Weekly Update 24 April 2016 – LS Trader

The S&P 500 rose to a new high for the year, but as yet without follow through. The week has also seen quite a considerable recovery for the dollar against several of the major currencies, and has, for the most part, seen a continuation of the recovery from a deep bear market in several commodities, some of which completed a change of long-term trend to up this week.

This week ahead sees the two-day FOMC meeting begin on Tuesday.

Stocks

The S&P rallied to take out the high of the year and to complete a change of long-term trend back to up in the process. In terms of the back-adjusted continuous contract, last week’s high was a new all-time high for the index. The weekly RSI also rose to 60.15, which is the first time since 2014 that the weekly RSI has been above 60. However, that is not yet a decisive enough break of 60 to consider that weekly RSI has entered the bull range.

The S&P 500 is currently the only stock index of the four that we trade at LS Trader that is in a long-term uptrend. So far, we have seen the S&P 500 struggle to move clear of the highs and resistance has been seen, as expected. However, if we do get a decisive breakout, the market will again be at all time highs, which brings with it the likelihood of considerable short covering, which has the potential to carry the market higher.

The Nasdaq 100 has been considerably weaker than the S&P 500, and prices may test the 50-day moving average. From a classical technical analysis standpoint, the Nasdaq 100 could be setting up a broadening top formation, which has long-term bearish implications if the setup is completed. For now, the long-term trend remains down, and considerable rally will be required for that to change.

The Dax broke through the 200-day moving average and broke through resistance at 60 on the RSI for the first time since November last year. However, a change of long-term trend is a long way above current levels, and unless something extraordinary happens, that change will not be seen for the next couple of months, at least.

The Nikkei also called this week but remains in a long-term downtrend, below its 200-day moving average and still below 60 on the RSI.

Commodities

Silver put in a huge upside move this week following the recent breakout from a 16-month wedge and the neckline of an inverted head and shoulders pattern that we wrote about last week. As before, these patterns give a longer-term target of around 1850 but expect wild swings along the way. Volatility is extremely high in Silver.

The grains markets have also seen some significant moves and usually high volatility this week. Soybean Meal ended the week higher by 5.39% in spite of giving back around half of its gains. A similar, but smaller move was seen in Soybeans. The long-term trend is now up for all three Soybean markets. Corn also completed a change of trend to up this week but ended the week lower after a sharp reversal on Thursday.

Currencies

It’s been an excellent week for the dollar, which has seen strength against nearly all the major currencies. However, in spite of recent strength, the long-term trend for the dollar remains down against all the majors. The best measure of overall dollar strength is the dollar index, which continues to be very much in a long-term downtrend, well below its 200-day moving average, and with the RSI still below 60, where it has been since December. If the RSI moves decisively above 60 on the index, then we may be due a period of sustained dollar strength.

We wrote last week about the possible head and shoulders bottom that was setting up on the British Pound. The neckline of that pattern was broken this week, which suggests further strength, possibly up to around the $1.50 level. However, as we wrote last week, the long-term trend is still down.

Interest rate futures

Interest rate futures have been weak this week, trading lower for five consecutive days and falling below the 50-day moving average. Prices are still well above the 200-day moving averages, and the long-term trend is still up. However, bull market support at 40 is going to be tested this week, and if this level is broken, further weakness may lie ahead.

Good trading

Phil Seaton

LS Trader

Weekly Update 17 April 2016 – LS Trader

We continue to see signs of strength returning to the commodities markets, and it’s possible that we have seen the bottom for many markets in the sector. If the commodities markets have bottomed, there is potential for some very large moves to the upside over the coming months. However, it’s important to wait for confirming price action not to jump the gun. These moves, when they come, will present very profitable opportunities.

Stocks

The S&P 500 continues to grind higher but as yet has been unable to break resistance and confirm a change of trend to up. There is no question that there is significant resistance at just above current prices, but should the market breakout to new all time highs it’s possible that we could see considerably higher prices. There are numerous traders that have tried and failed to call a top over the past few months, and there is still sufficient short interest in the market to suggest that a breakout would likely lead to a raft of short covering and further rally.

The Dax rallied this week but once again has run into resistance at the March high and also at the 60 level on the RSI, which has kept a lid on all rallies since December. The long-term trend remains down, and there is significant price resistance overhead in terms of chart structure and the 200-day moving average.

The Nikkei also called this week but remains in a long-term downtrend, below its 200-day moving average and still below 60 on the RSI.

Commodities

Gold ended the week lower but remains above its long-term moving averages, and more importantly, above bull market support on the RSI. However, there is a possibility of a head and shoulders pattern forming, so a break of the neckline and the March low may see a further pullback here before the long-term uptrend resumes.

Silver, which has lagged Gold this year, finally completed a change of trend to up and registered a gain for the week while Gold fell back. There is some resistance in a zone around 1650, but if that can be cleared, there is room for a considerable further rally. On the weekly chart, Friday’s close completed a breakout from a 16-month wedge and broke the neckline of an inverted head and shoulders pattern on the daily chart. These patterns give a longer-term target of around 1850.

We saw both Crude Oil markets break the 60 level on the RSI this week, but so far without follow through to the upside. The RSI for both Crude markets is in the bull range, but the long-term trend is still down. Brent has a change of long-term trend to up within range, and that could be completed in the next few weeks. However, let’s wait for confirming price action and not jump the gun.

Currencies

The dollar index fell to its lowest level since August last year before putting in a three-day rally and reaching its highest level since March. However, the long-term trend is still very much down, and the RSI remains in the bear range.

The British Pound, currently the only current future that we trade at LS Trader that we don’t have a current open position in, remains in a long-term downtrend. This is the only one of these currency markets where the long-term trend still favours the dollar. The Pound continues to find resistance around the 50 -day moving average and the RSI remains in the bear range. One potential bullish development that could be unfolding is the possible head and shoulders bottom that is taking shape. However, that’s not a trade that we would take if the neckline is broken, as the long-term trend is still down.

Interest rate futures

Interest rate futures ended lower this week, but all remain above key technical levels, and above their 50 and 200-day moving averages. The RSI is also still in the bull range, so the focus remains towards higher levels. The long-term trend remains up for the entire sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 10 April 2016 – LS Trader

Stocks ended the week lower, as did the dollar index, in what has been a relatively quiet week for the markets, certainly regarding the recent volatility.

Several commodity markets continue to look as though they may be at the start of new uptrends, particularly the energy markets, and we just have to wait for the confirmation of these moves in the form of price breakouts. The coming months should deliver some excellent trading opportunities, particularly in the commodities markets.

Stocks

The S&P 500 moved higher on Monday but then moved lower and closed the week down. The rally continues to look tired, and momentum continues to drop off, with the RSI moving back below 60 for the first time since February. The long-term trend remains down, but the market remains above both its 50 and 200-day moving averages, and a change of trend to up is within range. Whether we get there remains to be seen.

The Dax continued lower this week, moving back below its 50-day moving average. The RSI has fallen to test the 40 level, but due to its prior inability to clear the 60 level earlier in the rally remains in the bear range. That, combined with the long-term trend still being down keeps the focus on lower prices.

From last week: “This week saw the Nikkei break lower from a head and shoulders top. Traditional measuring targets suggest further declines to around the 15500 level, but quite likely lower.” The Nikkei moved lower and reached the head and shoulders target and exceeded it. For now, however, the market remains above support, but below both of its major moving averages. The long-term trend remains down, and the focus remains on a test of the critical February low.

Commodities

Gold continues to find support from the 50-day moving average, and the RSI also remains in the bull range, moving higher from above the 40 level. The long-term trend remains up, and the focus remains on higher prices, with another test of the March high expected.

Silver, which ha remained consistently weaker than Gold of late also moved higher this week, regaining both its 50 and 200-day moving averages. The RSI remains in the bull range, having found support from above the 40 level, so a push higher and change of trend to up remains on the cards.

The energy markets have had a bullish week, and they continue to look as though they may have put in a bottom. Both Crude Oil markets (Light and Brent) moved above their 50-day moving averages this week. Brent’s RSI closed at 59.53, just a touch below the 60 level. A decisive move through 60 would indicate further strength, and a change of long-term trend is coming into range.

Currencies

The dollar has mixed trading this week but remains in a long-term downtrend against everything but the British Pound. The dollar index made its lowest close on Friday since October last year, and the trend is still very much down. The index remains well below its moving averages, and the RSI is very much in the bear range, so the focus is towards lower levels over the coming weeks.

The dollar did manage to push the Pound lower, and the market appears to be finding resistance in the vicinity of its 50-day moving average. For now, the market is holding above key support, but that level could be tested this week. The RSI remains in the bear range.

Interest rate futures

Interest rate futures traded higher again this week. The 30 Year T-Bond continues to trade higher and remains above its rising 50-day moving average. We could yet see another test of the February high.

Similar price action is being seen in all markets in this sector at present, and the long-term trend remains up for interest rate futures across the board.

Good trading

Phil Seaton

LS Trader

Weekly Update – 3 April 2016 – LS Trader

Several markets completed a change of long-term trend this week, and there could be more to follow in the days ahead. US stocks continue to rise towards last year’s highs, but other global stock indexes are heading lower. The dollar has turned lower this week, and commodities have seen mixed trading.

Stocks

The S&P 500 has managed to grind out another week of the rally and has reached its highest level this year. From a bullish perspective, the market is above its major moving averages, and the RSI is in the bull range, but there is no question that the rally is tired. Volume continues to decline, as it has as the rally has extended to its current levels. For now, the long-term trend remains down, but a change of long-term trend to up is now within touching distance.

The picture is very similar for the Nasdaq 100, but the tech index remains considerably further below change of trend levels than the S&P 500. Seasonally, we’re still in a strong time of year. Historically, April is the best month of the year for the Dow 30, dating back to 1950. The S&P 500 and Nasdaq 100 are both highly correlated to the Dow, so higher prices certainly can’t be ruled out.

From last week: “The Dax continues to find resistance at the 60 level on the RSI, which suggests that the rally here too is running out of steam and that the market may turn lower again over the coming weeks.” The 60 level held firm on the RSI, and the market has rolled over as expected, back below the psychological 10,000 level. Here, the long-term trend remains down, and the RSI is still in the bear range.

Also from last week: “The Nikkei 225 remains the weakest of the four indexes and the most likely to turn lower first.” This week saw the Nikkei break lower from a head and shoulders top. Traditional measuring targets suggest further declines to around the 15500 level, but quite likely lower. The RSI has fallen through the 40 level, having been unable to break 60 during the earlier rally, and, therefore, remains in the bear range with the long-term trend being down. All this has happened at the same time that the US markets have reached their highest levels this year.

Commodities

Gold ended the week slightly ahead for the week but has seen a range of over $40 from low to high. The yellow metal has twice bounced almost exactly off its 50-day moving average. As we stated last week, if the trend is good, the RSI should hold above the 40 level. So far it has.

Silver has had a volatile week, which has included a big down day on Friday. As noted in previous weeks, Silver has remained considerably weaker than Gold and stays in a long-term downtrend.

All of the energy markets have seen weakness this week, and all remain in long-term downtrends. Whether we see new lows again remains to be seen, but these markets have fallen sufficiently over the past two weeks to suggest that is a possibility.

Currencies

The counter-trend strength seen in the dollar during the previous week reversed this week as expected, and it’s been a bad week for the dollar. This weakness has seen new lows in the Dollar Index, as well as a change of long-term trend for EUR/USD and USD/CHF. It has also seen the commodity-based currencies all move to new highs for this current move.

As we wrote in last week’s update, the dollar does remain in a long-term uptrend against the Pound. This week saw the Pound move above and then back below its 50-day moving average. The RSI has once again fallen short of the 60 level, and, therefore, remains in the bear range, so the focus is still towards a test of the February low at 1.3840.

Interest rate futures

Interest rate futures have moved higher this week, keeping the long-term uptrend intact. As before, all the markets in the sector remain above their major moving averages, and the RSI is also in the bull range. This suggests further strength ahead, but will to a large extent depend on what happens in the stock indexes over the coming weeks.

Good trading

Phil Seaton

LS Trader