Weekly Update 27 August 2017 – LS Trader

It’s been a reasonably quiet week in the markets which is to be expected as we come towards the end of light summer trading. Monday is a Bank Holiday in the UK, and the following Monday (4th September) is the Labour Day Holiday in the US. This should, therefore, be the last week of low volume trading as traders return to their desks on the 5th September.

Stocks

The S&P 500 fell to new lows since the 11th July on Monday but found support, printing a 4-bar morning reversal pattern, which will now be key short-term support. The rally seen this week has taken the market back to closing right on the 50-day moving average, with price roughly in the middle of the range of the past three months. Last week’s low and further below that the 2395 levels look to be the key support points and the market must be viewed as bullish above those levels. The Nasdaq 100 shows a very similar setup, with key short-term support at 5752.5. 5560 looks to be the critical support level at present.

In spite of recent weakness, it should not be forgotten that price in both US markets is still very close to new all-time highs. Also to be considered is the historical weakness that is often seen in September, which is still the biggest losing month in percentage terms since 1950. One way or the other, the recent low volatility period is likely to come to an end over the next month or so.

Commodities

Copper has had a bullish week and printed a very bullish candle on the weekly chart which also took prices to their highest level since November 2014. Volatility is elevated on the weekly chart where we have seen seven consecutive up weeks. Friday’s doji suggests indecision, so we may see some sideways/corrective action early next week, but the long-term trend remains intact with targets at 330 later this year.

Palladium made another new high print since March 2001 this week and continued to move higher, although the price action this week has been a little less convincing with most of this week’s candles having small real bodies. This suggests that the market may be getting a little tired and there is divergence between price and RSI. However, the long-term trend remains, and we continue to look for further rally towards all-time highs (1090) later this year.

Currencies

The Euro rallied to a new high late on Friday before dipping back to close below resistance. The Dollar Index also had a nibble at recent support on Friday but was unable to break through. The long-term trend remains down for the dollar and the week ahead could be interesting. Volatility in the dollar index has fallen to very low levels so a sizeable move could be on the horizon.

Interest rate futures

Interest rate futures continue to edge higher. We wrote in last week’s update that a decisive move above 60 on the RSI would likely lead to an upside breakout. The RSI continues to hug the 60 level and has yet to decisively clear it, but price action suggests that it might. There’s a decent probability of upside breakouts this week above the June highs and a resumption of the long-term uptrend. The surge in volume on Friday was due to the September contract rolling forward to December.

Good trading

Phil Seaton

LS Trader

Weekly Update 20 August 2017 – LS Trader

Stock indexes have seen mixed but volatile trade this week, but continue to display short-term weakness against the long-term uptrend which remains intact for now. The dollar has seen a bounce over the past two weeks, but that may have run its course. Price action in Gold has been very interesting and will be one to watch this week, as discussed below.

Stocks

Stocks have had a volatile week. Having found support at the prior week’s lows, the S&P 500 rallied through to Wednesday’s high before turning lower again, moving back below the 50-day moving average and the previous week’s low. This has seen the RSI drop below the 40 level, which is bull market support, and the uptrend is now under pressure.

The Nasdaq 100 has seen similar price action but held above the prior week’s low, and the RSI also held bull market support at 40, meaning that, for now, the Nasdaq is slightly healthier. However, a breach of 5761 would likely lead to a break of 40 on the RSI and may lead to further weakness back to medium-term support at 5560.

The Dax managed to hang on to support and quickly got back above its 200-day MA, almost reaching the 50-day MA before turning lower again. This index continues to look weak and is likely to be the first index to complete a change of long-term trend to down.

Commodities

Gold rallied to resistance to the tick, basis the back-adjusted continuous contract, matching the 1306.90 high that was printed on the 17th April. On the non-back-adjusted contract, Friday’s high exceeded the June and April highs mentioned last week on an intraday basis, but then quickly reversed, forming a falling off the roof pattern with a shooting star on the daily chart. This is ugly price action in the short-term and suggests that the market may move lower again next week. However, if Friday’s high can be taken out, that would be a bullish breakout to the upside. Therefore, Gold is at a key inflection point and price action early this week should be telling.

Copper and Palladium continue to lead the way higher for the metals. Copper cleared the 295.50 resistance level mentioned last week, printing a new high for the move at 298.25, before falling back and closing below prior resistance. However, price action still looks bullish, and the RSI remains above the 60 level.

Palladium made new highs again for the current move and took out the 913 resistance level to reach its highest level since March 2001. As we wrote last week, we now could see further rally towards all-time highs (1090) later this year.

Currencies

The dollar pushed higher against most of the majors this week, bringing the last two remaining currency trades we had open to an end. This resulted in the LS Trader system banking 696 pips profit from our long EUR/USD trade, where we had been long since 25th April. This was the second most profitable trade of the year to date. We also banked 211 pips profit from our short Dollar Index trade, where we had been short since the 28th June.

This counter-trend dollar rally now has us flat the currency markets, but that may not remain the case for long as several currencies are within range of breaking out again. Of particular interest is the Japanese Yen, where a range has been in place for all of 2017 to date. A successful breakout to the upside (Yen strength/dollar weakness) could be worth around 500 pips and could see the Yen head up towards parity against the dollar over the coming months.

Interest rate futures

Interest rate futures are gradually grinding higher. The 30 Year T-Bond continues to find resistance right at the 60-level on the RSI and therefore remains in the bear range. A decisive breakout above 60 would likely lead to a test of the June high and a possible breakout.

The shorter end of the yield curve has seen similar price action but is slightly more bullish, and a breakout could be seen this week, especially if stock market weakness persists. The long-term trend remains up for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 13 August 2017 – LS Trader

The past week saw the expected weakness in stocks and a continuation of the counter trend rally in the dollar against most of the majors. For now, the long-term trend remains up for stocks, although some short-term technical damage has been done. The long-term downtrend remains intact for the dollar in spite of the recent bounce.

Stocks

From last week: “August has been the worst month of the year for the S&P 500 since 1988 and given the extent of the recent rally and lack of volume and volatility; a correction is well overdue.”

We saw a big move down in stocks on Thursday this week as short-term support was broken. This continues weakness in the stock indexes since the outside-downside day on the 27th July where the Nasdaq 100 printed new all-time highs. This is not good price action to be coupled with new all-time highs. Price action has been similar in both the S&P 500 and the Nasdaq, and the break of support brings the uptrend to an end for the short-term, but the long-term picture and trend remain bullish, for now.

The Dax has been weaker still and is the weakest of the four stock indexes we trade at LS Trader. Price this week fell to and found support at the 200-day moving average. The RSI fell back below the 40-level, which is bull market support, and the RSI is therefore now in the bear range. A close below last week’s low would be bearish and suggest a change of long-term trend to down was imminent.

Commodities

Strength has been seen this week in the metals markets. Gold began the week lower but bounced right off its 200-day AM and rallied higher towards resistance around the $1300 level. Gold has broken the downward sloping trend line from the 2011 all-time high this week. A breakout above the April and June highs in Gold could be seen soon, and the bullish case is building. Silver remains weaker than Gold but also rallied. However, resistance has been found at the 200-day MA, and the trend for Silver is still down.

The stronger of the two metals markets, and the two that the LS Trader system currently has long positions in are Copper and Palladium. Copper rallied to its highest level since May 2015 but has run into resistance at the 295.50 level. Palladium reached its highest level since September 2014, but multi-year resistance at 913 continues to hold firm. If that level can be decisively broken, we could see further rally towards all-time highs (1090) later this year.

The energy markets continue to grapple with the 200-day MA as sideways trade continues and there is nothing doing in the energy markets at present.

Currencies

The dollar gained against most of the majors but was lower against the Euro. The dollar index also ended the week lower having earlier tested resistance. We could see the Dollar Index test the recent low. It should be noted that this week’s close on the Dollar Index is the lowest weekly close since April. The 91.36 low printed in the first week of May basis the back-adjusted continuation charge is a major support zone which will likely be vigourosuly defended. If that level is broken, then we could see longer-term declines towards the 86 level.

Interest rate futures

Interest rate futures displayed some strength this week to close higher for the second consecutive week, but Friday’s indecision bar on the Long Bond keeps these markets range bound for now. However, the shorter-term markets are closing in on a test of resistance, and we could see a breakout in the 5 Year T-note as early as Monday. The long-term trend remains up across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 6 Aug 2017 – LS Trader

The dollar has regained some of its recent declines against the majors following an extended period of dollar weakness that has resulted in high volatility readings in several current markets, including the dollar index and the Euro.

Stocks have pulled back since the latest all-time highs printed on the 27th July and are trading in a narrow range just above short-term support.

The long-term trends remain unchanged and are still up for stocks and interest rate futures, down for the dollar, where a corrective rally is expected, and mixed for commodities.

Stocks

Both the S&P 500 and the Nasdaq 100 failed to make new all-time highs this week, and both are undergoing volatility compression and are trading in a narrow range. August has been the worst month of the year for the S&P 500 since 1988 and given the extent of the recent rally and lack of volume and volatility; a correction is well overdue. However, the long-term trend is unquestionably up, and the market remains above short-term support.

The Dax found support at last week’s lows and pushed higher on Friday as the Euro declined. The index remains between its 50 and 200-day moving averages and may recover further if Euro weakness persists. For now, the long-term trend remains up, but this index remains the most likely of the four we trade at LS Trader to complete a trend change to down.

Commodities

The rally in the energy markets since the lows printed back in late June appears to have paused, with resistance found at the 200-day MA. The RSI has moved above the 60 level but has been unable to push on decisively. Therefore, with the long-term trend remaining down, there is considerable resistance at Monday’s highs and the 200-day MA.

Natural Gas remains the weakest by far of the energy sector, and Friday’s low was the lowest print for NG since early March.

Gold’s rally ran out of steam this week with the market unable to clear the $1280 level. Some weakness has been seen in all the metals as Copper, Palladium and Silver have also pulled back. With the exception of Silver, the long-term trend remains up for the metals.

Currencies

The dollar’s weakness may have run its course for now as we have seen the dollar gain almost across the board this week. The Euro reached its highest level since January 2015 but has seen a fairly aggressive pullback since the high on Wednesday. This has resulted in a bearish shooting star on the weekly chart as well as extreme high volatility readings on the daily and weekly charts.

The dollar index has, of course, done the opposite, and also has extreme volatility readings at daily and weekly level. This suggests that we can expect further dollar rally over the next week or so as we get some mean reversion against the primary trend.

Interest rate futures

Interest rate futures continue to undergo volatility compression and remain range-bound. The long-term trend remains up for all markets in the sector, but a breakout above the July highs is required before these markets will be of any interest.

Good trading

Phil Seaton

LS Trader