Weekly Update – 11 November 2018 – LS Trader

The past week has seen mixed trading in multiple markets, with a change of long-term trend to down being completed in Crude Oil and Brent Crude. Stocks continued their corrective rally and are now at a key price zone. The dollar has resumed recent strength, and interest rate futures remain mixed.

Stocks

The S&P 500 rallied this week, reaching a 61.8% retracement of the October decline. It is possible that if prices decline back to around the 2700 area and find support, that an inverted head and shoulders pattern could be forming. Such a pattern, if completed, would project a rally back to new all-time highs.

The technical damage done at daily chart level recently cannot be disputed, and it has changed the daily and weekly trend to down, but a check of the monthly chart shows that the bull market is still intact at a higher degree of trend. A complete retracement of the October decline and new all-time highs cannot be ruled out over the coming months, particularly given that we are now in a strong period of the year from a seasonal basis.

The other stock indices have seen similar price action, but the Dax, and then the Nikkei, remain the weakest.

Commodities

From last week: “A trend change to down is within range for Crude Oil and Brent Crude, and that could be completed within the next couple of weeks.” The energy markets were weak this week, and a change of trend to down was completed for both Crude Oil markets as expected.

It’s possible to label the rally in Gold from the August low to be a bear channel, which is in keeping with the long-term trend being down. A close below 1200 would bolster this view and suggest that prices would retrace the rally from the August low in full and go on to post new lows.

We mentioned a possible head and shoulders bottom in last week’s update but said that even if the pattern completed that the long-term trend would be down. Prices fell well short of the neckline and have turned lower and may now test the right shoulder bottom. If this price is broken (264.25) that would completed a head and shoulders failure pattern and would project prices lower to around the 235 level.

Silver has already completed the head and shoulders failure and may break to new lows this week. The long-term trend remains down for all the metals except Palladium.

Currencies

The US dollar completed a break out the neckline of a head and shoulders pattern visible on the weekly chart back to July 2017. This breakout, which now has prices at their highest level since May 2017, projects higher to around the 1.1000 area, around 1000 pips higher than current prices.

The dollar index may post new highs for the current move this week.

Interest rate futures

Interest rate futures had a mixed week with the shorter-term markets being weaker than the longer-term. The 30 Year T-Bond began a rally back to the underside of the 5-week flag mentioned last week. If resistance holds, that pattern has a projected downside target in the 130 area.

The long-term trend remains down across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 4 November 2018 – LS Trader

The past week has seen volatile price action in multiple markets, many of which have made corrective price moves against their primary long-term trends. The current trends are down for stocks, up for the dollar, down for interest rate futures and mixed for commodities.

Stocks

Stocks rallied sharply this week in what is corrective price action against the long-term downtrend. The corrective rallies were sufficient to end the trend in the short-term for both the Nikkei and Dax, but for now, the S&P 500 and Nasdaq 100 remain in current downtrends and below resistance.

It’s interesting to note that in spite of the sell-off over the past few weeks, the COT reports that large speculators on the S&P 500 have their highest net long position since 2013. Commercials remain heavily net short.

We’re entering into a seasonally bullish time of year for stocks, but the current technical picture always takes precedent. While there is no question that at monthly chart level stocks are still in a bull market, the weekly charts are less bullish, and the daily charts show a clear downtrend following the substantial technical damage done over the past few weeks.

Commodities

The metals markets have had a mixed week with some strong and weak days seen in all markets. The long-term trend remains down for the metals except for Palladium, which is still the leader. Copper has a potential inverted head and shoulder setup and may test the neckline this week. However, the long-term trend is still down.

The energy markets have seen additional weakness this week, but for now, the trend remains up for all markets except for RBOB gasoline, which completed a change of trend to down two weeks ago. A trend change to down is within range for Crude Oil and Brent Crude, and that could be completed within the next couple of weeks.

Currencies

The dollar saw some weakness this past week, which is also likely corrective against the long-term dollar uptrend. The dollar has been strongest against the Swiss franc, rallying this week to its highest level since May 2017.

Interest rate futures

Interest rate futures moves sharply lower again this week. The 30 Year T-Bond broke to the downside from a 5-week flag pattern which would project targets around the 130 level. The trend remains down across the sector for US markets and only the UK Long Gilts. Gilts were also sharply lower this week having failed to break upside resistance.

Good trading

Phil Seaton

LS Trader

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

Weekly Update – 30 September 2018 – LS Trader

The past week has seen stocks unable to make new all-time highs and has also seen some strength return to the US dollar. Strength has also been seen in the energy markets.

Stocks

The S&P 500 failed to make a new all-time high this week and saw some weakness, but for now, continues to trade above support. The Nasdaq 100 remains weaker than the S&P 500 and failed to confirm last week’s all-time high. The trend remains up for both US indices and it will for the foreseeable future unless we get a huge meltdown.

From last week: “The head and shoulders pattern in the Nikkei is now well underway following a decisive break above the neckline. As per our comments last week, the pattern now projects higher to 24690.” The Nikkei was the strongest of the four indices we trade this past week and this week’s high of 24320 is well on the way to our target of 24690, which may be seen this week.

Commodities

Commercial traders have moved to net long the Silver market this month for the first time in history, which is a possible indication of a rally ahead. The LS Trader system was stopped out of our extremely profitable short trade on Silver this week where we had ridden the trend lower since the 27th June short entry at 1639. Friday’s strong up day was accompanied by above average volume. The long-term trend remains down, but a rally may be in the cards.

Gold also has a minimal net long commercial position but the trend remains down and active as the market has not been able to breach resistance.

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.

The energy markets have rallied this week. Brent Crude ended the week higher by 4.99% has rallied to its highest level since November 2014. Crude Oil also surged 4.03%. Heating Oil, which was the first market in the sector to breakout to the upside, advanced 5.72% and is also at its highest level since November 2014. The long-term trend is up for all energy markets.

Currencies

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.

Interest rate futures

Interest rate futures remain in long-term downtrends but have ended the week higher, having printed new lows for the move earlier in the week.

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.

Good trading

Phil Seaton

LS Trader

Weekly Update – 23 September 2018 – LS Trader

The past week has seen mixed trading in the markets. The S&P 500 made a new all-time high. The dollar has seen continued short-term weakness overall. Interest rate futures have resumed long-term weakness and commodities remain mixed.

Stocks

From last week: “The Nasdaq 100 and S&P 500 both held above support and remain bullish. The S&P 500 looks poised for new all-time highs again this week.”

The S&P 500 did break out as expected to print new all-time highs. The Nasdaq 100 continues to lag but did bounce successfully from support once again to keep the trend intact.

The head and shoulders pattern in the Nikkei is now well underway following a decisive break above the neckline. As per our comments last week, the pattern now projects higher to 24690.

The Dax, which is the weakest of the global stock indices we trade at LS Trader and is the only one of the four in a long-term downtrend, saw additional strength this week in what is a counter-trend bear market rally.

Commodities

Palladium has had an excellent week with a large upside rally which completed the trend reversal. The long-term trend for Palladium is now up, the only one of the four metals we trade where that is the case. Copper has also seen strength this week but remains in a long-term downtrend.

Currencies

The currency markets have seen mixed trading. Strength has been seen in USD/JPY, which broke out to new highs for the current move having exceeded the July high. USD/CHF broke to new lows, completing a long-term change of trend to down. This is the first of the currencies to move into an uptrend against the dollar. The dollar remains in a long-term uptrend against all the other major currencies.

Interest rate futures

Interest rate futures have seen continued weakness this week as the long-term downtrend continues for the sector.

From last week: “We have written in recent weeks about the potential head and shoulders bottom on the 30 Year T-Bond. That pattern never broke the neckline and has since turned south and now looks set to test the right shoulder, at 141.09. If the market falls below that level, the head and shoulders pattern will fail and would give a downside target in the region of 135.” The right shoulder low at 141.09 was broken, which invalidates the potential head and shoulder bottom and now projects further weakness towards 135.

Good trading

Phil Seaton

LS Trader

Weekly Update – 16 September 2018 – LS Trader

Not much change was seen in the bigger picture this week with the long-term trends continuing to favour stocks and the dollar. The trends remain mixed for commodities with strength in some sectors, but weakness overall. The long-term downtrend for interest rate futures resumed this week.

Friday was also triple witching with quarterly stocks and currencies rolling forward to the December contract.

Stocks

The long-term trend remains up for three of the four stock indices that we trade at LS Trader, with the trend up for the S&P 500, Nasdaq 100 and Nikkei, and down for the Dax, which is by far the weakest of the four. The Dax did manage a corrective rally this week, and the long lower shadows of three of the past six daily buys do show demand coming into the market at those levels. However, the trend remains down, and it will take an additional 1000+ point rally to change that.

The Nasdaq 100 and S&P 500 both held above support and remain bullish. The S&P 500 looks poised for new all-time highs again this week.

The false breakout of the head and shoulder pattern on the 30th August now appears to be a premature breakout as strong buying action on Thursday and Friday broke the neckline again and exceeded the August high. The pattern now projects higher to 24690, some 1595 points above Friday’s close.

Commodities

The metals markets have had a mixed week with some strength and weakness being seen. Overall, the entire sector remains in a long-term downtrend with only Palladium showing any real signs of strength in recent weeks.

The energy sector has also seen some weakness again this week. Brent Crude pushed right up to test resistance but was unable to push through and fell back into the weekend. The long-term trend remains up for energies, but weakness is evident in the short-term.

Currencies

The dollar index tested support this week and support held firm. The long-term trend remains up for the dollar against all of the major currencies. The weakest currencies at present, namely AUD/USD and NZD/USD both managed a small corrective bounce this week but remain in long-term downtrends.

Interest rate futures

Interest rate futures have seen continued weakness this week with both the 5 Year T-Note and 3 Month Eurodollar breaking out to the downside to resume the long-term downtrend. The initial target for the Eurodollar is 96.90 and possibly 96.69 over the coming months.

We have written in recent weeks about the potential head and shoulders bottom on the 30 Year T-Bond. That pattern never broke the neckline and has since turned south and now looks set to test the right shoulder, at 141.09. If the market falls below that level, the head and shoulders pattern will fail and would give a downside target in the region of 135.

The long-term trend remains down for the entire US interest rate futures sector in spite of near-record commercial net long positioning (which has decreased over the past few weeks). The trend for UK Long Gilts remains up.

Good trading

Phil Seaton

LS Trader

Weekly Update – 9 September 2018 – LS Trader

Stocks have seen some weakness this week, but except for the Dax remain in long-term uptrends. The commodity-based currencies have seen further weakness. Interest rate futures have been unable to make any upside progress, and commodities remain mixed, but weak overall.

Stocks

From last week “Two possible negatives are the bearish divergence on MACD and the fact that historically, September is the weakest month of the year for stocks.”

The Nasdaq 100 fell just short of making new all-time highs this week and fell sharply, narrowly holding above support. That support level looks likely to be tested this week. The long-term trend remains up and the RSI is in the bull range, but we may see the 40 level tested this week as well.

The S&P 500 has seen similar action but has held up slightly better than the Nasdaq 100. The long-term trend remains up for both US indices.

The Nikkei also saw continued weakness this week following the failed breakout above the neckline of the head and shoulders continuation pattern. Support was broken, but the long-term trend remains up.

The Dax broke support and may decline further to test the March lows. Large head and shoulders top is forming on the weekly chart, which would indicate massive declines for this index over the coming months if completed, The long-term trend is down for the Dax, the only one of the four indices we trade at LS Trader that is in a downtrend.

Commodities

Palladium saw some further strength this week, but momentum is waning. The decrease in the size of the real bodies on the daily candles and the long upper shadows indicate resistance. However, Palladium is by far the strongest of the metals and may complete a trend change to up in the coming weeks. Gold, Copper and Silver all remain in long-term downtrends and are trading below resistance.

Gold has seen net long commercial buying activity this week for the first time since early 2001, which suggests that this downtrend may be about done. However, the long-term trend remains down, but we can expect resistance to be tested this week.

The grains markets remain in long-term downtrends with Oats and Wheat being the exceptions. New lows in these markets could yet be seen as the entire sector looks weak.

Currencies

The Australian Dollar continues its recent decline, falling to new lows for the current move and making its lowest print since February 2016. The New Zealand dollar also fell to a new low for the current move and also its lowest print since February 2016. The commodity-based currencies are all weak as the Canadian dollar is also in decline and may breakout this week.

Interest rate futures

Interest rate futures have seen some weakness this week, particularly on Friday. In spite of the near-record commercial buying, these markets can’t make any headway at the moment and remain in long-term downtrends.

Good trading

Phil Seaton

LS Trader