Weekly Update 28 August 2016 – LS Trader

The past week has seen a continuation of light summer trade, with low volumes and low volatility continuing. That should start to change over the next week or so as we move into September.

Stocks

The S&P 500 hit a new all-time high on Tuesday but ended the week lower following a break of support on Friday. The S&P 500 has traded in an incredibly narrow range for most of the past couple of months. The long-term trend remains up, and the RSI is still in the bull range. Therefore, a breakout to new highs cannot be ruled out.

The Nasdaq 100 has also been trading in a tight range and was also subject to a break of support on Friday. As with the S&P 500, the trend remains up, and new highs remain very much within range.

The Dax had a spike lower on Monday, forming a very wide range day, the range of which remained intact for the remainder of the week. The low of the week was just below key support but did just about hold the trend line. The trend remains up here too, and the RSI remains in the bull range.

Commodities

The energy markets backed off from their recent highs this week, but with the exception of RBOB Gasoline, remain in long-term uptrends. We could quite possibly see upside breakouts this week in a few of the energy markets, particularly Natural Gas.

Copper has moved sharply lower this week, accelerating away from its 50-day moving average. A resumption of the long-term downtrend could be seen soon. The other metals have all seen continued weakness, but remain in long-term uptrends. The strongest metal continues to be Palladium, which has held above support this week.

The grains markets remain weak and in long-term downtrends. Wheat has already broken to a new low for the current move and other markets in the sector could follow suit this week.

As has been the case overall for much of the past couple of years, there is little to be bullish about in the commodities sector, with the majority of commodity markets still in long-term downtrends. Most of the best trading opportunities in these markets remain from the short side.

Currencies

The dollar put in a big move higher on Friday against many of the majors. This move was also seen clearly in the dollar index where the market close above its 50-day moving average. We may see a test of the 200-day moving average this week, which is currently at 95.83.

The Euro, which is a close inversion of the dollar index, moved sharply lower on Friday and closed below both its 50 and 200-day moving averages. The long-term trend is still up for the Euro, but a change of long-term trend to down is within range. A break of the sideways consolidation that the Euro has remained within for many months will likely result in a large move once the breakout is completed/

Interest rate futures

Interest rate futures moved lower this week, with the shorter-term markets being the weakest. The 3-month Eurodollar moved below its 200-day moving average and broke a key level of structural support, indicating lower levels ahead. The 3-month Eurodollar is the first market in the sector to complete a change of trend to down. The trend remains up for the remaining markets, but that could change over the coming weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update 21 August 2016 – LS Trader

Stocks briefly hit new highs this week but have been unable to decisively move higher on the back of low volume and volatility. These low volume conditions are quite typical of summer trading, which should see an increase in volume as traders and fund managers return to their trading desks at the beginning of September.

Stocks

The S&P 500 hit a new all-time high again this week but closed just one and a half points up for the week on Friday. Volatility is low, as is volume, but the trend remains bullish until proven otherwise.

The Nasdaq 100 hit an all-time high as well basis the cash index but has yet to hit the same high on the basis of the continuous futures contract. Price action in the tech index is very similar to that of the S&P 500, low volatility and volume. The long-term trend remains very much up in both indexes.

The long-term trend is also up in the Dax, but having moved above 10800 for the first time this year, gave back the recent gains, falling back to the breakout level. This level should act as support, which it has so far on a closing basis. Further below that there is also potential support should we get a retest of the trend line from the April 2015 high. If both of those levels give way, then we will likely see further decline down towards the 50-day moving average, but for now, the trend is up.

Commodities

The energy markets have continued their recent recovery, and some of the markets in the sector are on the verge of breakouts to the upside. This includes a potential head and shoulders bottom evident on the weekly Crude Oil continuous chart, which if completed would indicate significantly higher prices for Crude and the sector overall. The long-term trend is up for four of the five energy markets that we trade at LS Trader, the exception being RBOB Gasoline.

The grains markets continued their recovery as we indicated could be the case in last week’s update. A few markets in the sector had put in short-term reversal patterns, and we got confirmation of that in Wheat and Rough Rice this week.

Soybean Oil has been extremely bullish since printing the low back at the end of July and has now rallied to within range of a change of long-term trend to up. There is some weakness on the last two daily candles, known as a hanging man. This shows that the market is using up its buying power just to stay flat, and no real advance has been made. There could be some short-term weakness before this market launches further upwards to test trend-defining resistance.

Currencies

The currency markets, for the most part, are continuing their consolidation with very little in the way of trending conditions evident in any currency market at present. The dollar index fell to an eight-week low but has yet to breakout of the current consolidation pattern. Once it does, there will likely be some explosive moves, not just in the dollar index, but in other currencies as well.

The Euro remains in a consolidation that has now been in effect for 19 months, dating back to February 2015. Once this market breaks out, the resulting move could be huge.

Interest rate futures

The long-term trend remains up for all markets in the sector with the exception of the three-month Eurodollar. The longer-term interest rate futures markets are all trading around their 50-day moving averages in a fairly narrow range with low volatility. A volatility expansion, which should trigger an increase in all the key metrics, volume, momentum and price should result in a breakout from the range and a new trending phase over the next few weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update 14 August 2016 – LS Trader

The past week has seen strength in stocks sufficient for the S&P 500 to print new all-time highs. The Nasdaq 100’s rally has continued and is within touching distance of new all-time highs as well. The other sectors have seen mixed trading. The long-term trend is up for stocks and interest rate futures, and mixed for the dollar and commodities.

Stocks

The Dax broke through resistance formed at the April highs and from the trend line that has been in place since April 2015. The breakout completed a change of long-term trend and price continued higher following the breakout. The move has been confirmed by a decisive break of the 60 level on the RSI, which puts the Dax back into the bull range.

The Dax was not the only stock index displaying strength. The S&P 500 also reached new highs but has had little in the way of follow through and is trading in a very tight range. Volatility remains very low in the S&P 500, and this will not likely remain the case for much longer. Volume remains low.

The Nasdaq 100 also reached new highs for the current move and is now very close to reaching a new all-time high. The long-term trend is now up for three of the four stock indexes that we trade at LS Trader and remains in a long-term downtrend only in the Nikkei.

Commodities

The energy markets have continued their recovery from the sell-off that lasted from early June through to the start of this month. The long-term trend is still up for all markets in the sector with the exception of RBOB gasoline, which is the weakest market in the sector by quite some distance.

The grains markets, most of which have been in deep bear markets in recent times are showing signs of a potential bottom. For now, the long-term trend is down across the sector but there is a possibility that some of the short-term reversal patterns that were printed this week will be completed with upside confirmation over the next week or so.

The metals markets have again seen mixed trading. Both Gold and Silver continue to consolidate at not that far below their recent highs. Silver remains the strongest and is narrowly holding on to its uptrend. Palladium, which has been the strongest of the sector in recent weeks reached its highest level since June last year on Friday but a sharp reversal followed the next day to take the market back to test key support. Last week’s low needs to hold to keep the trend intact or we could see further selling. The long-term trend remains up and will likely do so for a considerable time yet.

Currencies

The dollar index continues to consolidate and trade mostly sideways as it has done for months. The index has in fact been in a consolidation since March 2015 and. This is one sector where breakouts are well overdue, as with the exception of moves seen in GBP/USD and USD/JPY, there has been little in the way of trending conditions in these markets. Once the dollar index does breakout from its range we should see some very large moves.

Interest rate futures

Interest rate futures continue to consolidate in what is quite a narrow range for these markets. The consolidation has gone on for about month. Such conditions rarely last for long, so we can expect a breakout from this range in the not too distant future. The long-term trend remains up for all markets in the sector with the exception of the 3 month Eurodollar.

Good trading

Phil Seaton

LS Trader

Weekly Update 7 August 2016 – LS Trader

The S&P 500 posted new all-time highs again this week and may be poised for a breakout higher even though there is little volume fueling the move and that we are in seasonally the weakest month of the year. The Nasdaq 100 is closing in on its all-time highs posted in March 2000.

The dollar has had a mixed week but could be heading for a long-term trend change to up, with the opposite move a possibility for the Euro. Interest rate futures have moved lower and commodities remain mixed.

Stocks

The S&P 500 broke short-term support on Tuesday but then rallied for four days to test the high of the year, closing just one point below that level. There is a good chance of a breakout to new highs this week. Volume remains low, as does volatility. The RSI has moved back above 60 and remains bullish.

The Nasdaq 100 continues to be the leader regarding recent strength. This week’s high of 4797.75 is now only 86.25 points below the all-time high for Nasdaq 100 futures, printed all the way back in March 2000. There still appears to be higher for this index to run, and we could see all-time highs soon.

The Dax reached its highest level since April this week but has been unable to clear resistance from the April high. It has also been unable to break the trend line from the 2015 high. There is therefore significant overhead resistance, but if price can break through, that would be bullish. The RSI is in the bull range, but the long-term trend is still down and requires a break of resistance for that to change.

The Nikkei regained its 50-day moving average this week, but the long-term trend remains down, and the RSI is in the bear range. The Nikkei continues to be impacted by a strong Yen and is the weakest of the four stock indexes that we trade at LS Trader.

Commodities

The energy markets put in a bit of a reversal this past week. This makes last week’s lows key swing levels in the crude oil markets. These lows should now provide some support, but if broken they may lead to significant selling and further weakness. The exception is Natural Gas, which still looks like it could be in the early stages of a new leg higher in spite of finishing lower this week. There are a couple of key resistance levels that need to be taken out, but if they are we could be off to the races.

The metals markets have seen some weakness this week. Copper has moved below both of its 50 and 200-day moving averages and remains in a long-term downtrend. Gold and Silver have also moved lower, with both markets possibly set to test support this week. Even Palladium, which has been the strongest of the metals markets in recent weeks has displayed some weakness and may also test support soon. For now, the long-term trend is up for all metals with the exception of Copper.

Currencies

From last week: “The Euro rallied to take out the 50-day moving average and should test the 200-day moving average this week.” The Euro did rally and test the 200-day moving average, but was unable to break through, printing a two-day bearish reversal pattern right at the long-term moving average. The long-term trend remains up for now but a test of some key support levels looks to be in the cards.

The dollar index, which is a near-perfect inversion of the Euro, regained its 200-day moving average on Friday. The long-term trend is still down for the index, but a change of trend to up is within range. The RSI remains in the bear range but could reach the 60 level soon.

Interest rate futures

Interest rate futures fell this week, but the sector remains in a long-term uptrend. The shorter-term markets were the weakest, and both the 5 & 10 Year T-notes fell to test their 50-day moving averages.

The 3-month Eurodollar is currently the weakest in the sector and is already below its 50-day moving average and set to test the 200-day moving average this week. The RSI has entered the bear range already, and it looks like we might have a top in on this market.

Good trading

Phil Seaton

LS Trader