Weekly Update 29 May 2016 – LS Trader

Monday is a Bank Holiday in the UK and Memorial Day in the US, so nearly all markets will be closed.

Stocks have moved higher this week and the S&P 500, currently the strongest of the indexes we trade, is closing in on a new all-time high. The past week has also seen the dollar continue its recovery, as well as further strength in numerous commodities.

Stocks

The S&P 500 remains bullish and in a long-term uptrend. The potential head and shoulders top formation that we wrote about last week was violated by Wednesday’s move above the right shoulder. This week saw a sizeable up move, confirmed by a break above 60 on the RSI, which is bullish. This suggests that a test of the April high is imminent. Volume, however, continues to decline, which indicates that the current rally is lacking sponsorship. However, if we get a break to new highs this can quickly change, and there’s no reason that we can’t see a rally in the S&P from current levels.

The trend remains down for the other three stock indices that we trade at LS Trader, but strength has been seen there too. The Nasdaq 100 traded well through both its 50 and 200-day moving averages and looks set for a test of the April high. If that April high is breached, that will put paid to the possible broadening top formation that we have discussed here in recent weeks, and would shift the weight of the evidence and the long-term trend to bullish.

Commodities

Soybean Meal made another big move this week, taking our gains on this trade to well over 1000 points since we entered at 297.50 back on the 14th April. However, there are a few signs that are concerning in the short-term for the bull case. Thursday’s long-legged doji, which also closed in the bottom half of the day could have marked the top for now, especially since Friday pushed below Thursday’s low on an intraday basis. The RSI also reached 82.56, which indicates a slight bearish divergence on the daily chart.

However, the trend is unquestionably still up and bullish and as yet there is insufficient evidence to confirm that the trend is over, so we remain long and continue to give the trade a bit more room to breathe. If support is breached and we get stopped out, this trade will still have locked in huge gains and will be the most profitable trade of the year to date.

The energy markets continue to grind higher. Currently, Crude Oil is trading within an 18-week channel that began in the last week of January. The top of this channel has been tested three times in the last two weeks, but as yet, no upside breakout. With the long-term trend being up and the RSI in the bull range, the odds favour a breakout from this channel. If the breakout does occur, we could see further rally towards our next target around 58.00. Brent Crude is in a similar pattern and Thursday’s price printed above $50 for the first time since November last year.

Sugar continues to move higher and has this week reached its highest level since January 2016. The 14-month head and shoulders bottom that is evident on the weekly charts suggests further advance towards the 21.00 area over the coming months.

Currencies

The dollar’s continued recovery continues to suggest that the low printed on the 3rd May on the dollar index was a key reversal low, and that price will continue to grind higher. The dollar index is now holding above the 5-day moving averaged may test the 200-day, currently at 96.07 this week. The RSI is also testing the 60 level on the RSI. A decisive move through this level would also indicate further strength. For now, the long-term trend remains down for the dollar against all the majors.

Interest rate futures

Interest rate futures continue to consolidate in a 16-week descending triangle pattern, basis the 30 Year T-Bond. For now, the long-term trend remains up, but a breakout from this consolidation should yield a decent move in the direction of the eventual breakout.

Good trading

Phil Seaton

LS Trader

Weekly Update 22 May 2016 – LS Trader

The dollar has continued to advance over the past week, but the long-term trend is still down. There is potential for further dollar strength in the short-term, but we will need to see quite a bit more strength over the coming weeks for a change of long-term trend to be completed.

The commodity markets are continuing their early stages of a recovery from a deep and multi-year bear market, and stocks are consolidating just above critical support levels. It is, therefore, likely that the consolidation phase that has been present in many markets in recent months will be resolved soon, and there is potential for some very large moves in a handful of markets.

Stocks

The stock markets continue with indecisive trade in what is clearly a consolidation before the next significant move. With the exception of the S&P 500, the long-term trend for global stock indexes is down, so the odds favour a downside resolution to the current trading range.

The S&P 500 is forming a possible head and shoulders top formation which would be confirmed on a break of Thursday’s low at 2022. If that level is broken, we will likely see the 200-day moving average tested, and the 40 level on the RSI should also be tested. If the head and shoulders pattern is to reach its measured target of 1943, price will have gone well below the long-term moving average and will be deep in the bear range on the RSI. However, the change of long-term trend to down levels remain out of range, so this pattern will likely fall short of its target.

Due to the long-term trend already being down, the Nasdaq 100 is weaker than the S&P 500 and when shorting its best to sell short the weakest market. That suggests that the Nasdaq 100 will be the first to break down and also has more downside potential, with the major support being not far below current levels. We still have the broadening top formation possibly setting up, which, as we have covered in recent weeks would result in a significant device for this index, moving well below the February low at 3853.

Commodities

It’s all really about Soybeans and Soybean Meal in the commodity markets at present. Although there is a return to strength in a number of commodities markets at present, the two soybean markets are the only ones making large moves and large moves they are. Our current Soybean Meal position has open profits of just short of ten times initial risk, a ten-bagger, and as of now, the trend is not over. Our target of 375 was easily reached and exceeded, as meal rallied higher to 395.40 on Friday, before closing at 392.70 basis the July contract. That’s almost 1000 points higher than our entry price of 297.50 back on the 14th April.

Although it’s much less bullish in terms of price action, Soybeans, due to the current set up may move considerably higher yet and could be stronger than Mean over the coming weeks. Soybean Meal’s advance is almost parabolic, but Soybeans has consolidated for a few days. Based on the completed bull flag pattern and other measuring techniques, July Soybeans may push towards 1202 over the coming weeks.

Currencies

The dollar’s recent recovery has continued this week, with price on the dollar index moving back above the 50-day moving average for the first time since early March. When viewed at weekly chart level, the lows from 2015 represent major support. The brief dip below that support level and subsequent reversal to regain that support level, followed by further advance since suggests that the low printed on the 3rd May could well have been a key reversal low and that the dollar may continue higher from here over the coming weeks. For now, the long-term trend is still down for the dollar.

Interest rate futures

The long-term trend remains up across the interest rate futures sector, but strength seen in recent weeks ran out of steam at just below key resistance levels, so the breakouts that we were looking for did not occur. Currently, price is back in the middle of the range that has contained price for the past few months. A breakout in either direction could yield a significant move.

Good trading

Phil Seaton

LS Trader

Weekly Update 15 May 2016 – LS Trader

The past week has seen stocks move slightly lower whilst the dollar has continued its recent recovery. The long-term trends are mostly down for stocks already ( the exception being the S&P 500) and are also down for the dollar. Whether the dollar rallies sufficiently over the summer to complete a change of long-term trend to up remains to be seen.

Stocks

The stock markets ended the week lower. The S&P 500, currently the strongest of the four indexes that we trade at LS Trader, and the only one of the four in a long-term uptrend, fell to test its 50-day moving average this week. For now, price remains above both its 50 and 200-day moving averages and the RSI is also in the bull range. If we see additional weakness this week, with support at 2030.5 broken, we may also see the 40 level broken on the RSI. This would indicate further weakness over the coming weeks.

The Nasdaq 100 remains weaker and is also below both of its moving averages, and, more importantly, the RSI is already in the bear range. To continue to monitor the potential brooding top formation in this index, which if the stop competes would indicate sharply lower levels over the coming months. It’s possible that we will see critical support tested this week.

Commodities

The commodity markets continue to show signs of strength, although not yet anywhere near across the board. This week may see a critical change of long-term trend to up in more of the energies sector as most markets in this sector look set to test trend-defining resistance. Crude Oil already completed a change of trend to up for the first time in a couple of years, but as yet has been unable to break decisively higher.

The grains markets, particularly Soybean Meal and Soybeans have seen further strength this week. Soybean Meal reached and exceeded our 363 target and may yet continue higher towards our next target at 375. Based on the weekly chart we have a new high in price accompanied by a new high in momentum, which keeps the focus towards higher levels. Things are less bullish at daily chart level, where there is bearish divergence evident between price and RSI, and where volatility remains elevated.

Silver looks as though it will fall short of our 1850 target at this time. The market fell below the 60 level on the RSI, which is something that we did not want to see if our target was to be reached. The market has tested support on Friday and has held above it, but we will likely see support tested again this week. It’s possible that we will see further weakness this week before the long-term trend resumes.

Gold has also shown weakness along with Silver, and the RSI also dropped below 60. Here the market is also holding above support, but that level may also be tested this week. The long-term trend for both precious metals is still very much up, and we can look for our 1350 target in Gold and our 1850 target in Silver to be reached over the coming weeks after the current correction ends.

Not all metals are in long-term uptrends. Copper, which failed to breakout to a new long-term uptrend back in March has resumed its long-term downtrend this week, falling to its lowest level since mid-February. The RSI here has fallen back into the bear range. This does not bode well for the global economy, and we may see further weakness down to major support at 194.70 over the summer.

Currencies

The dollar has continued its recent recovery, but for now, it remains in a long-term downtrend against all the majors with the exception of the British Pound.

Interest rate futures

Interest rate futures are edging higher towards a test of critical resistance. We could see several markets in this sector breakout this week and print their highest levels since the spike high in February. The long-term trend remains up across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 8 May 2016 – LS Trader

The past week has been a good week for the dollar, where several key reversals have been seen. It has also seen stocks continue lower. The stock indexes that we trade at LS Trader may resume their long-term downtrends this week. Currently, only the S&P 500 remains in a long-term uptrend. The commodities markets, on the whole, continue to move higher. The CRB index this week reach 409.75, its highest level since July last year, and significantly above its 351.90 low print in January of this year.

Stocks

The S&P 500 continued lower this week, breaking support and moving briefly below its 50-day moving average. Friday saw a bit of a reversal day, taking the market back above the 50-day MA. The long-term trend is still up, and the RSI is still holding above bull market support at 40. If we see 40 give way on the RSI, then we will likely see further weakness down towards a test of the 200-day moving average.

From last week: “Price has moved below both its 50 and 200-day moving averages. Additionally, the RSI has broken below the 40 level for the first time since February. This all points to lower prices and a resumption of the long-term downtrend over the coming weeks.” Price has seen further weakness this week, and the Nasdaq continued to move lower. A resumption of the downtrend will be confirmed if prices break the next level of support. The possible broadening top formation that we have written about in recent weeks indicates a significant move lower over the coming months to well below the February low.

The Nikkei has consolidated this week, but that may just be a pause before the selling, and the long-term downtrend continues. The RSI is just about holding above bull market support at 40, but a test of the next level of support at the April lows will be expected if the RSI moves below 40, and possibly a test of the February lows to follow.

Commodities

Silver reached a new high for the current move on Monday but pulled back over the next few days. The long-term trend is still up and even with recent weakness, the RSI is above the 60 level. It’s a bullish sign if the RSI can hold above 60 and as long as that continues we can expect a rally back above last week’s high and possibly higher towards our 1850 target calculated from the breakout from the 16-month wedge and the neckline of an inverted head and shoulders pattern.

Gold has had a mixed week, having first printed a new high for the current move before pulling back. The RSI dipped briefly below the 60 level but has since regained it. As with Silver, we’d like to see the RSI remain above 60, and if it does, we might see further strength towards the 1350 level.

Soybean Meal reached the first of our targets at 349.50 and, in spite of highly volatile trading, remains on course to continue higher towards our next target at 363 further out.

The energy markets were mostly lower this week but stayed within range of a change of long-term trend to up. This could be very significant if completed, as the long-term trend has been down for almost two years, a time when the price was still above the $100 level in the Crude Oil markets.

Currencies

The dollar index put in a key reversal having found support from just below the critical level that we wrote about last week. This was highlighted by the bullish reversal candle printed on Tuesday, where a long lower shadow is very evident on the daily chart. This move indicates that the bulls took over with a rejection of new lows and strong buying. The index continued higher for the rest of the week but remains in a long-term downtrend. The RSI is also in the bear range.

This dollar strength was also seen against the other majors, which includes the Euro, a near perfect inversion of the dollar index. It was also evident against the Yen but on a smaller scale. Whether this dollar strength continues over the next week or so remains to be seen. The long-term trend is still against the dollar almost across the board.

Interest rate futures

Interest rate futures moved higher this week, having found support on the RSI around the 40 level. The week began with a bullish engulfing pattern completing on Tuesday and strength seen through to Friday until new highs were rejected.

The long-term trend remains up across the sector, and there is a possibility of a resumption of the long-term uptrend with a breakout to the highest price levels seen since the spike high back in February.

Good trading

Phil Seaton

LS Trader

Weekly Update 1 May 2016 – LS Trader

The past week has seen some big moves in commodities, where metals and grains markets have made large moves higher. The energy markets are also showing continuing signs of strength, and there may be a change of long-term trend in the energy sector this week. Commodities, on the whole, continue to move higher as we see further evidence that the commodity bear market is over. Commodity strength has been boosted by a resumption of the long-term downtrend for the dollar, where the dollar index has dropped to its lowest level since August.

Stocks

The S&P 500 has been unable to make any headway above all-time highs and appears to be rolling over. For now, the long-term trend is still up, with the RSI holding above bull market support at 40. Price is also above short-term support and the 50-day moving average. However, with the weakness seen in other global stock indexes, we may see both of these tested in the coming week.

We continue to monitor the broadening top formation on the Nasdaq 100, which has long-term bearish implications if the setup is completed. This week has seen short-term support broken and price move below both its 50 and 200-day moving averages. Additionally, the RSI has broken below the 40 level for the first time since February. This all points to lower prices and a resumption of the long-term downtrend over the coming weeks.

The Nikkei is also showing considerable weakness having been unable to hold above the 200-day moving average. Price dropped sharply on Thursday, moving well through the 50-day moving average. The RSI has also fallen to the 40 level, and we will likely see that level decisively broken this week, which would result in a return to the bear range for the Japanese index and would suggest a resumption of the long-term downtrend was imminent.

Commodities

Silver has traded higher throughout the week and continues to head towards our 1850 target calculated from the breakout from the 16-month wedge and the neckline of an inverted head and shoulders pattern.

Gold has also seen strength this week, breaking above the March high, with the breakout confirmed by the RSI breaking the 60 level. In recent weeks, we’ve mentioned the possibility of a head and shoulders top formation in Gold. This week’s break above the right shoulder and subsequently the head means that pattern has failed. Using standard failed head and shoulders price projections indicated further strength towards the 1350 level.

Soybeans and Soybean Meal have shot higher again this week, with Soybean Meal both markets recovering from the sell-off on the previous Friday to reach new highs. Soybean Meal is the stronger of the two, and we’re targeting the next level of resistance at 349.50 and possibly 363 further out.

Currencies

The dollar’s long-term weakness resumed this week, and the dollar index has fallen to a precarious position just above the next level of critical long-term support at the August low. If this level is decisively broken on a closing basis, we could see an acceleration lower as any remaining longs are likely to capitulate. The RSI sliced through the 40 level this week and remains in the bear range, with the long-term trend still down.

Dollar index weakness always correlates inversely with EUR/USD strength. The Euro has, therefore, risen right up to test key resistance and we could see a breakout this week in EUR/USD, which would be a resumption of the long-term uptrend.

Interest rate futures

Interest rate futures continue to trade around the 50-day moving average. The RSI briefly dipped below the 40 level but did not break it decisively, which just about keeps the RSI in the bull range. The long-term trend remains up for the sector, but price is effectively range-bound as it has been for the past couple of months since the spike high in the middle of February.

Good trading

Phil Seaton

LS Trader