interest rate futures reversed sharply lower, bringing the trends to an end for now. The 30-year bond had come to within a few points of last week’s high, but was unable to break through. The RSI on the 30-year bond has fallen to 46.41 and may drop further to test the 40 bull market support level. If the 40 level is decisively broken, that would be the first confirmation that a top may be in for interest rate futures.

Good trading

Phil Seaton

LS Trader

Weekly Update 1st February 2015 – LS Trader

The dollar rally continues as the dollar index rallies to its highest level since September 2003. The Dax has rallied to new highs in a move that is unconfirmed by other global stock indexes, which are all showing signs of weakness, and bonds have rallied to new highs for the current move. The big question however is whether the energy markets have finally bottomed following Friday’s sharp rally. More on that in the commodities section below.

Stocks

The Dax continues to be the runaway leader of the four global stock indices that we trade at LS Trader; indeed it’s the only one of the four that we have an open trade in at present. The week continued the way it had ended the prior week, with considerable strength. This led to a new all time high print at 10857.5 basis the March contract before some mostly sideways price action followed for the rest of the week (albeit choppy) before the week closed at 10695. The key level for the Dax will be the prior breakout resistance zone around 10150 and the Dax should be considered bullish above that level (prior resistance once broken becomes support if the trend is good). A move much below 10150 would suggest that a top was in for now and a period of weakness likely.

U.S. stocks are considerably less bullish and are in fact in a fairly precarious position. Most traders will be looking at the December and January lows and probably setting themselves up for short positions should those support levels be broken. With the long-term trend still being very much up, such a move may be premature and could result in a number of sell-stops being triggered before a sharp reversal wiping out the weak shorts. Considerable further weakness is required before a change of trend to down is confirmed. The first indication of that happening would be the RSI moving decisively below the bull market support level at 40. It currently sits at 42.27. A decisive break and close below the December low of 1961.5 would be the second indication. A third level of confirmation will be required for a trend change to down.

Commodities

The energy markets rallied sharply on Friday, finally bringing to an end three of the most profitable short trades for LS Trader in years. Heating oil, no leaded gas and Brent crude all rallied sufficiently for us to exit our short trades, banking huge profits in the process.

  • Brent crude short from 10638. Trade closed at 5250. 5388 points profit.
  • No leaded gas short from 23710. Trade closed at 14456. 9254 points profit.
  • Heating oil short from 23165. Trade closed at 16826. 6339 points profit.
  • Total of 20,981 points profit banked from three trades.

We still remain short crude oil, but probably not for much longer, but also currently have 4118 points profit on that position as well, and are also still short natural gas, which did not rally on Friday but instead dropped to new lows.

While Friday’s rally may have brought the trends to an end in the short-term, it remains to be seen as to whether the final bottom is in or not. The first thing to look for will be whether the RSI can decisively beak above the 60 level, or whether bear market resistance between 50 and 60 holds firm. If 60 does hold we may yet see new lows in this sector.

Currencies

The dollar rally continues and this week saw the dollar index come within pips of the 50% retracement of the large decline from the 2001 top basis the cash index. This is a very good indication of recent strength and who is to say that further rally to another popular retracement level, the 61.8% level will not follow over the coming months? Such a move would see the index print above the 100 level for the first time since September 2003. Sentiment though is still very bullish towards the dollar, so one wonders how long it will be before we see a correction. For now all the trends remain intact and in favour of the dollar.

Interest rate futures

Interest rate futures continued their recovery from the spike low on the 22nd January and rallied to new highs for the current move on Friday. The long-term trend remains up across the sector and the 30-year bond may continue to rally higher to test the all time high print of 153.34 from July 2012.

Good trading

Phil Seaton

LS Trader