Weekly Update – 27 May 2018 – LS Trader

This coming week will be a shortened trading week due to the Bank Holiday in the UK and the Memorial Day holiday in the US. As of Friday’s close, the long-term trends remained up for US stocks, up for the Dollar, down for interest rate futures and mixed for commodities.

Stocks

The Nasdaq 100 continues to grind higher. The current market pattern is that of a massive failed head and shoulders pattern, which if correct would give targets of over 800 points above current price levels. That move could get underway with a breakout this week, which if successful may lead to a test of the March 13 all-time highs.

The S&P 500 has consolidated since breaking out of a large symmetrical triangle pattern. The upper boundary of the triangle from above has been tested, and the market remains above the triangle. The RSI is funding resistance at the 60 level, but a break above last week’s highs may see the RSI move decisively above 60 and the bull market resume.

Commodities

The energy markets moved sharply lower this week, stopping us out of our long Crude Oil trade. We remain long the remaining markets in the sector but have tight stops. A breach of last week’s lows will likely usher in a deeper correction.

From last week on Lumber: “It’s possible that the top may have been seen on Friday with the daily charts printing a key reversal day and ending the day limit down. This may be the beginning of a corrective decline. However, it’s been a hugely successful trade, and the market remains above support. Price action early next week will be critical, or this market may unravel swiftly.”

Last week’s comments were right on target, and the Friday mentioned was the top, at least for now. The market did unravel sharply with a couple of limit-down moves, which resulted in us exiting a hugely profitable long trade, which was also our most profitable trade of 2018 to date.

Corn made its highest print in almost two years but has printed a long-legged doji pattern on the weekly chart, which reflects indecision. The trend remains up, and the market is above well-defined short-term support.

Currencies

Last week on the British Pound: “Bullish divergence appears in downtrends. The more critical factor is the test of support. If support is broken, there is room for a further decline to the $1.3150 area.” The Pound broke support and has continued lower following the breakout. The trend remains down. Two potential bullish factors are bullish momentum divergence setup (no trigger) and very bearish sentiment. The last time sentiment was this negative against Sterling the Pound was almost 1000 pips lower against the dollar.

Interest rate futures

Last week on interest rate futures: “The only bullish thing for the sector at present is the near-record net long position for commercials on the COT report. With commercials near record net long and large speculators near-record net short, there is the possibility of a sharp move to the upside.”

The COT bullish commercials profile proved to be bang on, and interest rate futures rallied sharply. However, price action was a bear market rally, and the long-term trend is still down. We may see a resumption of that downtrend over the coming weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update – 20 May 2018 – LS Trader

The past week has seen stocks consolidate but has also seen continued strength in the energy markets and the dollar, and weakness in metals. The long-term trends remain up for US stocks, down for metals and interest rate futures, up for energies and sideways to up for the dollar.

Stocks

Strength remains evident in the US stock markets, where the long-term trend is still up. As mentioned in last week’s update, one possible interpretation of the Nasdaq 100 is that of a large failed head and shoulders pattern, which if correct would give targets of over 800 points above current price levels.

The S&P 500 has also broken out of a large symmetrical triangle pattern during last week’s trading and tested the upper boundary of the triangle from above this week. However, the S&P 500 is considerably weaker than the Nasdaq 100 in terms of chart construction and proximity to their respective all-time highs.

Commodities

Gold moved sharply lower on Tuesday this week following the failure to break resistance the previous week. This week’s decline took prices to their lowest level this year, and the long-term trend remains down.

Lumber continued to make new all-time highs with a series of limit up moves. We cautioned in last week’s update that a top was likely due based on extreme bullish sentiment, bearish momentum divergence and other factors that we measure at LS Trader. It’s possible that the top may have been seen on Friday with the daily charts printing a key reversal day and ending the day limit down. This may be the beginning of a corrective decline. However, it’s been a hugely successful trade, and the market remains above support. Price action early next week will be critical, or this market may unravel swiftly.

Currencies

From last week: “There was insufficient strength in the Dollar Index to complete a trend change to up, and the Pound has held up just above the key trend change level. However, if dollar strength resumes this week, both trades could get triggered.” The Dollar Index did complete a change of trend to up as the rally continued, printing the index’s highest price since mid-December.

The British Pound has so far held support, and there has been a lessening of momentum as the decline has persisted. There is very slight bullish momentum divergence setting up on the chart but as we have said many times before that does not mean a bottom is imminent. Bullish divergence appears in downtrends. The more critical factor is the test of support. If support is broken, there is room for a further decline to the $1.3150 area.

The Australian Dollar has been unable to break resistance so far but came very close to doing so. A short-term head and shoulders pattern is forming which will either mark the bottom of fail and indicate a much lower move. We will know soon enough.

Interest rate futures

Interest rate futures all remain in long-term downtrends, and all US futures moved to new lows for the current move. However, there was some bullish price action on Friday, but the long-term trend is down. The only bullish thing for the sector at present is the near-record net long position for commercials on the COT report. With commercials near record net long and large speculators near-record net short, there is the possibility of a sharp move to the upside.

Good trading

Phil Seaton

LS Trader

Weekly Update – 13 May 2018 – LS Trader

US stocks have continued to recover from the sell-off earlier this year and show signs of renewed strength. It’s possible that we will see further strength and breakouts to new all-time highs over the coming weeks.

Stocks

The US stock indices remain in a long-term uptrend and have shown renewed strength this week. The S&P 500 has this week broken out of a large 3-month descending triangle. This breakout has been accompanied by a move above 60 on the RSI, which places the RSI back in the bull range for the first time since February. Volatility is at low levels and is starting to expand again which suggests this market has higher to run to the upside.

The Nasdaq 100 is stronger still and this weeks strength, which has also occurred on expanding volatility from low levels and a return to the bull range on the RSI suggests that further strength and new all-time highs will be seen in the coming months. This week’s price action has also completed the failure of the head and shoulders top, which if correct, projects a rally higher towards 7828, over 800 points higher than current levels.

Commodities

It’s important to always remember that we trade a market of commodities, not a commodities market. This means that each market must be assessed and traded on its own individual merits and chart structure. Some commodities can move up whilst others can move down.

The energy markets moved sharply lower on Tuesday but recovered to hit new highs for the current move on Thursday and all remain in uptrends. Natural Gas, which has been the laggard in this sector for a long time, is within range of an upside breakout.

Lumber remains a very strong market and has hit new all-time highs again. However, there are some reasons to have one eye on the exit. Sentiment has been and remains extremely high, and there is bearish divergence momentum setup that could potentially trigger this week. However, even if this trade does get stopped out it has been a huge winner for the LS Trader system.

Currencies

From last week: “The dollar continues to gain ground against many of the majors and we could see changes of the long-term trend against the British Pound and Euro, as well as in the dollar index itself over the next few weeks.” The dollar did complete a change of trend against the Euro, but some strength has been seen since the breakout. There was insufficient strength in the Dollar Index to complete a trend change to up, and the Pound has held up just above the key trend change level. However, if dollar strength resumes this week both trades could get triggered.

Interest rate futures

Interest rate futures moved slightly lower this week having been unable to clear resistance during the prior week. These markets, therefore, all remain in long-term downtrends.

Good trading

Phil Seaton

LS Trader

Weekly Update – 6 May 2018 – LS Trader

This week has seen continued dollar strength and we now have the dollar in a new long-term uptrend against a couple of the majors with possibly more to come this week.

The stock markets remain mixed, as do commodities. Interest rate futures are consolidating near their recent lows and remain in a long-term downtrend.

Stocks

The US stock indices have had a mixed week but the Nasdaq 100 ended higher by 1.61%, but both remain some way off their recent all-time highs and need considerable further strength before the uptrend resumes if indeed, it does.

The Dax and Nikkei, the two stock indexes that we trade which are already in long-term downtrends are roughly in the middle of the range from their January highs and February lows. A breakout in either direction is currently out of range.

Commodities

The energy markets shrugged off their recent correct, rallying from just above a key support level and went on to make new highs for the current move. Light Crude Oil came just 3 cents short of printing $70 for the first time since November 2014. Brent Crude remains the stronger of the two in terms of price, having hit $75.61 this week. The long-term trend remains up for the sector, but Natural Gas continues to lag.

Gold and Silver broke to the downside having broken support but have so far been unable to press further to the downside. The long-term trend is now down for all four metals that we trade at LS Trader.

From last week: “Lumber continues to run and shows no sign of stopping at present. There is no bearish divergence in momentum. The only negative is that sentiment is extremely bullish.” Lumber rallied to new all-time highs again. Sentiment remains extremely bullish, yet volatility is moderate and there is no momentum divergence, so we could have further to run.

Corn made its highest print in almost two years as several of the grains markets resume strength. Cotton also made its highest print in almost a year.

Currencies

From last week: “However, dollar strength is becoming evident against several of the major currencies, having already broken out against the Swiss franc this week. A change of long-term trend is within range for the Australian dollar this week, where major support is likely to be tested.” The Australian dollar broke support as expected to complete a long-term trend change to down, but so far without follow through.

The dollar continues to gain ground against many of the majors and we could see changes of the long-term trend against the British Pound and Euro, as well as in the dollar index itself over the next few weeks.

Interest rate futures

Interest rate futures continued their short-term corrective rally this week and came close to testing resistance, which has so far held firm. The long-term trend remains bearish and the RSI is in the bear range, where it has been since September last year.

Good trading

Phil Seaton

LS Trader