Weekly Update 29 November 2015 – LS Trader

The past week was a shortened trading week due to the Thanksgiving Holiday in the US. The long-term trends remain as before across the market sectors. Commodities, in particular, have been bearish.

Stocks

The S&P 500 exceeded the highs of the previous week but fell short of testing the all-time highs posted earlier this year. The RSI tested the 60 resistance level on the RSI multiple times but has so far been unable to break through. As before, a decisive move through 60 on the RSI would indicate a likely test of the recent all-time highs.

The Nasdaq 100 is in a very similar position to the S&P 500, within touching distance of its recent highs. Here too the RSI continues to trade around the 60 level but the needed decisive break through this range has yet to materialise.

The Dax finished higher this week having reached its highest level since early August. The Dax, however, remains in a long-term downtrend and considerably lower than its US counterparts in relation to its all-time highs. The same is true for the Nikkei.

Commodities

Gold and Silver both fell to new lows for the year, and the long-term trend for the metals sector remains bearish. Gold’s low print was its lowest since early 2010, and Silver dropped to its lowest level in over six years. Copper’s low for the week was its lowest print in six and a half years. Palladium, however, managed to find support just above its recent lows, but still ended the week lower. Each of these metals still has the potential to move lower. Ideally, we’d like to see Palladium and Silver decisively break their respective support levels to assist with the other metals moving lower still.

Currencies

The dollar index finished the week higher, once again rallying to its highest level since April and remains on course for a test of 101.43. The long-term trend remains up, and the RSI is in the bull range. However, the price action is not totally convincing as we have a series of small real bodies on the daily charts, and several have upper and lower shadows, which indicate some indecision in the near-term. The chart pattern is also that of a rising wedge.

The Euro also fell to its lowest level since April and remains on target for the March low at 1.0503. The British Pound, which is normally highly correlated with the Euro, has yet to break to the downside. A test of support looks very likely this week, and there is potential for a decent move lower over the coming weeks.

The biggest move in the currency markets at present is USD/CHF, which this week moved to a multi-year high. There is little in the way of overhead resistance to prevent this market from rallying another few hundred pips higher.

Interest rate futures

The long bond traded slightly higher this week, but price action is far from convincing. Shadows are evident above the daily candles, which indicates that the sellers are taking control near the top of the daily range. The long-term trend remains down, and the RSI is still in the bear range. Unless we see a move above 60 on the RSI, we can expect this market to turn over once again.

Good trading

Phil Seaton

LS Trader

Weekly Update 22 November 2015 – LS Trader

The past week has seen mixed trading in numerous markets. The stock markets traded higher this week, as did the US dollar against most of the major currencies. Commodities markets remain in a long-term bear market, and interest rate futures moved higher.

The long-term trends remain as before and are mixed for stocks and interest rate futures, up for the dollar and down for commodities.

Stocks

The stock markets shrugged off the tragic events in Paris and moved higher this week. Both US indices are within range of testing their recent highs. The S&P 500 gained an impressive 90 points this week, which has taken the RSI back to a test of the 60 level. A decisive move through 60 on the RSI would indicate a likely test of the recent all-time highs.

The Nasdaq 100, which is still the strongest of the four stock indices that we trade at LS Trader, has already seen its RSI move through 60, so there is a good probability of new highs for the index in the coming days.

The Dax and Nikkei continue to lag their US counterparts but are also continuing higher. For now, the long-term trends in both the Dax and the Nikkei remain down, but if strength persists, in what is seasonally a bullish period for stocks, we could see both markets complete a trend change to up between now and the end of the year.

Commodities

Both Copper and Gold dropped to new lows this week. Copper’s low was its lowest print since April 2009, and Gold fell to its lowest level since 2010, which was some eighteen months before it printed its all-time high. Both markets have since bounced a bit higher, but a look at the long-term charts shows clearly how far these markets have fallen. From a technical standpoint, both markets still have potentially further to go.

Silver remains slightly stronger and is trading just above a key low, which is its lowest level since 2009. If this key low can be broken, in a move confirmed by Gold, we could still see lower levels.

Palladium has also found support just above its key support level but remains in a deep bear market. Last week’s lows and the multi-year lows in Silver and Palladium could be key to the metals’ price action over the coming weeks.

Currencies

The dollar index moved above last week’s high to reach its highest level since April and remains on target for further gains towards our target at 101.43

The Euro fell to its lowest level since April and remains on course for further weakness down towards and ultimately below the March 2015 lows.

Interest rate futures

Interest rate futures have seen mixed trading this week as we approach the expiry of the December contract and roll forward to the March contract in the next few days. The long-term trends remain up for four of the five markets that we trade at LS Trader, with only the 30 Year T-Bond in a long-term downtrend.

The long bond has shown some strength in the past couple of weeks, but the trend remains down and the RSI is still in the bear range. A turn lower from not much above current levels will be required to keep the downtrend intact, a view that would be bolstered by the RSI not exceeding the 50-60 bear market resistance zone.

Good trading

Phil Seaton

LS Trader

Weekly Update 15 November 2015 – LS Trader

The past week has seen stocks turn lower once more and has also seen the dollar give back some of its recent gains. The long-term trends are, however, still intact in these markets.

Commodities had a highly active week, and many markets broke out from their recent trading ranges in what could be the start of a strong trending period for many financial markets.

Stocks

The S&P 500 failed to break out to new all-time highs, and this failure to confirm the Nasdaq 100’s rally to new highs contributed to further weakness for the tech index. The long-term trend is up for the Nasdaq 100 but remains down for the S&P 500, Dax and Nikkei. The tragic events in Paris may weigh on stocks once they reopen next week.

The LS Trader system is currently flat the four stock indexes that we trade, but short entries are within range in two of the four indexes should the markets break lower next week.

Commodities

The commodities markets remain in a deep bear market, with only a few exceptions. From all the commodity markets that we trade at LS Trader, only London Cocoa, and Orange Juice are showing signs of strength. OJ this week reached a 16-month high, and London Cocoa has reached its highest level in 4 1/2 years.

The energy markets resumed their long-term downtrends this week as expected. Heating oil has already fallen to a new low for the year and the other markets in the sector don’t look far behind. Natural gas, which has been the weakest market in the sector in recent months, looks like it may test resistance this week having found support at the recent lows.

Metals have also seen further weakness, with copper, silver and palladium all breaking to the downside this week to add to the gold short position. Gold, basis the back adjusted continuous contract, tested it low for the year to date, but so far without follow through.

Copper fell to its lowest level in over six years and still has further room to the downside. Palladium looks set to test and possibly exceed its lows for the year printed back in the summer, and we may also see Silver do the same.

Currencies

The dollar showed some weakness this week as it was unable to build on the gains from recent weeks. However, the long-term trend continues to favour the dollar almost across the board, and we will likely see dollar strength resume over the coming days.

The dollar index corrected slightly lower this week but remains near its highest level in six months. If last week’s high can be exceeded, we should see further gains towards the high of the year at 101.43 and likely beyond. The RSI remains in the bull range, and the long-term trend is up.

It’s the opposite view for the Euro, which is an inversion of the dollar index. Once last week’s lows are exceeded, further weakness down towards and ultimately below the March 2015 lows should be seen.

Interest rate futures

The 30 year T-Bond dropped through the next level of support but has so far been unable to continue lower, and last week’s low now represents key support in this market.

For now the long bond is the only market in the sector that is in a long-term downtrend. Further weakness will be required for the others to follow suit. As of Friday’s close, change of trend levels are some way below current levels.

Good trading

Phil Seaton

LS Trader

Weekly Update 8 November 2015 – LS Trader

The period of choppy, consolidating markets that have dominated most markets for the past few months could now be at an end. Friday saw some key breakouts in several markets and some decisive moves that may be the early stages of some decent trends in several markets.

Stocks

The Nasdaq 100 posted new 15 1/2 year highs this week but as before, the breakout is still unconfirmed by the S&P 500. The S&P 500 came close to testing its all-time high posted earlier in the year but has as yet been unable to break through. The price action of the last few days reflects some indecision and has also seen momentum decline slightly. However, the RSI remains in the bull range.

The Dax has recovered to its highest level since mid-August, and the Nikkei has reached an 11-week high. The long-term trend remains down for both markets, and they continue to lag the US markets.

Commodities

The energy markets have seen some fairly volatile trading, with strength during the first part of the week taking a few energy markets through short-term resistance, before reversing and ending the week lower. We could see the long-term downtrends resume this week.

There were some decent moves seen in the metals section, with Gold, in particular, making a decisive move to the downside, resuming the downtrend in the process. We should now see a test of the July low at a minimum over the next week or so. The other metals have also declined and are close to testing key support levels in the days ahead.

Wheat once again ran into price and RSI resistance, which has kept the trend down. There is price resistance at 531, and the RSI continues to reject the 60 level. If both of these levels can be exceeded, there is potential for a large up move over the coming weeks, with the next level of technical resistance almost $1 higher.

Currencies

There have been numerous key moves in the currency markets this week. The dollar index broke through resistance to complete a change of trend to up; the Euro and British Pound both broke support, changing their respective trends to down, and the dollar broke parity against the Swiss France to reach its highest level since January.

One currency market that we have written about for several weeks, and which we viewed as potentially the key to unlocking the currency and other markets from their long consolidation, was USD/JPY. This week finally saw the two-month box range broken, and this resulted in a big move in this market as well as other related markets. This should result in a period of further dollar strength and large moves in many other markets over the weeks and months ahead.

Interest rate futures

The 30 year T-Bond has been the sole interest rate futures market not to confirm a change of trend to up. Therefore, as expected, it has been the first one to make its move to the downside, having fallen sharply this week. There is support around Friday’s low, which if broken could open the way to further declines towards the year’s lows around the 146.00 mark, so 600+ points below Friday’s close.

For now the long-term trend remains up for other markets in the sector, but that could change over the coming weeks if recent weakness persists.

Good trading

Phil Seaton

LS Trader

Weekly Update 1 November 2015 – LS Trader

The past week has seen the Nasdaq 100 rally briefly to new 15-year highs and has seen the Euro continue its recent decline. Interest rate futures were lower this week, and commodities have seen mixed trading.

Stocks

The Nasdaq 100 completed the recovery and rallied to a new 15-year high this week. However, the index was unable to hold the breakout level on Friday and closed back below prior resistance. The breakout was confined by the RSI, which reached its highest level since November 2014, but has so far been unconfirmed by the S&P 500. Should we see new highs for the Nasdaq 100 over the coming days, confirmed by a breakout on the S&P 500 to new all-time highs, we could see further strength through to year-end. Strength will need to be seen this week, or we will likely see the Nasdaq 100 move lower.

As has been the case for the past couple of months, the Dax and Nikkei lag considerably behind their US counterparts and both indexes remain a considerable distance below their respective highs of the year.

Commodities

Heating Oil dropped to its lowest level since January as the energy markets continued with weakness early in the week. Following the break to new lows, Heating Oil has made a recovery rally, along with the other markets in the energy sector, with the exception of Natural Gas. Natural Gas, which is down 14.64% in a month, dropped to its lowest level since June 2012 on Friday before finishing the week with a strong close. The trend remains down for the entire energy sector in spite of strength seen this week.

Strength has been seen in some commodities, particularly Wheat, which looks set to test a major resistance level in the coming days. The RSI has risen to 60.85, and a decisive move above 60 would suggest further strength and a probable break of resistance.

Sugar has also continued its rally but has run into resistance at 14.80. If this level can be broken, then it could be clear skies above and continued rally towards the next resistance level around 16.50.

Currencies

The Euro fell hard in the middle of the week but recovered some of its losses by Friday’s close. The recovery bounce occurred just above key trend-defining support, which if broken would have changed the trend for the Euro to down.

The dollar index had a similar week, but being the near-perfect inversion of the Euro, moved in the opposite direction up towards trend-defining resistance. For now the long-term trends remain up for the Euro and down for the dollar index, but this could change soon. When it does, we will likely see some large moves in the currency markets, which for the most part, have spent much of this year consolidating. Such breakouts should also give rise to large moves in other markets that are impacted by the dollar, namely commodities.

Another important currency market is USD/JPY, which has been in a box range for over two months now. This week saw resistance tested but not broken, and so far price continues to trade sideways within the box range. An eventual breakout from this box range should also yield a decent move in this and other related markets.

Interest rate futures

Interest rate futures were lower this week, and it’s possible that the top may be in for the sector. The long-term trend is still up for four of the five markets that we trade in this sector, remaining down only for the 30 Year T-Bond. The long bond may test support this week, and if successful, may lead the entire sector lower over the coming weeks.

Good trading

Phil Seaton

LS Trader