Weekly Update 30 April 2017 – LS Trader

The past week has seen the Nasdaq 100 make new all-time highs and has seen the Dollar Index drop to its lowest level this year. The Dollar remains mixed with strength in some markets and weakness in others. Strength is being seen in the stock markets and we could see the S&P 500 make a new all-time high this week.

Stocks

In last week’s update, we wrote on the Nasdaq 100: “Friday’s close was the highest weekly closing price of all time. All time weekly closing highs are not a bearish characteristic!”. The Nasdaq 100 continues to make new all-time highs but the technical picture is not fully supportive of further strength. On the plus side, volatility and momentum are expanding, which is what we like to see in a trending market, but volume is not materialising.

The S&P 500 came within a few points of a new all-time high but failed at resistance. The technical picture for the S&P 500 is similar to the Nasdaq, but the S&P is weaker.

Commodities

The energy markets continued with anticipated weakness, but so far only RBOB Gasoline has made the downside breakout, which confirmed a change of trend to down. Both Crude markets have declined to levels not far above trend-defining support. A change of trend to down could be completed in the next week or so if weakness persists.

Silver declined sharply this week having fallen below its 200-day MA on Monday. This has taken the RSI into the bear range and suggests a test of the swing low at 1690.6 may follow.

Gold was also lower this week and continues to consolidate around fair value. Volume and volatility have declined in concert with price, which suggests that weakness seen over the past two weeks is corrective.

Palladium is currently the strongest from the metals complex and this week reached its highest level since March 2015. If resistance can be cleared, the focus will shift higher towards 913, the 104 high.

Sugar fell to its lowest level in over a year, but printed a three-day bullish reversal pattern at the end of the week, and also a bullish hammer on the weekly chart. This suggests that we may see some additional short-term strength, but the trend remains down and the market is below resistance.

Currencies

The currency markets have shown some signs of life this week with a few breakouts being seen. As yet, there has been little in the way of follow through. The currency markets do remain mixed, with dollar strength being seen in some markets and weakness in others. The long-term trend picture is also mixed.

The British Pound has reached its highest level since late September and is pressing gradually higher on slightly above average volume. The RSI has reached 72.6, a level not seen in almost two years.

The Canadian dollar fell through clearly defined support and dropped to its lowest level since February 2016. There is a lot of room for further weakness in this pair (strength in USD/CAD).

The Kiwi also fell to its lowest level this year and looks set to test the December low, which, if broken, could open the way to significant further declines.

The dollar index dropped to its lowest level this year but has since regained the prior support level. The index is at a critical juncture, the resolution of which may determine the overall direction for the dollar for months to come.

Interest rate futures

Interest rate futures have had a mixed week, with weakness seen during the first half of the week. Long lower shadows are evident on the daily candles, which shows that buyers are entering the markets at these levels, which is just about keeping some of these trends intact. The long-term trend is up across the sector and strength may yet resume.

Good trading

Phil Seaton

LS Trader

Weekly Update 23 April 17 – LS Trader

The first round of the French Presidential elections occurs on Sunday, with exit polls being available around 7 pm on Sunday night. This has the potential to move a few markets about, particularly the Euro, Dax, and to a lesser extent the British Pound, depending on the outcome. The current polling data shows that the race is very close but has Fillon and Le Pen being the two candidates to go forward, with Macron very close behind, but Brexit and Trump have both shown previously how unreliable polls can be!

Stocks

The stock indexes have seen mixed trading. The S&P 500 has regained its 50-day moving average but continues to lag the Nasdaq 100 and remains 50 points below its all-time high, which was last posted back on the 1st March.

The Nasdaq remains close to its all-time high, which was posted earlier this month. However, Friday’s close was the highest weekly closing price of all time. All time weekly closing highs are not a bearish characteristic! This shows that the trend for stocks is still up, even though there has been some short-term weakness. However, volatility continues to decline, and volume is below average.

The Dax broke support to bring the current uptrend to an end for now, but the market is finding support at its 50-day MA, and the long-term trend is up.

The Nikkei remains the weakest of the four global stock indexes that we trade at LS Trader. Here, the Nikkei dipped briefly below its 200-day MA last week but has yet to close below it. This week saw a minor recovery rally, which keeps the long-term trend up. However, the RSI is already in the bear range, and that suggests that the recent low and 200-day MA will be tested again soon. The possibility of a change of long-term trend to down remains.

Commodities

The energy markets have had a bearish week and look set to decline further to test major trend-defining support. Friday’s price action saw Crude Oil close back below $50 per barrel for the first time this month.

Gold made a new high for the current move on Monday but has so far been unable to cross the $1300 level. Price has since pulled back, but the uptrend remains intact for now. Silver did not fare so well following its new high for the move, and pulled back to below its 50-day MA on Thursday, closing below it on Friday. The 200-day MA sits just below prices at 1777, and support can be expected around that area. The long-term trend remains up.

Currencies

The big move in the currency markets came from the British Pound, which caught a lot of traders on the wrong side of the market. The COT data shows a near record number of traders positioned short on this market. The break above resistance resulted in forced short covering for many traders and a huge spike higher. Since the large move higher on the 18th, the market has consolidated slightly, but the long-term trend for the Pound is now up.

However, the currency markets remain mixed and continue to favour the dollar overall. The Canadian dollar has been pushed lower towards a major shelf of support (resistance for USD/CAD). The dollar has been threatening to move higher against the Canadian dollar for a long time. Will this breakout, if it occurs, be the start of the next leg up for the dollar? Time will tell.

Interest rate futures

The 5-Year T-Note and 3 Month Eurodollar both completed changes of long-term trend to up this week as expected. The long-term trend for all the interest rate futures markets is now up. Since interest rate prices and rates more inversely, this means that the trend for interest rates in both the UK and the US is now lower, which is the complete opposite of what most people expect.

Good trading

Phil Seaton

LS Trader

Weekly Update 16 April 17 – LS Trader

The last week was a shortened trading week with the markets closed on Friday. Monday is a Bank Holiday in the UK, but most global markets will be open as normal.

Many markets appear to be on the verge of some large moves. Although we have yet to see any sustained trends, which have been sorely lacking so far this year, there are multiple markets that are positioned quite nicely for some extended trends.

Stocks

The S&P 500 closed below its 50-day moving average for the first time since November last year. The RSI also fell into the bear range, also for the first time since November. These both indicate further short-term weakness ahead, particularly if the swing low at 2317.5 is taken out on a closing basis.

The Nasdaq 100 broke short-term support but remains above its 50-day MA and also above its March lows. As with the S&P 500, if the March lows are broken, further weakness could be seen. For now, the Nasdaq’s RSI remains above bull market support, which Friday’s print at 43.43. A decisive move below 40 would also indicate further weakness.

The Nikkei is even weaker and broke medium-term support this week. The Nikkei could now be heading for a trend change to down. A test of the 200-day MA, currently at 18325 should be tested this week. The RSI has already moved deeply into the bear range, printing 27.79 on Friday, its lowest level since February 2016.

The Dax is the strongest of the four indexes in the short-term and is currently holding just above support. However, support could be tested this week.

For now, the long-term trend is up for all four indexes. Only the Nikkei has a change of trend to down within range. It will take considerable weakness for a change of trend for the US markets.

Commodities

Gold and Silver broke resistance and both confirmed changes of long-term trend to up in the process. Gold reached its highest level since November and appears to have stabilised above both its 50 and 200-day MAs. The RSI is bullish any 72.22, well into the bull range. Volatility is expanding along with price, as is momentum. All of these are supportive of further advance. The two slight negatives are the doji, an indecision bar, printed on Friday, and the fact that volume is not increasing. Silver, which also broke above resistance this week, has also printed a doji on Friday and closed just a touch back below prior resistance. We’d like to see a decisive close back above last week’s highs, ideally on increasing volume to indicate that this trend has legs.

Currencies

The US dollar index fell back below its 50-day MA but remains above its 200-day MA and trend-defining support. The dollar remains in a long-term uptrend across the board.

However, weakness in the dollar has been seen against the Yen, where the dollar has fallen to its lowest level since November. This week saw price close below its 200-day MA of the first time in five months and has also seen the RSI fall to 30.09, well into the bear range. This is the lowest RSI reading since June last year. A change of long-term trend to down could be completed this week.

The Euro continues to trade below its 50-day MA as it has since the end of last month, but remains in the middle of the trading range that has been in place since December.

The British Pound has edged up towards the higher end of the box range that has been in pace since October but remains in a long-term downtrend.

Interest rate futures

Interest rate futures continued their recent good run and made multi-month highs in the process. The long-term trend is now up for the 30 Year T-Bond, 10 Year T-Note and UK Long Gilt. Both the 5 Year T-Note and 3 Month Eurodollar (March 18 contract) could complete a change of trend to up this week.

As we have written recently, speculators have a near record short position in interest rate futures, which leaves these markets prone to a short squeeze, forced short covering and further rally. This continues to suggest that interest rates will fall, not rise, which is the opposite of the currently popular view. Let’s see what unfolds.

Good trading

Phil Seaton

LS Trader

Weekly Update 9 April 2017 – LS Trader

Several markets have shown an increase in volatility this week, and we could be entering a more active period in the markets. We saw multiple key levels tested in the markets and a change of trend to up complete for the 30-Year T-Bond. Gold and Silver are also close to a change of trend to up, and that could complete this week. The dollar has also seen some renewed strength and remains in a long-term uptrend. Multiple long dollar breakouts are within range this week.

Stocks

The S&P 500 ended the week lower by just 0.3% but had been lower before finding support right at the 50-day moving average. The long-term trend remains up.

The Dax made a 2-year high on Monday, just shy of our long-standing target at 12429.5, which is the all-time high for the Dax printed back in April 2015. Price pulled back into Thursday’s low before a minor recovery but ended the week lower. The long-term trend is still up, and price remains above support and considerably above its 50-day MA.

The Nasdaq 100 remains the strongest of the three indexes and printed a new all-time high on Wednesday. In spite of weakness during the latter half of the week, the Nasdaq remains well above support and clearly still in a long-term uptrend. Volatility declined to its lowest level since early October.

The Nikkei remains the weakest of the four stock indexes that we trade at LS Trader and this week made two attempts at breaking the bottom of the rectangle that has been in place since December. Both Thursday and Friday’s candle show long bullish shadows, which show that buyers are coming in at those levels. The long-term remains up, but a close below Friday’s low would suggest further weakness back to the 200-day MA, currently at 18314.

Commodities

The energy markets had another bullish week, with Crude Oil regaining the 50-day MA and price retracting more than 50% of the decline from the December high. Price also moved back above its 200-day MA and broke the 60 level on the RSI, also for the first time since December. The long-term trend remains up.

Sugar continued its recent decline, and fell to its lowest level since May last year, and possibly still ha further to run to the downside, in spite of some strength seen on Thursday and Friday.

The Soybeans markets all made new lows for the current move. Soybean Oil is the weakest commodity so far this year and is down 9.5% in 2017.

Gold rallied to its highest level since November, before printing a shooting star reversal on Friday as the breakout was rejected. However, Friday’s high takes this market to within range of a change of long-term trend to up. The trend for Gold has been down since November. Silver remains weaker but is also within range of trend-defining resistance.

Currencies

The Dollar Index moved back above its 50-day MA this week, and the RSI is testing the 60 level on the RSI. If 60 is broken, we can expect further strength towards the March highs, a break of which would be bullish and would suggest that the Index was going to rally further to test the January high.

The dollar has also gained ground against most of the major currencies and has multiple breakouts within range, the closest of which is the Aussie, which price closed below its 200-day MA and just pips away from a breakout and a resumption of the long-term downtrend. The failure of the Aussie to break the November high resulted in a double top and suggests that should the breakout be successful, we may see weakness back to the December low, which is over 350 pips below Friday’s close.

Interest rate futures

Interest rate futures continued their recent strength, and the 30 Year-T-Bond broke briefly above resistance on Friday before the highs were rejected. Price remains between the 50 and 200-day MAs, and the 50 MA may now provide support. The UK Long Gilt remains the strongest in the sector, this week reaching its highest level since October. A change of long-term trend is within range for the remaining markets in the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 2 April 2017 – LS Trader

The Nasdaq 100 printed a new all-time high this week, but the S&P 500 did not. The S&P 500 has not made a new high since the 1st of March. The dollar put in a substantial reversal to keep the long term bull trend intact, and interest rate futures remain at a pivotal juncture.

Stocks

The S&P 500 fell to its lowest level since the middle of February on Monday before finding support in the region of the 50-day moving average and printing a bullish hammer reversal. Price continued higher through to Friday. As per our comments last week, Tuesday the wide range bar on the 21st was the largest daily bar of the year to date. This bar also fell on significant volume. This will leave a high-volume resistance blueprint on the chart. If the high of that bar, 2378.75, is exceeded, all-time highs will likely be tested once again. The long-term trend is still up.

The Nasdaq 100, as has been the case recently, was stronger than the S&P 500 and did print new all-time highs on Thursday and Friday. Although new all-time highs must always be considered bullish, two indecision candles on Thursday and Friday do put a dampener on the new highs, as does the below average volume. However, we must continue to follow the trend until it is broken.

The Dax also had a bullish week, with five straight up closes. This brings the Dax to within range of our long-standing target at 12429.5, which is the all-time high for the Dax printed two years ago in April 2015.

Commodities

The energy markets have had a bullish week and remain in long-term uptrends. Crude Oil’s rally has retraced just a few ticks shy of its 38.2% retracement of the decline from the December high and looks set to test its 50-day MA this week, currently at 51.43.

Sugar broke the sloping neckline of an arguable head and shoulders top pattern this week on the weekly chart. Sloping neckline patterns are less reliable that horizontal necklines, but nonetheless, the standard measuring method suggests that Sugar has potentially much further to fall. The LS Trader system already has nice profits locked in on this trade since we entered back on the 7th March at 19.02, with potentially much further to go.

The Soybeans complex is also heading south. We wrote a few weeks back that a potentially significant move was building up in Soybean Meal and that a volatility expansion and price breakout was highly likely to occur. That move has since started to materialise, and the price trend has been confirmed by volatility and volume expansion. Regarding chart structure, the September 2016 low at 294.10 represents a possible target. The move in Soybeans is more mature than the move in meal, and volatility is reaching elevated levels already. Support can be expected around 934.

Currencies

In last week’s update, we wrote about keyword support and resistance levels on the Dollar Index and Euro respectively. Both levels were tested and exceeded on an intraday basis, but both levels effectively held and big reversals followed, keeping the long-term trend in favour of the dollar.

Interest rate futures

Interest rate futures have consolidated this week. The long bond remains in a range between its 50 and 200-day MAs and is holding just below a key resistance area. The Commitments of Traders Data (COT) has shown a near record short position for speculators and hedge funds in recent weeks. If we get a rally above resistance that would catch many on the wrong side of the market and could lead to a massive wave of short covering and a rally.

The vast majority of market participants continue to think that we are in an environment of higher rates (futures prices move inversely to rates) and are positioned accordingly. This set up presents a potentially excellent opportunity on the long side if resistance is decisively broken. The 200-day MA is within range in all markets in the sector, and that will be the first target should resistance be taken out.

Good trading

Phil Seaton

LS Trader