Weekly Update 28 May 17 – LS Trader

The week ahead will be a shortened trading week due to the Memorial Day holiday in the US and the Bank Holiday in the UK.

The past week has seen US stocks print new all-time highs but has seen mixed trading in other asset classes. Commodities markets have been particularly weak with multiple markets extending their recent declines to new lows for the current move.

Stocks

US Stocks resumed the uptrend and rallied to new all-time highs. Price has rallied for seven consecutive days following the sharp decline seen back on the 17th May. That large black candle on the 17th was a high volume bar and therefore a key footprint in the market. The fact that the market was able to reverse and trade above that bar is a plus on the side of the bulls, as is the fact that the decline never broke the 40 level on the RSI, which is bull markets support. The RSI also broke back above 60 on Friday/

The negative is that volume has been declining as the rally has progressed. Fridays’ doji on the daily S&P 500 e-mini chart also suggests some indecision. Nonetheless, all-time highs are bullish, and the trend remains up.

Lean Hogs has had a good week, breaking decisively above key resistance to reach its highest level since July last year. Other commodities such as Coffee, Orange Juice, Sugar, Soybeans and Soybean Meal all fell to their lowest levels of their current moves as multiple commodity markets remain in long-term downtrends.

Commodities

The energy markets had been pushing tentatively higher until Thursday where a very large reversal bar was printed on the daily charts. This decline was partially recovered on Friday, but the energy markets are now back to the middle of their trading range. The long-term trend remains down.

The weakest market in the sector is Natural Gas, which has been trading in a box range for the past two months and is now trading just above support. Both recent rallies have been unable to take out bear market resistance on the RSI and the 200-day moving average.

Currencies

The dollar index fell to a new low for the current move on Monday but has been trading sideways to slightly up for the remainder of the week. The long-term trend is down for the dollar.

The Euro, which moves inversely to the dollar index, made new highs for the move on Monday and Tuesday but fell just shy of the 1.13 mark before trading lower for the rest of the week. The trend remains up, and the market is quite well above support.

The British Pound has had a poor week, trading lower every day and breaking support and is now trading at its lowest level since 21st April.

Interest rate futures

US Interest rate futures tested support but just about managed to hold on. All markets in the sector remain in long-term, uptrends, but price action is far from convincing. The increase in volume seen over the past few days is due to the rollover to the September contract.

The UK Long Gilt was the strongest of the interest rate futures sector, rallying to exceed their April highs and reaching their highest levels since September last year.

Good trading

Phil Seaton

LS Trader

Weekly Update 21 May 2017 – LS Trader

The stock markets saw a sharp increase in volatility this week with a very large reversal bar printing on Wednesday which took out the entire month’s trading to date! Weakness continued at the open on Thursday before a reversal higher which retraced around two-thirds of the decline.

Stocks

The S&P 500 printed a new all-time high on Tuesday before the sharp reversal seen on Wednesday which took out support and all the bars dating back to the 24th April. This down bar was on well above average volume and has left a major footprint on the charts. The two-day rally that followed was also on above average volume, so volume and volatility appear to finally be returning to the stock markets.

From last week on the Dax: “When markets don’t rally on what is perceived by most as good news, there is generally something not right. With volatility at elevated levels, for the past week or so, further pullback to fair value, currently at 12534 may follow.” The Dax did indeed pull back as expected and fell briefly below fair value on Wednesday and Thursday, before a minor recovery.

Similar price action was evident in the Nikkei, but the Japanese index held up better than its US counterparts and did not violate support.

Commodities

The energy markets have continued their recent short-term recovery following the sharp reversal that was seen back on the 5th May. The long-term trend remains down across the sector, so this is classified as a bear market rally. The RSI has recovered to test the 60 level and price is also testing the 200-day moving average, so next week will be an interesting one as multiple resistance levels will be tested.

The commodities markets remain mixed, with the majority still in long-term downtrends and a handful of markets, such as Orange Juice and Soybean Meal falling to new lows for the current move.

Sugar, which has been in a very nice downtrend for the past few months looks as though it may have bottomed and is now testing resistance. The long-term trend is clearly still down with price below its 50 and 200-day MAs. The RSI also remains in the bear range.

Currencies

From last week on the Dollar Index: “A 3-4 bar evening reversal pattern formed on the index and if Friday’s low is taken out early next week, may result in a test of this week’s lows.” Friday’s low was exceeded, as were the recent lows, so the index has now fallen to its lowest level since the 9th November.

Benefitting from dollar weakness, both the Euro and the British Pound rallied to new highs for the current move, with the latter closing above $1.30 for the first time since September last year.

Dollar weakness is evident against all the major currencies as these markets continue to gain against the dollar, even the commodity-based currencies of Australia, Canada and New Zealand, which have been the weakest of late. The Swiss franc also completed a key breakout this week out of a rectangle pattern that had encapsulated price action for all of this year to date. Friday made a nice clean breakout with a tall white candle and no upper shadow, known as a bullish marubozu. This suggests a strong market and continuation higher next week for the franc.

Interest rate futures

Interest rate futures did complete their recovery as expected and except the long bond, all made new highs for the current move. Some weakness was seen following the breakout, but the long-term trend remains up across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 14 May 2017 – LS Trader

The French Presidential election resulted in the expected outcome, and the anticipated sharp increase in volatility in European markets did not materialise. Both the Dax and the Euro moved lower following the result, which would have been the opposite of most market participant’s expectations.

Several stock markets made new all-time highs, or new multi-year highs as the bull market in stocks continues, albeit on muted volume and volatility. The currency markets have been mixed, and multiple other markets have made short-term reversals to move to align with the major trends.

Stocks

The Nasdaq 100 made new all-time highs again this week and continues to grind higher. The S&P 500 made a new all-time high on Monday before drifting lower for most of the week and continues to lag the Nasdaq 100.

The Nikkei crossed above the 20,000 level for the first time since 2015 and remains in an uptrend. However, a shooting star pattern has printed on the weekly charts. This may lead to a test of the prior resistance level, which should now act as support if this breakout is to continue.

The FTSE 100 made a new all-time high on Friday and closed above prior resistance. Volatility is expanding nicely, and the RSI has reached a bullish 67.91. There could be further to go for the UK market which has lagged global stocks for years.

The Dax pulled back this week, which was a case of buy the rumour and sell the fact after the markets got the expected Macron win by a comfortable margin in the French Presidential election. When markets don’t rally on what is perceived by most as good news, there is generally something not right. With volatility at elevated levels, for the past week or so, further pullback to fair value, currently at 12534 may follow.

Commodities

The energy markets have continued a sharp pullback this week, which started on the 5th May but remain in a long-term downtrend. The market has retraced to the area of prior support, which should now provide resistance. For this interpretation to be correct, the market needs to turn lower from not far above current levels. If it does, the head and shoulders pattern suggests that there is approximately another $10 of decline in the Crude Oil market, down to the $38 region.

Currencies

The Dollar Index fell to a new low for the current move on Monday before reversing higher to Thursday’s high. A 3-4 bar evening reversal pattern formed on the index and if Friday’s low is taken out early next week, may result in a test of this week’s lows.

The Euro has, of course, been the inverse of the Dollar Index, and printed a bullish morning star pattern from just above support to keep the uptrend intact. The British Pound was also lower but is holding just above support.

The currency markets remain mixed, as they have for a couple of years. Much of this is due to the very tight range that the Euro has been in. In fact, the 2-year range has been the tightest 2-year range in the history of the market. When a solid breakout does occur, a huge move is going to follow. It’s just a matter of when. When this does occur, that breakout move will unlock the other currency markets and many other markets that are impacted by the currency markets.

Interest rate futures

Interest rate futures may have completed their correction in the new uptrend, and all markets have printed bullish reversals this week, led by the shorter term markets. The three-month Eurodollar and 5 Year T-Notes have been the strongest and are leading the rally. Depending on which market in the sector we are looking at, the retracement was about 50% of the advance from the March low.

Good trading

Phil Seaton

LS Trader

Weekly Update 7th May 2017 – LS Trader

The coming week’s opening will be dominated by the outcome of the French Presidential Election on the 7th May, and that may lead to some volatility when the markets open Sunday night/Monday morning.

Stocks have been bullish, but the dollar has remained mixed, as have commodities. The energy markets took a battering until a partial recovery was seen on Friday.

Stocks

The Nasdaq 100 made a new all-time high again this week. The S&P 500 also made a new all-time closing high on Friday. Whether we see a continuation of strength this week may be determined by matters elsewhere. Either way, US stocks are bullish at this time.

The Dax also made new all-time highs this week, but huge volatility can be expected on Monday following the result of the election. If Macron does not win by a large margin, or if Le Pen wins against the odds, the Dax will very likely take a tumble. The Nikkei also completed a recover from the sell-off seen during April to reach its highest level since 2015.

Global stocks remain bullish, and all four indexes that we trade are in long-term uptrends.

Commodities

The energy markets showed further weakness this week with both Crude Oil markets breaking down to complete the anticipated trend change.

Silver continues to decline sharply, falling below the swing low at 1690 that we highlighted last week. Silver has now fallen from 1873.6 on the 17th April to 1621.5 on Thursday 4th May, 15 consecutive down days. Volatility has reached elevated levels, and the next level of support at 1582.8 will likely be strongly defended and attract some bottom fishers.

Sugar did continue with short-term strength and then reversed lower again, as we expected, printing new lows for the move on Thursday and Friday. Prices do not look overdone, nor is volatility even close to extreme levels, so with structural support not appearing until 14.00, low prices may yet be seen.

Currencies

It’s been an interesting week in the currency markets and the expected volatility on Sunday night/Monday due to the French Presidential elections will likely lead to some large moves this week.

The Dollar Index fell to new lows for the current move, and, perhaps critically, closed below major support. The trend is down for the dollar index, which is the inverse of EUR/USD. The Euro rallied to above 1.10 for the first time since November and appears to be finding support at the 200-day moving average.

The British Pound has reached its highest level since late September, but there is bearish divergence evident on the RSI. That does not mean that lower prices are imminent, merely that momentum has decreased. Here too, the 200-day MA appears to be providing support.

The Canadian dollar dropped to its lowest level since February 2016. There is a lot of room for further weakness in this pair (strength in USD/CAD), but Friday’s key reversal day puts that view under pressure in the short-term. The trend will need to reassert itself early this week as a move back into the prior trading range would suggest that trend had faltered.

Interest rate futures

Interest rate futures continued short-term weakness, and remain below their 200-day MAs. The 50-day MAs appear to be providing support at this time. The long-term trend remains up for the sector, but short-term weakness is evident.

Good trading

Phil Seaton

LS Trader