Weekly Update – 28 October 2018 – LS Trader

The stock market sell-off continued this week, and the long-term trend is now down for stocks. The dollar has seen some strength, as have interest rate futures. The long-term trends are currently down for stocks, up for the dollar, down for interest rate futures and mixed for commodities.

Stocks

The depth of the sell-off in global stocks has been sufficient to change the long-term trend to down for all four stock indices we trade at LS Trader. This week’s weakness has seen the Nikkei, Nasdaq 100 and S&P all complete changes of trend to down, joining the Dax, which was already in a long-term downtrend.

Commodities

Palladium hit a new all-time high as forecasted here in recent weeks. Palladium remains the strongest of the metals and currently the only one in a long-term uptrend. Gold also rallied and made its highest print since mid-July.

The energy markets remain mixed but have seen weakness over the last month. RBOB Gasoline completed a change of long-term trend to down and is the first in the energy sector to do so. This week’s low was the lowest print since February.

Grains remain in a long-term downtrend except for Oats, the strongest in the sector, and Rough Rice.

Currencies

From last week: “Breakouts could be seen in favour of the dollar against a few of the major currencies this week, and the dollar index may also test its mid-august high.” Dollar strength resumed this week in several markets, with the Dollar Index breaking out to new highs for the current move. The dollar also broke out against the Euro and Swiss franc. The long-term trend currently favours the dollar against all of the majors.

Interest rate futures

Interest rate futures have rallied this week, moving inversely to stocks as part of a flight to safety. The long-term trend remains down for interest rate futures except for the UK Long Gilt, which remains in a long-term uptrend. Gilts could complete a breakout to the upside this week and continue to be the strongest market in the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 21 October 2018 – LS Trader

The past week has been relatively quiet in comparison to recent weeks, but the long-term trends remain in effect. In spite of recent weakness in stocks, the long-term trends are still bullish for US stocks and the Nikkei. Only the Dax is in a downtrend. Interest rate futures remain in a downtrend. The trend remains mixed for commodities and down for interest rate futures.

Stocks

The Dax remains the weakest of the four stock index markets that we trade at LS Trader and is the only one currently in a long-term downtrend. The remaining three markets all currently remain long-term bullish but a change of trend to down is within range. Whether that change of trend completes remains to be seen. Once we get beyond this month, the historical seasonal record is bullish. At weekly chart level the RSI for the Nasdaq 100, S&P 500 and Nikkei 225 are all still in the bull range and above 40. Until this changes, the focus remains to the upside.

Commodities

Metals continue to show signs of turning bullish, although currently, the only metal in a long-term uptrend is Palladium, which looks set to print new all-time highs in the coming weeks. All the metals markets have recently seen commercial buying activity, which in the case of Silver is the first time in history. This is likely a bullish development longer-term, but as yet price action does not confirm it. Copper is forming a head and shoulders bottom but requires further rally to test the neckline.

Currencies

The dollar remains in a long-term uptrend and has moved higher this week. Breakouts could be seen in favour of the dollar against a few of the major currencies this week, and the dollar index may also test its mid-august high.

Interest rate futures

Interest rate futures remain in a long-term downtrend. Short-term markets remain the weakest, with the 3-month Eurodollar printing its lowest level for the current move, and also its lowest print in almost four years. The long-term trend remains down for all US markets but is still up for UK Long Gilts.

Good trading

Phil Seaton

LS Trader

Weekly Update – 14 October 2018 – LS Trader

The past week has seen the most volatility in the markets since the prior stock market top in late January. This volatility has filtered through into many other market sectors, bringing an end to a few current trends. However, none of last week’s moves has resulted in a long-term trend change, so the trends remain as before, up for stocks (Dax being the exception), up for the dollar, down for interest rates and mixed for commodities.

Stocks

From last week on the S&P 500: “Weakness at the end of the week has violated a 14-week trend line that has been in place since July.” This week’s selling unquestionably represents a change of character in the stock markets. Wednesday’s bar was the biggest bar in a long time and was accompanied by heavy volume, which indicates institutional selling. However, the weekly and monthly charts still show a clear uptrend and the long-term trend is still up.

Also from last week: “The Nasdaq 100 completed a double top pattern on an intraday, but not a closing basis. That pattern would project to another 300 points of decline.” Selling resumed this week in the Nasdaq 100 and the 300 point decline projected from the double top pattern was easily exceeded. The long-term trend remains up, but a change of trend to down is within range.

The Dax, which has been the weakest of the indices we trade at LS Trader and the only one currently in a downtrend, triggered a short entry on Monday as the neckline of a large head and shoulders top was broken, as was a nine-year trend line, which had been in place since the March 2009 low.

Commodities

Gold rallied to its highest level since the 1st August, breaking above resistance and bringing an end to a very profitable downtrend, one in which the LS Trader system had been short since the 1st May. As mentioned in previous weeks, the chances of a bottom in the metals markets has increased due to commercials taking a rare net long position in Gold (first time they have been net long since 2001), and Silver, where they are long for the first time since the COT data has been recorded. Palladium, of course, is the leader of the metals and the only one currently in a long-term uptrend. Interestingly, commercials are still net short Palladium, which possibly indicates how much farther this market has to run over the coming months and years.

Currencies

The Australian and New Zealand dollars broke to new lows for the current move, but overall, the dollar has seen weakness this week. The long-term trend continues to favour the dollar against all the majors with the expiration of the Swiss franc.

The British Pound has seen some strength this week and is moving within range of a potential long-term trend change to up. That may surprise many who have a negative view of Brexit. However, note that commercials have been accumulating a significant net long position for the past few months, which is currently not that far shy of an all-time net long position.

Interest rate futures

From last week on the 30 Year T-Bond: “The right shoulder low at 141.09 was broken, which invalidates the potential head and shoulder bottom and now projects further weakness towards 135.” Prices fell to a new multi-year low this week at 136.50 before reversing higher. All markets in the sector moved higher this week in contra trend rallies as stocks fell. However, the long-term trend remains down for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 7 October 2018 – LS Trader

The past week has seen stocks pull back from all-time highs, the dollar rally resume, interest rate futures continue their decline to multi-year lows, and energy markets rally to multi-year highs. Market conditions are as expected for the final quarter of the year, which is often the best time of year for market trends.

Stocks

The stock markets reversed sharply this week after the S&P 500 failed to make a new all-time high on Wednesday and declines followed through to the weekend. Weakness at the end of the week has violated a 14-week trend line that has been in place since July.

The Nasdaq 100 completed a double top pattern on an intraday, but not a closing basis. That pattern would project to another 300 points of decline. However, there was decent buying action coming in from the lows of Friday which may halt the declines and be a spring back to higher prices. The long-term trend remains up.

The Nikkei has also seen weakness having fallen just short of our target of 24690. Last week’s lows now represent key support for the short-term.

Commodities

From last week: “Palladium is the strong horse in the sector, but Friday’s candle was a doji, and with both volatility and sentiment at very high levels, we may see a correction soon. The long-term trend, however, remains up, and a test of all-time highs which were printed back in January at 1124.9 may be seen over the coming weeks.” Palladium did correct lower as expected but has helped above support, keeping the uptrend intact.

The energy markets have seen further strength this week with all markets in the sector rallying to new highs for the current move.

Currencies

From last week: “USD/JPY has continued higher to reach its highest level since December 2017. This week’s price action has consolidated above the top of a symmetrical triangle that dates back to 2015. This suggests that the current move has a long way yet to run over the medium-term timeframe.” The dollar continued its rally against the Yen this week, as it has against the other majors. Renewed dollar strength has seen it push the Australian and New Zealand dollars to new lows for the current move.

Interest rate futures

From last week on the 30 Year T-Bond: “The right shoulder low at 141.09 was broken, which invalidates the potential head and shoulder bottom and now projects further weakness towards 135. This week’s low was the lowest low for almost four years.” This week saw further declines for the 30 Year T-Bond, which this week printed its lowest price since September 2014.

The entire sector remains weak. The last market in the sector, the UK Long Gilt, could also test major support and complete a change of trend to down this week.

Good trading

Phil Seaton

LS Trader