Weekly Update 28 February 2016 – LS Trader

Both stocks and the dollar have moved higher this week. The British Pound has fallen to a near seven-year low. Commodities have seen mixed trading and interest rate futures have moved lower. The long-term trends remain down for stocks and commodities, up for interest rate futures and mixed for the currency markets, but slightly favouring the dollar.

Stocks

The S&P 500 continued its recent short-term rally this week, moving well through its 50-day moving average in the process. However, the rally ran out of steam beneath the 200-day moving average, with candle printing a shooting star bearish reversal pattern. The RSI has also failed to reach the 60 level and, therefore, remains bearish. The long-term trend is still down.

The Nasdaq 100 traded in very similar fashion to the S&P 500. The principle difference being that the Nasdaq remains below both its early February highs and its January highs, whereas the S&P 500 has cleared its equivalent levels. The 50-60 level on the RSI is bear market resistance and as long as that resistance zone holds we can look for further price weakness.

The Nikkei also rallied this week but remains below short-term resistance. The RSI also remains below the 50 level so is still very much in the bear range. Due to its proximity to Friday’s close, resistance could be tested this week, but the long-term trend remains down, and it will take a very significant rally for that to change any time soon.

Commodities

Gold has chopped around this week but ended the week lower. Significantly, Gold has remained above the key support level which we highlighted last week. As before, as long as that support level holds, the outlook for Gold remains bullish. Silver, however, has seen considerable weakness this week, moving back below both its 50 and 200-day moving averages. The RSI has also dropped and may test the 40 level this week.

Copper made a spike high on Friday, which was its highest print since mid-November, but the breakout from the range was unable to hold. Interestingly, the RSI turned down from the 60 level, keeping it in the bear range. The long-term trend remains down for the metals sector.

Sugar tested major trend-defining support and rallied sharply higher to test its 200-day moving average. A break of last week’s low would confirm a change of trend to down, but for now, the long-term trend remains up.

Currencies

The dollar index rallied this week to its highest level in three weeks, helped by strong day on Friday, which took the index well through its 50-day moving average. The index also remains above its 200-day moving average, and the long-term trend is up. The RSI, which has been in the bear range since early December, has risen significantly over the past couple of weeks, and we may see a test of bear market resistance at 60 in the next few days. A decisive move through 60 would be bullish for the index, and the dollar overall, and would suggest additional rally for the index towards the January and possibly December highs.

The British Pound broke through its recent lows to fall to its lowest level in almost seven years. The long-term trend is clearly down for the Pound, and the RSI is in the bear range, suggesting that we may see lower levels yet. The only positive for the Pound is that there is bullish divergence between price and RSI as we have a new low in price without a new low in momentum, but this does not necessarily suggest a reversal is imminent.

Interest rate futures

Interest rate futures moved lower this week, but all remain above support with the exception of the 3-Month Eurodollar. Weakness seen in the remaining markets in the sector suggests that we may see support tested in some or all of these markets over the coming week or so. As yet there is still no bearish divergence in any of the markets in the sector, but the RSI has dropped considerably since its high print earlier in the month. For now, the long-term trend remains up, and the RSI is in the bull range.

Good trading

Phil Seaton

LS Trader

Weekly Update 21 February 2016 – LS Trader

The past week has seen stocks and the dollar both advance, but it’s been a quieter week than we have seen recently. Volatility has also dropped in most of the markets that we trade.

There are a handful of markets that are trading within range of key breakouts, and one or two markets are on the verge of changes of long-term trend.

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

Stocks

The S&P 500 put in a four-day rally this week but ran into resistance exactly at the 50-day moving average. The long-term trend remains down, and the RSI is still in the bear range.

The Nasdaq 100 displayed very similar price action but remains weaker than the S&P 500. The RSI on the Nasdaq 100 has so far been unable to break the 50 level. The 50-60 level on the RSI is bear market resistance and as long as that resistance zone holds we can look for further price weakness.

The Nikkei remains considerably weaker than both US indexes, and the current downtrend remains intact. The RSI here has been unable to break even the 40 level, and, therefore, remains very much in the bear range.

The Dax gapped higher at the open on Monday and traded higher through to Thursday. The rally was sufficient to break the prior support level from the August to January lows, which should now have acted as resistance. The break of that level may have broken the bears’ back in the near term, but the long-term trend and RSI remain bearish.

Commodities

Gold ended the week slightly lower than it began, but also some $35 higher than the lows printed on Tuesday. That low came right at the same level that had previously been resistance in this market, so if the current uptrend is good, that former resistance level should now act as support. This makes last week’s low a key level for this market. If support there fails, then we will likely see some further weakness in this market. For now, the long-term trend is up and the RSI remains in the bull range.

The energy markets have had a mixed week, but the long-term trend remains down across the sector. Brent rallied to test its 50-day moving average but has been unable to break through. The RSI in all four energy markets that we trade at LS Trader remains in the bear range, so as yet, there is no evidence that the long-term trend is going to change anytime soon.

Natural Gas has been very weak and will likely test its December low this week. RBOB Gasoline also remains near its recent low, and it too could push to new lows this week.

Sugar has taken out a recent support level and may complete a change of long-term trend to down in the coming week or so. Price has now moved well below both the 50 and 200-day moving averages, and the RSI is in the bear range. Not much more weakness will be required for a change of trend to down.

Currencies

The dollar has made a bit of a recover this week against several of the majors. The dollar index rallied to test its 200-day moving average, but as yet has been unable to close above it. The RSI remains in the bear range, but the long-term trend is still up.

Interest rate futures

Interest rate futures have had a mixed week, and all five markets that we trade at LS Trader remain below their highs printed on the 11th February, but also above support. The long-term trend is still up across the sector, and the RSIs all remain bullish. Regarding momentum, there is no bearish divergence, and the strength of the rally that began early this year suggests that there will be new highs yet to come. Whether those new highs occur in the current move or a bit later in the year remains to be seen.

Good trading

Phil Seaton

LS Trader

Weekly Update 14 February 2016 – LS Trader

The markets have been very active once again this week, with large moves being seen in virtually all market sectors. Stocks, currencies, metals, interest rate futures and energies have all delivered significant price moves over the past few days.

The long-term trends remain as before overall, but there have been changes of long-term trends in a couple of individual markets. Currently, the long-term trends are down for stocks, up for interest rate futures, mostly down for commodities (Gold being the notable change this week), and mixed for the dollar.

Monday is Presidents’ Day in the U.S., so many U.S. markets will be closed.

Stocks

Each of the four stock indexes that we trade at LS Trader fell to new lows this week, but all have bounced higher having found some support. This has resulted in some momentum divergences, so we may see a bit more upside follow through next week, but the long-term trend is down across the board for stock indexes.

The S&P 500 tested support but was unable to break below the prior low. The long-term trend remains down, and the RSI is in the bear range, so we may yet see another test of the recent lows.

The Nasdaq 100 continued with weakness and completed a change of long-term trend to down as expected. However, having printed its lowest level since October last year, the Nasdaq subsequently bounced higher. As with the S&P 500, the trend remains down in spite of the bounce.

The Dax dropped to its lowest level since October 2014 but managed a bit of a recovery from Thursday’s new low for the move. In spite of the recovery, the Dax still ended the week lower by over 300 points.

Commodities

There are signs that some commodities markets may be forming a bottoming process, led higher by precious metals.

Gold short higher for a second consecutive week, and strength seen this week was more than sufficient to complete a change of long-term trend to up. This week’s high was the highest level that Gold had reached in a year. This week’s Gold RSI print was its highest since October 2010; such has been the extent of recent strength. Thursday’s move higher of over $60 was one of the biggest daily moves in recent times. From Thursday’s high, there has been a bit of weakness, but the long-term trend is firmly up, and there is no bearish divergence or a slowing of momentum, and the market remains well above support.

Silver has also moved higher, but remains weaker than Gold, and has as yet fallen short of completing a change of long-term trend to up. That could follow over the next week or so if the precious metals rally persists.

The energy markets have had another highly volatile week, making large percentage swings on an almost daily basis. This week has seen some of the energy markets fall to new multi-year lows, but an aggressive bounce was seen during the latter part of the week. The long-term trend remains down for the sector, and it remains to be seen as to whether we have seen the bottom in these markets.

Currencies

The dollar index has seen continued weakness this week, moving further below the 200-day moving average. The RSI has also moved further into the bear range, but as yet there has not been sufficient weakness for a change of long-term trend.

Other currency markets have seen mixed trading. The Euro, which is a close inversion of the dollar index, rallied to its highest level since October, but as yet has not completed a change of long-term trend to up.

The biggest move once again came in USD/JPY, where the Japanese Yen rallied sharply against the dollar for a second consecutive week, pushing the dollar to its lowest level since October 2014.

Interest rate futures

Interest rate futures all soared higher this week, making new highs for the current move in each market. Thursday saw a sharp rally which could not hold through the close, and further weakness on Friday. However, there is no momentum divergence as the new high in price was accompanied by a new high in momentum. The RSI is also firmly in the bull range, and the long-term trend remains up, with all the markets still well above support. As long as these factors remain true, the uptrends remain intact.

Good trading

Phil Seaton

LS Trader

Weekly Update 7 February 2016 – LS Trader

The past week has seen stock indexes, and the dollar move lower. Precious metals benefitted from dollar weakness and have rallied to their highest level in several months. Interest rate futures rallied to new highs, and energy markets have seen mixed trading.

Stocks

Stocks have had a mixed week. Strength seen early in the week soon evaporated and the major indexes ended the week considerably lower than where they started, and well off their highs of the week.

The long-term trend remains down in three of the four stock indexes that we trade at LS Trader, currently remaining up only in the Nasdaq 100. However, weakness was seen last week, which included a 3.27% decline on Friday, suggests that critical trend-defining support will be tested this week, with a change of trend to down looking increasingly likely.

The Dax has been the weakest of the major indexes, dropping to a slight new low for the current move, and printing its lowest price since December 2014.

Commodities

Gold rallied sharply this week, moving well through its 200-day moving average. The RSI also accelerated, moving easily through the 60 level and entering the bull range in the process. Friday’s RSI print of 74.08 is the highest in over a year. For now, the long-term trend remains down, but that could change over the next week or so if we see continued strength.

Silver also moved higher but has been far less convincing than Gold. Silver remains below its 200-day moving average, and the RSI is grappling with bear market resistance at 60. The best moves happen in these two markets when both markets move together. As yet, Gold’s strength has not been matched by Silver.

The energy markets have seen mixed trading but remain very much in a long-term downtrend. RBOB Gasoline remains the weakest of the energy markets and fell to new lows for the current move on Friday. The other markets, in spite of high volatility and a short-term rally, may test their recent lows again soon.

Currencies

The dollar index failed to break resistance and reversed sharply lower. The RSI was also unable to break through the 60 level after multiple attempts and also moved sharply lower, falling below bull market support at 40. Price also moved through the 200-day moving average for the first time since October. For now, the long-term trend for the dollar index is up and further weakness will be required for that to change.

The Euro, which is a near perfect inversion of the dollar index, rallied through its 200-day moving average and reached its highest level since October last year.

The dollar had another wild week against the Yen, more than reversing the gains seen during the prior week. The sharp reversal keeps the trend for USD/JPY down, and a test of major support looks likely next week.

Interest rate futures

Interest rate futures rallied this week, making new highs for the current move. The 30 Year T-Bond made a new high for the current move this week, accompanied by a new high in momentum, which negated the bearish divergence that we noted last week. The long-term trend remains up for the sector.

Good trading

Phil Seaton

LS Trader