Weekly Update – 17 February 2019 – LS Trader

This Monday is Presidents’ Day in the US, so US markets will be closed, and it will, therefore, be a shortened trading week. Seasonally we are in a bullish time of year for stocks, but the long-term trend remains down.

Elsewhere, the trend remains up for the dollar, metals and interest rate futures, and mixed for the remaining commodities.

Stocks

The Nasdaq 100 is leading stocks to the upside, and the RSI has moved decisively above the 60 level, which is bullish. However, the long-term trend remains down for global stocks.

Commodities

Gold managed to hold just above support and closed very near its highest close in almost ten months. The long-term trend is up for all the metals except for Copper. Copper is, however, within the range of an upside breakout and change of long-term trend to up.

Palladium remains in a monster bull market and posted new all-time highs on Friday, as well as making an all-time closing high. Sentiment remains elevated, but it has been at or near extremes many times since September. The LS Trader system has been long Palladium since the 19th September 2018, and it is by far the most profitable open position at present.

Currencies

The Dollar has had a mixed week, gaining against some majors and declining against others. The Dollar Index itself tested resistance but has been unable to push through. The RSI is also finding resistance at the 60 level. The Euro fell to its lowest level since April 2017, basis the back-adjusted continuous contract, but did see some buying coming in from the low on Friday, with a strong demand tail evident on the daily charts. The RSI is finding support at the 40 level, so last week’s low appears to be a critical support level.

Interest rate futures

Interest rate futures have been unable to break through resistance so far, but remain in long-term uptrends. The UK Long Gilt did break resistance intra-day, but so far without follow-through.

Commitments of Traders reporting data is catching up after the US government shutdown. The data is still a week or so behind, but still shows commercials as net long, indicating further price strength and lower interest rates.

Weekly Update – 10 February 2019 – LS Trader

The dollar has gained ground this week and may be on the verge of resuming its long-term uptrend. Stocks and energies may both be coming to the end of their corrective rallies and may resume their long-term downtrend soon.

Stocks

The RSI cleared the 60 level on the S&P 500, but price made no progress for the week as the market closed flat. Both the Dax and the Nikkei have been weaker than their US counterparts, and these two indices look likely to make downside breakout ahead of the Nasdaq 100 and S&P 500, but decent-sized moves will be required.

The long-term trend remains down for global stock indexes.

Commodities

Crude Oil turned lower from price and RSI resistance. Bear market resistance at the 60 level is evident on the daily chart of Crude. The long-term trend remains down, and prices may start heading lower towards the December lows soon.

Natural Gas completed a change of long-term trend to down as expected, following a breakout to new lows for the move.

The metals markets were mostly lower this week but remain in a long-term uptrend, except for Copper. Copper, however, has broken the 60 level on the RSI this week and could complete a change of long-term trend to up in the coming weeks.

Currencies

Dollar strength looks as though it is resuming. The Dollar Index has closed higher in 6 of the last seven trading days. The RSI is testing the 60 level. If we see a decisive move above 60, we may see a rally higher to test the mid-December high.

The Euro looks set to test support once again and could break to new lows for the year. This would indicate, that if the January EUR/USD effect is to be correct this year, that the high of 1.1632 made on the 10th January will be the high of the year.

Interest rate futures

Interest rate futures look poised for new breakouts to the upside and a resumption of the long-term uptrend. The RSI has closed just above the 60 level on the 30 Year T-Bond and remains in the bull range. Strength is evident across the sector, with the short-term three month Eurodollar futures also likely to breakout this week.

The 3month Eurodollar could be one of the big moving markets this year as many get caught on the wrong side of interest rate expectations. Many continue to expect higher rates, but the COT positioning and other factors suggest that will be wrong and that interest rates will reverse and move lower, not higher (note, futures prices move inversely to rates).

The UK Long Gilt made its all-time high weekly close on Friday, and we could see a breakout to new highs this week. As with the US, interest rates look set to be headed lower, not higher.

Good trading

Phil Seaton

LS Trader

Weekly Update – 3 February 2019 – LS Trader

January has been a fairly quiet month from a trading perspective with many markets in sideways ranges, digesting last year’s moves. That is likely to change and could do so from as early as this week as multiple markets are on the cusp of breakouts.

The long-term trends remain intact and are still down for stocks, up for metals, down for energies, up for interest rates, and up for the dollar overall.

Stocks

The January effect says that as goes January for stocks, so goes the rest of the year. January was a bullish month for stocks, which put in a considerable counter-trend rally. From its low point in early January, the S&P 500 has rallied almost 500 points. That rally becomes over 400 points if you start at the low print on December 26th. The season record, therefore, points to a good year for stocks. However, for now, the long-term trend is still down, and breakouts in either direction are out of range, so we’ll have to watch stocks from the sidelines for now and see what unfolds.

Commodities

The energy markets have spent much of the past three weeks going sideways. The long-term trend remains down. Crude Oil has completed a head and shoulders pattern with a break of the neckline, which suggests strength may continue. This gives a target of 6745, a long way above current prices. However, the long-term trend is still down, and the RSI has been unable to clear the 60 level decisively.

Natural Gas, currently the weakest market in the sector, looks poised to complete a change of long-term trend and breakout to the downside on the open this week.

Currencies

We’ve covered the January EUR/USD effect in recent weeks, which states that there is a strong tendency for this currency to put in its low or high for the year during January. Based on the March futures contract, those levels are 1.1337 and 1.1632. If this pattern, which has a 76% accuracy in past years holds, a break of either of those two levels would indicate which direction the currency is likely to move for the year. For now, the long-term trend remains down, so the technical picture favours that the high is in.

However, with the Federal Reserve has made mistakes with recent rate rises in the US, and hinted this week that those hikes would be paused and possibly reversed (as we suggested would be the case in past issues), would indicate dollar weakness, which would be bullish for the Euro. As ever, we will let the market tell us which way it wants to go and jump on for the ride when the timing is right. Until then, we wait.

Interest rate futures

Interest rate futures did see an increase in volatility this week, as we indicated in last week’s issue. However, the move has so far been insufficient for a breakout. The long-term trend remains up for the sector.

Good trading

Phil Seaton

LS Trader