Weekly Update 27 December 2015 – LS Trader

Overall it’s been a quiet week, as is to be expected during the holiday period. Two consecutive shortened trading weeks due to and light trading due to the holidays generally results in little in the way of market moves, even though this is historically a bullish few days of trading in the stock markets. Another quiet week probably lies ahead before we see a big uptick in trading activity during the first week of January.

As we enter the final trading week of the year, the long-term trends remain pretty much as they have for most of the year to date, down for the commodities, up for the dollar and mixed for interest rate futures. The only real change has been in stocks, where the long-term trend has been up for most of the year but is now mixed since weakness seen at the end of August.

Stocks

The S&P 500 had a bullish week, rallying from above support and moving back above its 200-day moving average. The long-term trend, however, remains down, and the RSI is still in the bear range. As we mentioned last week, this is a bullish time of year with the last five trading days of the year and the first two of the New Year forming the traditional Santa Claus rally.

The Nasdaq 100 traded in almost identical fashion to the S&P, but the Nasdaq remains the stronger of the two indexes. The tech index is considerably above its 200-day moving average, and it has remained so since early October. Here the long-term trend is up and the RSI is in the bull range.

The Dax and the Nikkei both remain considerably weaker than their US counterparts and are both still in long-term downtrends.

Commodities

Both Crude Oil markets, Brent and Light Crude, traded at new lows early in the week before a bit of a recovery during the remainder of the week. Light Crude closed the week above Brent, which is unusual as Brent historically trades at a significant premium over Light Crude.

Natural Gas had a very strong week, rallying sharply from the new sixteen year lows that were printed during the prior week. It looks likely that the downtrend is coming to an end, at least in the short-term, although the long-term trend will remain down for the foreseeable future.

Currencies

The dollar index moved lower this week, trading back below its 50 day moving average, but still above the 200. The long-term trend is still up for the index, and the RSI remains in the bull range.

The dollar has been weak against most of the majors this week, losing ground against all of the commodity-based currencies. Changes of the long-term trends to up are within range for both NZD/USD and AUD/USD. Even the currency against which the dollar has been strongest of late, the Canadian dollar, gained ground on the greenback.

Interest rate futures

The uncertainty in the interest rate futures markets that has been present for quite some time continued this week. Trading in this sector can only be described as sloppy and choppy and without overall trend.

These interest rate markets continue to move mostly sideways, but towards the lower end of their recent trading ranges. RSI readings hovering around the 50 level indicate an almost complete lack of trend at present. However, this is one sector where things can get moving very quickly and breakout levels are not that far from current prices, so we should see some action in these markets early in 2016.

Good trading

Phil Seaton

LS Trader

Weekly Update 20 December 2015 – LS Trader

The past week has seen some decent moves in several markets and has also seen the US Federal Reserve finally raise interest rates for the first time since 2006.

Stocks had a mixed week with some reasonably large price swings, but the long-term trends remain intact, which is down with the exception of the Nasdaq 100. The long-term trends remain down for commodities, most of which are still in a deep bear market, and continue to favour the dollar.

Stocks

The S&P 500 had quite a volatile week. Having opened lower, it rallied through to Thursday and then turned sharply lower, trading back below its 200 day moving average. The RSI is also back below the 40 level, so we may see further weakness in the coming days. However, this is a very bullish time of year for stocks, with the much-fabled Santa Claus rally due to hit the markets on Wednesday, based on historical data.

The Santa Claus rally has generated a 1.5% average rally each year since 1950 for the last five trading days of the year and the first two in January. Let’s see if it materialises this year.

The Nasdaq 100 has seen similar price action to the S&P 500 but remains stronger. Here the long-term trend is still up, and the RSI remains above bull markets support at 40, which it has since September.

The Dax rallied for most of the week but turned lower on Friday. The index finds itself at an interesting juncture, as price, and both the 50 & 200-day moving averages are all pretty much at the same level. The long-term trend remains down, and the RSI is in the bear range.

Commodities

Weakness in the energy markets has continued this week even though we have seen some attempted rallies. Light crude oil fell to a new multi-year low on Friday and may yet test its 2009 low, which was at 33.55 basis the back-adjusted continuous futures contract. Price action in Brent Crude was a near perfect image of US Crude, and the spread between the two (Brent historically trades at a significant premium) has all but disappeared.

Natural Gas has moved sharply lower, continuing its long-term bear market trend, and this week printed its lowest prices since March 1999.

Currencies

The dollar index rallied this week, moving back above its 50 day moving average and remaining well above its 200 day moving average. The long-term trend is still up, and the RSI remains in the bull range. Whether we see sufficient strength to test the early December high remains to be seen.

The dollar was at its strongest against the Canadian dollar, where it reached its highest level since June 2004. The dollar also pushed the British Pound down to its lowest level since April, but as yet without downside follow through. As we have written several times in recent weeks, a decisive move below support on a closing basis would support the idea of a continued decline down towards the April low, which is almost 400 pips lower than current prices.

Interest rate futures

The long-term trends remain mixed in the interest rate futures sector and are still up for the shorter-term markets but down for the long bond. All five markets that we trade at LS Trader remain above their 200-day moving averages, but most remain bearish according to the RSI. This uncertainty is evidenced by a complete lack of trend in this sector at present.

Good trading

Phil Seaton

LS Trader

Weekly Update 13 December 2015 – LS Trader

The markets have returned to a more normal state this week following the extremely volatile price swings seen in numerous markets during the previous week. Volatility remains elevated in many markets, but this week has seen some markets trend better than they have in recent weeks.

The long-term trends are still mixed, but remain mostly down for stocks and commodities, up for interest rate futures, and up for the US dollar.

Stocks

The S&P 500 was unable to take out recent highs and moved sharply lower this week. The RSI, which has been unable to move above the key 60 level, turned sharply lower and fell through 40, which puts it back in the bear range. Additionally, the index fell below the 200-day moving average, so we may see lower prices again this week.

The Nasdaq 100 also traded lower this week but remains stronger than the S&P 500. This week saw the tech index trade below its 50-day moving average but remain above its 200-day moving average. The RSI has fallen to test bull market support at 40, which is currently holding, but only just.

The Dax fell further this week, keeping the long-term downtrend intact. The Dax has now shed almost 1200 points in the space of two weeks, which is a big move. The RSI has fallen below the 40 level, returning it to the bear range. Lower prices may be ahead, and we may ultimately see a test of the double bottom around 9300.

Commodities

The energy markets have continued with weakness, with Brent Crude dropping below $40 per barrel for the first time since 2009. Light crude oil remains on target to test its 2009 low, which was at 33.55 basis the futures contracts, printed in February 2009.

Heating oil had a hugely bearish week, declining some 14.66%, which included a 6.49% decline on Friday alone. This has seen the RSI fall to 21.35. Natural gas also had a bearish week, ending lower by 8.97% and printing below the 2.00 level for the first time since April 2012.

Once again, therefore, we see that the energy complex is still the most profitable to trade, as it has been for quite some time, and the LS Trader system is currently sitting on excellent profits by being short four markets in this sector. The exception being the strongest enemy market in the sector, No Lead Gas, where we remain flat. No Lead gas was the only market in the sector that managed a gain this week, having bounced from just above support.

Metals have also seen some weakness with Silver falling to a new low since 2009. The new low in Silver has not been confirmed by Gold. Although resistance held in Gold, the yellow metal remains some $30 above its lows for the year. Regardless, the long-term trend for the metals remains down, as it does for nearly all commodities markets.

Currencies

The US dollar had an excellent week against the Canadian dollar, where it rallied to its highest level since 2004, having narrowly exceeded the 2009 highs.

Overall, the US dollar has seen further weakness following the large moves seen during the previous week. The dollar index fell below last week’s low and the RSI has fallen to test the key 40 level, which is bull market support. Should we see a decisive move below 40, we may see further weakness towards the 200-day moving average, which currently sits at 96.29. For now, the long-term trend is up for the dollar index, as it is also for the dollar against most of the majors.

Interest rate futures

Interest rate futures have seen some strength this week with the sector rising to its highest level in around six weeks. The long-term trends remain mixed in the sector and are still up for the shorter-term markets but down for the long bond.

Good trading

Phil Seaton

LS Trader

Weekly Update – 6 December 2015 – LS Trader

This past week has seen a mixture of decent moves and some highly volatile trading, particularly on Thursday, following the ECB announcement. The markets have since retraced some of those moves, which is particularly the case in the stock markets, and the long-term trends have not been affected. It’s likely that several of the affected markets will completely retrace Thursday’s moves over the coming weeks.

Stocks

The Nasdaq 100 rallied to new highs on Wednesday but then reversed lower in volatile trading. The move to the downside was clearly a knee-jerk reaction, and it was reversed again on Friday and the market recovered back to within touching distance of Wednesday’s multi-year high. It is likely that we will see the tech index rally to new highs this week. It’s worth noting that the Nasdaq 100 is very much within range of rallying to its all-time high print of 4884 back in March 2000.

The S&P 500 once again fell short of new all-time highs and reversed lower. Interestingly, the RSI held firm at 60, and the market was unable to break through. Following almost identical price action to the Nasdaq 100 (save for reaching new highs) the S&P recovered well on Friday. We will likely see major resistance tested this week, both in terms of price and RSI. A breakout would be bullish and would open the way for a year-end rally to new all-time highs.

As has been the case for the past few months, both the Dax and Nikkei continue to lag the U.S. market, and both remain some distance below their highs for the year. The trend for these two indexes is still down and considerable rally over the coming weeks will be required for that to change.

Commodities

In spite of the volatility seen in several markets, the energy markets continued their bear trend. Both Brent and Light Crude Oil fell to new multi-year lows, as did Heating Oil and Natural Gas. RBOB remains the strongest in the sector and is still above its November low. Even dollar weakness was unable to lift energy prices.

The metals were significantly affected by the moves in the currency markets (metals are priced in dollars, as are most commodities, so a weaker dollar tends to support metals and commodities prices in general). All four of the major metals moved higher, but Copper remains the weakest in the sector. Gold rallied to test resistance, which has so far held firm, but due to its proximity to Friday’s close, we will likely see resistance tested early this week.

Currencies

The currency markets had reached new extremes this week, with the dollar index reaching new highs for the current move. The Euro fell to new lows as well before both markets reversed sharply on Thursday. Thursday’s trading in the Euro was the most volatile in five years. However, none of the moves seen have impacted the long-term trends in the currency markets, all of which remain intact for now. The long-term trends, therefore, continue to favour the dollar, although both the New Zealand and Australian dollars are moving within range of key trend-defining levels.

Interest rate futures

The long bond displayed some strength during the first part of the week but then reversed sharply lower on Thursday, printing an evening star bearish reversal in the process. The RSI had earlier moved slightly through the 60 level but was unable to hold. This suggests further weakness ahead.

The other interest rate futures markets are also showing weakness, and we may see both the 5 & 10-year T-Notes complete a change of trend to down over the coming weeks.

Good trading

Phil Seaton

LS Trader