Weekly Update – 31 May 2020 – LS Trader

Stocks

The Nasdaq 100, which is the strongest of the stock indices, began the week with continued strength again, moved lower and then pushed back higher to close near the highs for the week, and, within range of a breakout to new all-time highs. Volatility continues to contract and is now at the lowest level since early February.

Commodities

Gold began the week with weakness and pushed down to an intraday low below the lower boundary of the triangle, but then reversed higher, with a strong buying tail, and printing a hammer pattern. The long-term trend remains up.

Currencies

The Dollar Index is at a very critical make or break juncture. Tuesday and Thursday saw big down days, the triangle broken and a break of horizontal support, only to see buyers return and form a hammer, and closing back at the prior support level. If we see price move above Friday’s high, we may see further rally as that would suggest the bulls had defended the lows. If last week’s low is taken out, we may see a cascade of selling, potentially down to the March low, which is the next structural level of support.

Interest rate futures

From last week: “The long-term uptrend remains intact for the shorter-term interest rate futures markets. Both the 10 Year T-Note and 30 Year T-Bond continue to coil just below resistance and could breakout to the upside.” Volatility continues to contract in the interest rate futures markets as price continues to coil. The eventual breakout from this range could be substantial, and it could be to the upside or the downside. The technical and trend structure before the consolidation into the random 2-way rotational environment still supports upside resolution.

Weekly Update – 24 May 2020 – LS Trader

Monday is a Bank Holiday in the UK and is Memorial Day in the US, so the week ahead will be a shortened trading week.

Stocks

Despite the recent rally, the long-term trend remains down for all stock indices. The Nasdaq 100 remains by far the strongest index and may well test and possibly exceed the February all-time high.

However, the other global indexes are weaker and are struggling to make any upside progress, finding resistance around the 61.8% retracement levels of the prior decline.

Commodities

Gold made a new high for the week but remains below the April high. Silver continued the rally that began last week but turned lower on Thursday. The long-term trend remains down.

The energy markets have continued their recent corrective rally, which appears as though it may be running out of steam at a critical resistance area.

Currencies

The Dollar continues to consolidate against the majors. So far, the Dollar has only completed a breakout against the British Pound, but multiple breakouts are within range for a resumption of the long-term dollar bull trend.

Interest rate futures

Interest rate futures continue to consolidate in a very tight range just below the highs of the year, in the case of the shorter-term markets. The 10-year T-Note, and the weakest in the sector, the 30-year t-bond continue to trade in rectangles. An upside breakout in these two markets would likely lead to a test of the March high. Volatility has gone from an extreme high in March, to the current low levels, which are also low by historical standards.

Weekly Update – 16 May 2020 – LS Trader

Stocks

The Nasdaq 100, which is the strongest of the stock indices, began the week with continued strength but then gave up the gains and ended the week lower. The general stock market has made no upside progress for a month and could be on the verge of rolling over. Despite the recent rally, the long-term trend remains down for all stock indices.

Commodities

From last week: “Gold has held above support and continues to trade sideways in a triangle. The triangle has a slight upward bias in terms of the expected breakout being in the direction of the primary trend, which is up.” Gold broke out through the upside of the triangle in line with the primary trend and will now likely test and exceed the recent high at 1788.

Currencies

The Dollar has had a good week, gaining against most of the majors. The Dollar Index is testing the upper boundary of a triangle and may break to the upside. EUR/USD is naturally the inverse pattern, so we could see a downside breakout for the Euro.

The British Pound already broke to the downside from a similar price congestion area, and now has little in the way from a technical standpoint to protect against a test of the recent low.

Interest rate futures

From last week: “Interest rate futures have continued to trade mostly sideways, with a slight upward bias, especially in the shorter-term markets. The 3-Month Eurodollar broke out to a new high but was unable to hold that high into the close.” The long-term uptrend remains intact for the shorter-term interest rate futures markets. Both the 10 Year T-Note and 30 Year T-Bond continue to coil just below resistance and could breakout to the upside.

Weekly Update – 10 May 2020 – LS Trader

Stocks

The S&P ended the week higher but remains below the recent high, which is a clear resistance level. In addition, volatility continues to contract, as does volume. The RSI, despite the massive rally, has been unable to clear the 60 level and remains in the bear range. The long-term trend remains down.

The Nasdaq 100 has been stronger and did exceed its prior high. However, the same technical weakness is also evident here, except for the RSI, which has moved above 60. New all-time highs are a possibility.

Commodities

Gold has held above support and continues to trade sideways in a triangle. The triangle has a slight upward bias in terms of the expected breakout being in the direction of the primary trend, which is up.

The energy markets continue their recovery but remain in a long-term downtrend.

Currencies

The Japanese Yen was the first to break out, but as yet without follow-through. The Dollar remains within range of breakouts against multiple majors.

Interest rate futures

From last week: “Interest rate futures have failed to move higher and break the neckline, as volatility continues to contract. This is a choppy consolidation that could still resolve either way, with a slight upward bias in the direction of the primary trend.” Interest rate futures have continued to trade mostly sideways, with a slight upward bias, especially in the shorter-term markets. The 3-Month Eurodollar broke out to a new high but was unable to hold that high into the close.

Weekly Update – 3 May 2020 – LS Trader

Stocks

The S&P continued to rally higher, slightly exceeding the 61.8% retracement of the prior decline until Thursday before turning lower. Friday gapped lower and closed lower again. It is possible that will be the end of the corrective rally and that prices may resume the downtrend.

The Nasdaq 100 had been stronger still, testing the 78.6% retracement of the prior decline. As we have mentioned several times over the years, when the 78.6% retracement level is exceeded, the market will often go on to at least test the prior high. However, the current global backdrop and the price action seen on Thursday and Friday continue to keep that view as a low probability in this case.

Commodities

Commodities continue to consolidate and digest the recent moves. The energy markets are trying to scrape themselves off the bottom but remain in long-term downtrends, as they will for the foreseeable future.

Metals have seen continued weakness. Gold has traded lower but for now, is holding above support.

Currencies

The Dollar has seen continued weakness this past week, and we remain flat all currencies. A few majors are within range of breakouts.

Interest rate futures

From last week: “Interest rate futures continue to trade in the vicinity of the neckline and could yet break to new highs. The trend remains up across the sector.”

Interest rate futures have failed to move higher and break the neckline, as volatility continues to contract. This is a choppy consolidation that could still resolve either way, with a slight upward bias in the direction of the primary trend.

Weekly Update – 26 April 2020 – LS Trader

Stocks

From last week on the Nasdaq 100: “Friday’s bar turned lower, and that may be the end of the rally.” Stocks opened the week lower but did regain some of the declines with a strong day on Friday, but still closed down for the week.

Commodities

The energy markets had the wildest of weeks with May Crude Oil declining to -$40.32 before recovering. However, although weakness was also seen in June, which made a low print of $6.50, it never made the extreme move that May did. It is normal to roll out of the expiring contract around a week before expiry, and those that stayed in May got caught out. Therefore, the price action in June is more important as it was the liquid contract at the time. Nonetheless, one would never think that such prices levels would be seen in Crude. Whether we have a similar situation when June expires next month remains to be seen.

The trend remains down in the Crude markets. Still, there is very little value in a short position due to the extreme volatility; the required position sizing makes it all but impossible to structure a short trade with asymmetric risk-reward from current levels.

Gold dipped on Tuesday but recovered and rallied back towards the recent highs, keeping the uptrend intact.

Currencies

The dollar remains in the middle of the recent range but is still in an uptrend against the majors. We are currently flat all currency markets, which is a situation that does not arise that often.

Interest rate futures

From last week: “There are arguable head and shoulders continuation patterns forming on the 30 Year T-Bond and 10 Year T-Notes. A break of the neckline would suggest new highs and possibly negative interest rates in the US.”

Interest rate futures continue to trade in the vicinity of the neckline and could yet break to new highs. The trend remains up across the sector.

Weekly Update – 19 April 2020 – LS Trader

Stocks

From last week: “Markets could continue to rally further, and the adage of don’t fight the Fed is often prudent.” Stocks continued their recent corrective rally. Strength has been impressive, certainly in the Nasdaq 100, which has easily exceeded the 61.8% retracement level from the all-time high, falling just short of the 78.6% retracement level.

Friday’s bar turned lower, and that may be the end of the rally. However, history tells us that when 78.6% retracement levels are exceeded, markets tend to complete the retracement and go on to make new highs. That would have seemed inconceivable a few weeks ago, and it still seems unlikely, but possible.

Commodities

Gold reached new seven-year highs on Tuesday but ended the week lower. The long-term trend remains up. Silver continues to correct, and the correlation between silver and several other markets, including the commodity-based currencies, is evident. If stocks do resume the downtrend, other correlated instruments will follow.

Currencies

The dollar remains in the middle of the recent range but is still in an uptrend against the majors. As above, the commodity-based currencies remain weak, and a resumption of the downtrend is within range.

Interest rate futures

From last week: “There are arguable head and shoulders continuation patterns forming on the 30 Year T-Bond and 10 Year T-Notes. A break of the neckline would suggest new highs and possibly negative interest rates in the US.”

Interest rate futures tested the neckline but have so far been unable to break above resistance. The trend remains up for the sector, which the 5-year T-Notes and 3 Month Eurodollars remain strong.

Weekly Update – 12 April 2020 – LS Trader

Monday is a Bank Holiday in the UK, but US markets will be open as normal.

Volatility continues to undergo compression in most markets as it declines from the recent peak, which shows that markets are correcting against the primary trend. We can expect the resumption of most trends over the coming weeks.

Stocks

Stocks have retraced to the 50% range and have met the minimum requirements for a retracement. Indices could turn down as early as this week. However, markets are now back within the middle of the range and with the Fed throwing the kitchen sink at them, confirmation that the downtrend has resumed is required. Markets could continue to rally further, and the old adage of don’t fight the Fed is often prudent.

Commodities

Gold made an explosive move to the upside, taking out the prior highs as expected, and reaching its highest level in over seven years. Silver also rallied, bringing an end to a profitable downtrend.

Commodities overall have seen mixed trading with strength in some markets and weakness in others.

Currencies

The dollar moved lower this week against the majors, and the Dollar Index ended the week lower, back in the middle of the current range.

Interest rate futures

The trend remains up for interest rate futures, with the shorter-term markets still holidng above support. There are arguable head and shoulders continuation patterns forming on the 30 Year T-Bond and 10 Year T-Notes. A break of the neckline would suggest new highs and possibly negative interest rates in the US.

Weekly Update – 4 April 2020 – LS Trader

Volatility has been at unprecedented levels in many markets in recent weeks. Volatility remains high in most markets but is undergoing compression in most markets as it declines from the recent peak. This suggests that markets that are undergoing volatility compression are correcting against the primary trend. Therefore, we can expect the resumption of most trends over the coming weeks.

Stocks 

Stocks continue to find resistance around the 38.2% retracement level of the decline from the all-time high. The rally from the lows last month are counter-trend and corrective, but the corrections may not be completed yet. The trend structure appears to be incomplete to the downside, so new lows, perhaps to much lower levels, remain a possibility.

Commodities

From last week “The energy markets appear to be trying to bottom. RBOB Gasoline leads the way to the upside, and we exited our short position this week, for the biggest winning trade of the year to date.”

The energy markets continued their rally from the prior week, with massive upside moves being seen on Thursday and Friday. We exited two more highly profitable short trades on Brent and Light Crude. The long-term trend remain down but it’s looking increasingly probable that the lows are in for the foreseeable future.

Currencies

The Dollar Index found support at the prior week’s lows and rallied for most of the week, keeping the dollar uptrend intact. In spite of the weakness seen during the preceding week, the dollar remains strong against the majors and is in current uptrends against the Canadian Dollar and the British Pound.

Interest rate futures

Interest rate futures remain in long-term uptrends, with the shorter-term markets remaining stronger than the 30 Year T-Bond. The trend remains up across the sector, and we may yet see new highs.

Weekly Update – 29 March 2020 – LS Trader

Stocks

From last week: “Markets are reaching a volatility extreme, and there is also momentum divergence between price and RSI. Therefore, a corrective rally, which may be sharp, could begin over the next week or so. Such a rally could retrace around 38% of the decline from the all-time high printed on the 20th of February. Measuring from Friday’s low on the S&P 500, that would suggest a rally to the region of 2637. We may then see the next leg down to exceed the current lows.”

The markets rallied sharply as expected. The S&P hit a high of 2634.5, just below our target of 2637, before closing lower on Friday. We may see further strength over the coming week or so before the primary downtrend resumes.

Commodities

The energy markets appear to be trying to bottom. RBOB Gasoline leads the way to the upside, and we exited our short position this week, for the biggest winning trade of the year to date.

The metals markets continue to swing wildly. The long-term trend for metals is currently down.

Currencies

The Dollar Index sold off sharply this week as the dollar gained against the majors. The long-term trend continues to favour the dollar but a change of long-term trend is within range for the Dollar Index should weakness persist.

Interest rate futures

Interest rate futures have seen some strength this week. The shorter end of the curve remained above support, and the uptrends are intact. The 10 Year and 30-year T-Bond have also rallied this week. Whether they make it back to new highs remains to be seen.