Weekly Update – 24 June 2018 – LS Trader

The past week has seen the Nasdaq 100 make new all-time highs but then pull back from those highs towards the end of the week. The dollar has had a mixed week with new highs for the current move being seen in the Dollar Index and a few of the majors, but a reversal was seen during the latter part of the week.

The long-term trends remain up for stocks and the dollar, down for interest rate futures and mixed for commodities.

Stocks

From last week on the Nasdaq 100: “The one negative is that there is a bearish divergence between price and RSI, which indicates a slight weakening of momentum.”

The S&P 500 did have an expansion of volatility this week as expected, particularly on Tuesday where there was a sharp move lower which we swiftly reversed, keeping the uptrend intact.

The Dax has seen considerable weakness over the past two weeks following the failure to breakout above 13186. Price has fallen back to the middle of the range between the late January high and the March low. A head and shoulders pattern is forming on the weekly charts, but additional weakness is required to complete the pattern.

Commodities

Last week on Copper: “The Commitment Of Traders (COT) profile has large speculators at a record net long position, so with the market being unable to breakout to the upside this week we may see a further unwind of long positions and continued weakness.” Weakness continued this week, and a downside breakout is very much within range early this week. Commercials have a record net short position which suggests weakness will continue and support will be broken this week, resuming the long-term downtrend.

Gold fell to new lows for the year and may continue to decline towards the next level of support around $1250. Silver and Palladium have also seen weakness and the long-term downtrend could resume this week.

The energy markets saw a significant bounce on Friday. Crude Oil was higher by 5.71% on Friday and 7.86% on the week. The long-term trend remains up across the sector, and we may see continued strength back towards a test of the May highs.

Currencies

The dollar saw continued strength this week until a reversal on Thursday. The long-term trends currently favour the dollar, but a correction has been overdue with sentiment being extremely negative for most of the majors. Typically, when sentiment gets this low, a short-term reversal, correcting the prior trend is not too far away. We have seen some of that this week with several majors bouncing higher from their recent lows.

Interest rate futures

The long-term trend remains down for interest rate futures, and the markets continue to consolidate in a narrow range. Volatility has compressed on both daily and weekly charts, and this suggests that a range expansion will be seen soon. For now, these markets remain rangebound.

Good trading

Phil Seaton

LS Trader

Weekly Update – 17 June 2018 – LS Trader

The past week has seen the Nasdaq 100 print new-all time highs and has seen some volatility in the currency markets, as is often the case during the week of the FOMC meeting. The volatility resolved itself in favour of the Dollar, which is in line with the current long-term trend.

Stocks

The Nasdaq 100 rallied for most of the week and printed new all-time highs once again. There was some weakness on Friday, but the lows of the day bounced right off the former resistance line, which is now acting as support. The long-term trend remains up, and there is further room for this market to run. Volatility has expanded into the sweet spot for trend continuation. The one negative is that there is a bearish divergence between price and RSI, which indicates a slight weakening of momentum.

The S&P 500 has effectively gone nowhere this week, trading in a very narrow range. Small range bars such as this on the weekly chart accompanied by low volatility suggest that a more significant move is imminent.

Commodities

Copper failed to complete the potential upside breakout that we wrote about last week and turned sharply lower, keeping the long-term downtrend intact. This has taken the market back to the middle of this year’s trading range and has both upside and downside breakouts within range. The Commitment Of Traders (COT) profile has large speculators at a record net long position, so with the market being unable to breakout to the upside this week we may see a further unwind of long positions and continued weakness.

We have written in recent weeks about the narrow range in Gold and suggested that a breakout of that range would likely result in a decent move in the direction of the breakout, particularly if the breakout came to the downside, in the direction of the long-term trend. The market tested resistance on Thursday, was unable to push through and reversed sharply, gapping lower on Friday morning and printing a wide-bodied bar to the downside, trading well through support. This weakness took Gold to its lowest level this year.

Except for Natural Gas, the energy markets have seen continued weakness this week as the record net long large speculation position continues to be unwound. The RSI is testing bull market support on Brent Crude, and a decisive move below that level would also point to continued weakness against the prevailing long-term trend.

Currencies

From last week on the Dollar Index: “The pullback has taken the market back to fair value, so we may see strength return over the next week or so. The long-term trend continues to favour the Dollar Index, as it also favours the Dollar against all the majors except for the Japanese Yen.” The Dollar reversed higher right on cue and is now moving higher across with board, with multiple breakouts in range this week, even against the Japanese Yen, where the long-term trend has been against the Dollar.

Interest rate futures

Interest rate futures remain rangebound near the recent lows, and the long-term trend remains in a long-term downtrend. As before, commercials remain near a record net long position with large specs near a record net short position. This COT profile continues to suggest the potential for an additional counter-trend rally, but for now, the long-term trend remains down

Good trading

Phil Seaton

LS Trader

Weekly Update – 10 June 2018 – LS Trader

The Nasdaq 100 did break out to new all-time highs, and the S&P 500 also broke out of its range, with as we suggested last week. The dollar has also had the expected pullback. The long-term trend remains up for stocks and the dollar, down for interest rates and mixed for commodities.

Stocks

From last week on the Nasdaq 100: “We did get the breakout and Friday saw very bullish price action combined with a decisive move above 60 on the RSI. The next target is for a retest of the March all-time high.” The Nasdaq reached and exceeded the March all-time high in line with our comments last week. However, there has been a pullback since and the market has closed back below prior resistance.

Also from last week on the S&P 500: “The S&P 500 continues to probe resistance on price and RSI, and a breakout to the upside could be seen this week.” The RSI did breakout from the range of the past two months and may now continue higher towards its own test of all-time highs.

Commodities

Cotton did pullback early in the week as we suggested might happen, but the long-term trend is still clearly up and the second half of the week saw bullish price action and Friday’s close was the highest close since March 2014.

Copper has had a very bullish week, and price action has closed above what would have been the right shoulder of a potential head and shoulders top. The neckline of this pattern has been tested multiple times over the past several months and has held firm. This week’s price action means that the head and shoulders pattern is a failed pattern and that has bullish potential and if the upside breakout is successful would give upside targets in the 375 region.

Currencies

The Dollar Index saw the expected weakness continue this week after sentiment had reached extreme levels. The pullback has taken the market back to fair value so we may see strength return over the next week or so. The long-term trend continues to favour the Dollar Index, as it also favours the Dollar against all the majors except for the Japanese Yen.

Interest rate futures

Interest rate futures have pulled back to the middle of the price range of the past few months. The long-term trend remains down for now. However, there are some potential bullish points which suggest a bottom may be in for now and that we might see further strength. These include the very bullish COT profile where commercials have huge long positions in all markets in the sector. Also, the RSI is back in the bull range. There is also bullish divergence on momentum indicators. This suggests that there is potential for further counter-trend rallies. However, these will be voided if the market prints new lows for the current move.

Good trading

Phil Seaton

LS Trader

Weekly Update – 3 June 2018 – LS Trader

The long-term trend remains bullish for US stocks. The Nasdaq 100 has seen bullish price action this week and may head back to test all-time highs. The S&P 500 remains weaker but may also breakout this week.

A look at the monthly and weekly charts confirms that the uptrend is still intact in spite of what the perma-bears will say, who will no doubt be complaining this week that the market is wrong. It’s a mistake to fight the trend because the market is where it is because that is where it is supposed to be, and it’s supposed to be where it is because that’s where it is!

Stocks

From last week on the Nasdaq 100: “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.” We did get the breakout and Friday saw very bullish price action combined with a decisive move above 60 on the RSI. The next target is for a retest of the March all-time high.

Also from last week on the S&P 500: “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.” The S&P 500 continues to probe resistance on price and RSI, and a breakout to the upside could be seen this week.

Commodities

Cotton rallied to its highest level in over four years this week. The trend remains bullish but volatility is reaching an extreme and sentiment is also highly bullish so a short-term pullback may be forthcoming in the next week or so. However, the long-term trend is well established, and we may see a further rally in the longer-term.

Gold remains in a long-term downtrend and has traded in a near $20 range for the past two weeks. A break to the upside from that range will indicate that the downtrend is over for now, whereas a break to the downside through the May lows would point towards further weakness to around $1250, approximately $50 lower than Friday’s close.

Currencies

The Dollar Index ran into resistance at the November highs at just over 95.00 and has been unable to break through so far. The Euro, which is the inverse of the Dollar Index has been weaker (stronger dollar) and made its lowest print since July last year. The long-term trend continues to favour the dollar, although sentiment had become extremely negative against the Euro and bullish for the Dollar that a correction was due.

Interest rate futures

Last week on interest rate futures: “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.”

The rallied stalled at resistance from the early April high and turned lower. Commercials have a near-record net long position on the 10 Year T-Note in the COT report so there may yet be higher to go to the upside before the downtrend fully resumes.

Good trading

Phil Seaton

LS Trader