Weekly Update – 1 April 2018 – LS Trader

The past week was a shortened trading week due to Good Friday, and Thursday’s close also saw the end of the first trading quarter of the year. The first quarter has been far more volatile in many markets than recent quarters but has also been profitable to trade in spite of some large swings in the markets. That volatility is expected to continue for the foreseeable future and should bring with it plenty of large moves and profitable trading conditions.

The long-term trends remain mostly as before, mixed for stocks, up for commodities (with a few exceptions), down for the dollar, and down for interest rate futures.

Stocks

From last week on the Nasdaq 100: “Additionally, sentiment has become extremely negative with only 10% bulls. The last time sentiment was this low was the end of the early February sell-off. A substantial rally followed.” Stocks bounced this week as suggested in last week’s update from extremely negative sentiment readings.

The long-term trend for US stocks is still up at monthly and weekly chart level but is turning negative on the daily timeframe. However, a change of trend to down for either the S&P 500 or the Nasdaq 100 has yet to be completed.

The Dax fell to new lows for the current move but reversed higher. However, the trend remains down, and the market is below resistance. The Nikkei also rallied and was strong enough to take out short-term resistance. The long-term trend remains down for the Dax and Nikkei but still up for the Nasdaq 100 and S&P 500.

Commodities

Brent Crude completed its highest monthly close in almost three years in spite of a bit of a pullback this week. The long-term trend remains up for both Crude markets, and new multi-year high monthly closes are not bearish.

After a few weeks of selling, some of the grains markets had extremely bullish days on Friday, namely Corn, Soybeans and Soybean Meal. This may indicate that the correction in these markets is over and the local top may be tested, with possible breakouts this week.

One important observation in the commodities markets is commercial buying of many commodities markets as reported in the COT data (Commitments of Traders Reports). This indicates that commercials are expecting inflation and higher prices and a likely bull market in commodities. Commercials are often early, so we have to wait for trend confirmation and buy triggers, but once these moves get going, they are likely to be big.

Currencies

The currency markets continue to consolidate, much as they have since the middle of January. The long-term trend remains against the dollar.

Interest rate futures

Interest rate futures have continued their short-term counter-trend rally this week and are now approaching levels that could provide resistance and a possible turn lower to resume the long-term downtrend.

The long bond is now in the zone between the 38.2 and 50% retracement levels of the decline from the December high, which is about the level that normally sees a correction of this degree fizzle out. The 50% retracement level is at 147.37.

Good trading

Phil Seaton

LS Trader

Weekly Update – 25 March 2018 – LS Trader

Global stocks took a heavy hit this week, ending the week sharply lower. Sentiment has become extremely negative for stocks, so with the long-term trend remaining up for US stocks, it is possible that we will see a bounce higher this week, but things look to be taking a turn for weakness in the longer-term. For the first time in a long time, we have no long entries for any of the stock markets and look likely to add to our short positions over the next week or so on sell triggers.

Stocks

From last week on the Nasdaq 100: “The decline below the prior January high has bearish implications so we may see further weakness this week”. The Nasdaq began the week with weakness and continued sharply lower, ending the week down 7.06%. However, along with the S&P 500, the long-term trend is still up. Additionally, sentiment has become extremely negative with only 10% bulls. The last time sentiment was this low was the end of the early February sell-off. A substantial rally followed.

The Nikkei completed a change of long-term trend to down on Friday and joined the Dax in a long-term downtrend. However, the Nikkei is currently the weakest of the four stock indexes that we trade at LS Trader based on the current chart structure. The Nikkei ended the week lower by 5.89%

Commodities

From last week on Brent Crude: “Support from the triangle held exactly, and we saw a breakout of the triangle on Friday, which suggests further strength ahead. The trend remains up.” Brent Crude continued to rally and will likely breakout to new highs for the current move early this week.

The rally in the grain markets appears to have fizzled out, and we have gone from being net long the grains sector to short. Soybean Meal remains the strongest in the sector and may rally to test the local top in the coming weeks.

Gold held support and has rallied sharply over the last three days and may now press higher towards resistance. Silver broke out to the downside on Tuesday but was unable to continue lower and has since rallied back to test resistance. The trend remains down for Silver.

Currencies

The currency markets remain quiet, as they have for the past few weeks. The long-term trend remains against the dollar. The Dollar Index and the Euro remain rangebound.

The Yen has rallied to its highest level against the dollar since November 2016. There is bullish divergence on USD/JPY, but for now, the trend remains against the dollar.

Interest rate futures

Interest rate futures continue to grind higher in a counter-trend move. The long-term trend remains down across the sector, but moderate strength continues to be evident in the short-term. The shorter-term markets remain the weakest for now, but they are likely to test resistance this week. It is possible that resistance will hold as there is short-term bearish divergence where we have a new high in price without a new high in momentum.

Good trading

Phil Seaton

LS Trader

Weekly Update – 18 March 2018 – LS Trader

This week sees the FOMC Meeting with the Fed expected to raise rates in their announcement on the 21st March. This rate increase is already priced into the markets.

Overall, it’s been a quiet week in the markets, but things will likely pick up this week around the time of the aforementioned Fed announcement on Wednesday.

Stocks

The Nasdaq 100 began the week with strength as expected, printing a new all-time high on Wednesday at 7214.5 on Tuesday before pulling back for the rest of the week. The decline below the prior January high has bearish implications so we may see further weakness this week, but for now, the trend is still clearly bullish, and the market is above support.

The S&P 500 also began the week with strength but was unable to continue the rally. Volatility has declined sharply since late January. Friday saw a narrow range 7 bar printed, which is a good setup for a low volatility breakout in the direction of the open on Monday. The long-term trend remains up

Commodities

From last week: “Brent Crude has been trading in a symmetrical triangle pattern since late January….The long-term trend remains up, so the odds favour a breakout to the upside.” Support from the triangle held exactly, and we saw a breakout of the triangle on Friday, which suggests further strength ahead. The trend remains up.

Gold looks set to test the recent low, which if broken would have the downtrend back in effect with room for further declines down towards the mid-December low around $1240. Weakness is evident in all the metals markets at present. Silver is also close to a downside breakout. Silver is the weakest of the metals as it never completed a change of trend to up when the rest of the sector did.

Currencies

The currency markets remain quiet for the most part, likely waiting for this week’s Fed meeting before making their next move. The long-term trend continues against the dollar.

The weakest currency at present is the Canadian dollar which is back at levels not seen since June last year. The dollar rallied from support this week and ended the week higher by 2.2%.

Interest rate futures

The shorter-term markets remain the weakest in the interest rate futures sector. The long bond rallied to its highest level in over a month this week but pulled back on Friday. The long-term trend remains down across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 11 March 2018 – LS Trader

The past week has seen bullish price action in US stocks, led higher by the Nasdaq 100 which made a new all-time weekly closing high on Friday. That is not a bearish characteristic.

Multiple other markets have continued to consolidate as they digest the recent spike in volatility. The long-term trends remain as before, up for stocks, mixed to up for commodities, and down for the dollar and interest rate futures.

## Stocks

From last week: “The Nasdaq remains the strongest of the stock indices and new highs are still a possibility and could be seen this week.” As expected, the Nasdaq 100 rallied to new all-time highs this week. Perhaps of significant importance is that fact that the breakout occurred on Friday, with a close above the breakout level.

As we have been saying for years, the most important price of the week is Friday’s close, as that is the price that traders are willing to hold their positions over the weekend. It carries even more importance in recent times due to 24-hour markets and, therefore, daily closing prices having less significance than they once did. Another bullish factor is that Friday’s breakout completed a cup and handle continuation pattern. Also, Friday’s close took the RSI back into the bull range, above 60.

The S&P 500 also continues to recover and is within range of a breakout to new highs. The Dax and Nikkei both remain weaker, with the Dax already in a long-term downtrend. The long-term trend for the Nikkei remains up.

## Commodities
Brent Crude has been trading in a symmetrical triangle pattern since late January and is now at the point along the triangle towards the apex where a breakout can be expected. Technically, that breakout is already late and overdue. The long-term trend remains up, so the odds favour a breakout to the upside. A similar pattern can also be seen in Light Crude.

However, it’s not all bullish for the sector as both Heating Oil and RBOB Gasoline have potential head and shoulders top patterns forming. These are not perfect patterns as the right shoulder is much shorter in time duration than the left shoulder. However, a break of the neckline in both markets would result in a change of long-term trend to down, and the breakouts would have very favourable asymmetric risk/reward.

Gold ended the week flat and has seen weakness since the failure to push through resistance from the September high. A break of the recent low would have bearish implications.

## Currencies
The currency markets have been quiet for the past couple of weeks, but the trend remains against the dollar.

## Interest rate futures
Interest rate futures have consolidated this week but remain in long-term downtrends. The shorter-term markets remain the weakest of the sector. The 10 Year T-note and 30 Year T-Bond are within range of new downside breakouts.

Good trading

Phil Seaton
**LS Trader**

Weekly Update – 4 March 2018 – LS Trader

The stock market ended the week lower but closed well above the lows. The Dollar Index ended the week almost flat but had been higher during the week. The long-term trends remain intact, up for stocks, down for the dollar and interest rate futures, and mixed for commodities.

Stocks

Four days of selling in the S&P 500 ended on Friday as the market bounced nicely from the lows of the day. Volatility continues to expand in the stock market as it has throughout February. The long period of low volatility in stocks appears to be over. It is interesting to note that the ATR in the S&P 500 began the year at 17. On Friday it ended the week at 69, so the current daily range in the S&P 500 is now four times what it was at the start of January, just two months ago.

From last week: “The Nasdaq 100 leads the way and may test all-time highs this week, with a breakout to new all-time highs a real possibility.” The Nasdaq 100 began the week with strength did not make new highs as a bearish engulfing pattern printed on Tuesday, and the market headed lower until Friday, where support was found in the vicinity of the 50-day moving average. The Nasdaq remains the strongest of the stock indices and new highs are still a possibility and could be seen this week.

The Dax remains the weakest of the four indexes we trade but bounced from support on Friday in concert with other global stock indices. If last week’s low is taken out, there is considerable room for further declines. One possible target could be the 200-week moving average, currently at 11037.

Commodities

Gold is roughly in the middle of its recent range between circa 1370 and circa 1240. It is also between its 50 and 200-day MAs, both of which are flat. This indicates, along with a neutral RSI, no trend in the short-term. However, a break from this range could yield a large move in the direction of the breakout, but we may need to wait a few weeks for either to occur.

Silver tested support this week but narrowly held on. A downside breakout could be seen thus week.

Soybean Meal had another bullish week, gaining 3.38% in spite of some weakness on Friday. Price briefly crossed the 400 level for the first time since July 2016. Soybeans was also bullish and experience a weak day on Friday with a long upper wick as well.

Currencies

The Euro’s price action on Wednesday and Thursday may turn out to be a bear trap as medium-term support was violated and then quickly reversed, with price regaining the 50-day moving average. The trend remains up for the Euro in spite of recent dollar strength.

USD/JPY resumed its downtrend this week having earlier broken out of a 10-month rectangle. Price targets from that suggest that we may see further weakness down towards the 100 level.

USD/CAD briefly cleared resistance on Friday but has yet to make any upside progress. If it can make a decisive breakout this week, there is plenty of room for further rally.

Interest rate futures

The trend remains down for interest rate futures in spite of some midweek strength. Friday saw a reversal which kept the downtrend for the shorter-term markets intact. The 10 Year T-note and 30 Year T-Bond may both head down to test their recent lows.

Good trading

Phil Seaton

LS Trader

Weekly Update – 25 February 2018 – LS Trader

The past week, which was a shortened trading week due to the Presidents’ Day holiday in the US, was also a fairly quiet one by recent standards. Volatility has receded from the extremes seen at the start of the month.

Stocks continue their recovery after the recent sell-off, and the Nasdaq 100 stands a decent chance of new highs this week. Many other markets have spent most of the week consolidating, with the long-term trends remaining unaffected.

The long-term trends are currently up for stocks, down for the dollar, down for interest rates, mixed to up for commodities. Commodities continue to gain strength overall, and those that have not yet completed changes of trend to up continue to form a base. The CRB Commodity Index looks poised for a breakout from a base that has been in place for over three years.

Stocks

From last week: “At present, the long-term trend remains up, and US stocks are heading back towards their all-time highs.” The Nasdaq 100 leads the way and may test all-time highs this week, with a breakout to new all-time highs a real possibility. Commercials are net long the Nasdaq 100 again, which is not a normal position. They are usually short due to hedging. They currently hold their largest net long position since December 2011, when the Nasdaq was trading around 2200. It stands at 6902.5 today, basis the March contract.

Commodities

The energy markets continue to recover from the recent sell-off and may push higher to test their recent highs. The long-term trend remains up.

Gold ended the week lower and continues to consolidate below key resistance, and what may prove to be the neckline of an inverse head and shoulders.

Lumber advanced another 2.41% this week to print new all-time highs once again.

Soybean Meal made its highest print since July 2016 but was unable to make much progress after printing the new high, advancing only 0.53% for the week and printing an indecision bar on the weekly chart. The long-term trend remains bullish but volatility is nearing extreme levels, and a correction could be seen before the rally continues.

Currencies

The dollar index continues to consolidate near the lows of the recent downtrend, and it remains in a long-term downtrend with new lows still a possibility.

The Euro ended the week lower by 0.93% but remains within range of a breakout. Commercials remain net short.

Interest rate futures

Interest rate futures fell to new lows for the current move earlier in the week before recovering and finishing the week with strength. Sentiment, which fell to single digits two weeks ago remains very bearish but has risen slightly this week. Commercials remain net long the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 18 February 2018 – LS Trader

Monday is Presidents’ Day in the US, so it will be a shortened trading week for US markets.

Stocks continued their recovery that began during the previous week. Interest rate futures resumed their downtrend and commodities continue to gain traction to the upside.

Stocks

Stocks continued the bounce that began on the prior Friday and, in the case of US markets crossed back above their 50-day moving average. However, it should be noted that on Friday a doji was printed on the S&P 500, which is an induction bar and indicates that the bounce has lost momentum. That may turn out to be a temporary pause as the market catches its breath from the rally, or it could be a turning point. At present, the long-term trend remains up, and US stocks are heading back towards their all-time highs.

The Dax has been the weakest of the four stock indices we trade at LS Trader and is the only one of the four to complete a change of trend to down. However, the Dax bounced as well and is heading back towards a test of its 200-day MA. It will take significant rally for the Dax to recover to new all-time highs as it is still some 1150 points below those levels. The bias in the Dax has turned to the short side.

Commodities

From last week: “Soybean Meal has seen bullish price action and could complete a bullish trend change this week.” The grains markets have continued to see bullish price action and evidence continues to stack up that a long-term bottom could be in. Soybean Meal exploded to the upside, advancing some 8.58% this week. Soybeans also completed a change of trend to up, but Friday’s breakout was unable to hold above the prior resistance level.

Lumber printed new all-time highs having posted gains for the week of 5.33%. The negative here is that bullish sentiment is at a very high reading. However, we saw a similar reading back in October, and the rally has persisted since.

In spite of large commercial buying, Coffee remains in a long-term downtrend and after a 3.14% decline on Friday appears poised to breakdown to new lows.

Currencies

From last week: “We could see breakouts this week against the dollar for the Japanese Yen and Swiss franc.” Both the Japanese Yen and the Swiss franc broke out as expected, and the dollar remains weak.

The Euro came within pips of a new breakout but reversed at prior resistance. Sentiment remains high, and commercials maintain a near-record net short position. Both of these are negatives for further advance. However, commercials may capitulate if a breakout to the upside is successful, such a move has been seen before in the Euro’s history.

The Dollar Index tested support and bounced but the long-term trend remains down, and we could see new lows again soon.

Interest rate futures

From last week: “The expected bounce did materialise, and although it was a large bounce, it did not damage the longer-term trend, which remains down. We could see this sector resume the downtrend as soon as this week.” Interest rate futures moved lower this week as expected, and the sector resumed the downtrend. Some strength was seen at the end of the week, particularly in the 30 Year T-Bond.

Good trading

Phil Seaton

LS Trader

Weekly Update – 11 February 2018 – LS Trader

Stock market weakness continued this week as volatility continues to expand across multiple markets. Volatility has reached extreme levels in the stock markets, and a new period of higher volatility in stocks appears to have arrived.

However, the extremes seen over the past week or so are likely to decrease somewhat over the coming weeks but remain at elevated levels compared to what has been seen over the past year or so. The period of low volatility, which has been deadly for trends in most markets, appears to be behind us. A new period of large trends is on the horizon in many markets.

Stocks

Stocks continued lower this week and broke support, as we suggested would happen in last week’s update. The weakness seen so far is a correction, and that will remain so until a change of trend is completed. However, price action does have an impulsive look to it, so if weakness persists, change of trend-defining support could be tested and broken.

Bullish sentiment has continued to decline and fell as low as nine this week, which is actually 1 percentage point lower than the low at the time of the US election, from which the massive rally was launched.

On the S&P 500, the price fell below the 200-day moving average on Tuesday and Friday, but on both occasions, a bounce followed shortly afterwards. Tuesday’s low at 2529 was matched almost exactly on Friday with a low at 2530.25. Both times strong buying was evident, as can be seen by the long lower wicks on the daily charts, a sign that the lows are being rejected. For now, the long-term trend remains up but last week’s lows will likely need to hold. If they are broken decisively, a change of long-term trend to down will come within range.

From last week: “A change of long-term trend to down is within range on the Dax and could complete later this week if weakness persists.” The Dax, which has been the weakest of the four stock indexes we trade, did complete the change of trend to down this week. However, as with the S&P 500, the lows were strongly rejected on Friday. Last week’s low will be a key level to watch this week if weakness resumes.

Commodities

Although the focus of many has been on the stock markets, the energy markets have also collapsed and broke support this week as expected. This has brought to an end some highly profitable and long-running trends in the energy markets, at least for now. As with stocks, the long-term trend is still up.

The metals markets have also seen weakness, but not to the same degree as stocks or energies. Silver, which is the weakest of the sector, could resume its long-term trend to down soon. Copper and Palladium both have changes of long-term trend coming into range.

From last week: “Corn is on the verge of a change of trend breakout to up, which could complete this week.” Corn did complete the change of trend to up, but so far without follow through. Soybean Meal has seen bullish price action and could complete a bullish trend change this week.

Currencies

The Euro declined this week as the dollar’s recovery continued. However, the long-term trend is still very much up for the Euro and based on the January effect we’re looking for the January low to hold for the year. The long-term trend for the dollar remains down in spite of recent weakness. We could see breakouts this week against the dollar for the Japanese Yen and Swiss franc.

Interest rate futures

From last week: “The long-term trend remains down across the sector and is likely to continue so for a considerable time, even if we do get the expected short-term bounce.” The expected bounce did materialise, and although it was a large bounce, it did not damage the longer-term trend, which remains down. We could see this sector resume the downtrend as soon as this week.

Good trading

Phil Seaton

LS Trader

Weekly Update – 4 February 2018 – LS Trader

Stock markets reversed aggressively this week following a new high at the open which could not hold. The price action this week certainly represents a change in personality of the market and puts the market into corrective mode. Interest rate futures collapsed, making their lowest print since 2015 (30 Year T-Bond).

Stocks

Stocks opened the week higher but were unable to press further as the weakness that commenced on Monday continued throughout the week, with a significant down day on Friday. The reversal broke short-term support on the S&P 500 and the Dax and had taken the Nasdaq 100 right to support, which will likely be tested and probably broken on Monday.

The reversal printed on the S&P 500 is a key reversal on the weekly chart. However, the long-term trend is still most certainly bullish, and this can only be viewed as a correction in a bull market at this stage. Considerable further weakness will be required for a change of trend. Nonetheless, it has put a large dent in the bull case.

Bullish sentiment, which had been at or near record highs for several weeks, took a battering as the percentage of bulls has dropped from 96 to 39 in only two weeks.

The Nikkei and Dax have both been weaker than US markets. We exited a profitable Nikkei trade during the prior week on a break of support. The Dax also broke support this week and not only did it break short-term, support, it also broke medium-term support. A change of long-term trend to down is within range on the Dax and could complete later this week if weakness persists.

Commodities

The energy markets have seen some weakness this week and support has been tested and stands a good chance of getting broken this week.

The metals markets have also seen weakness as Gold, Silver, Palladium and Copper were all lower.

The grain markets continue to show signs that a long-term bottom is forming, or is already in place. Corn is on the verge of a change of trend breakout to up, which could complete this week.

Currencies

The Euro closed the month significantly higher, so according to the January effect, the low for the year should be in at the January low at 1.1964 (basis March contract). Of course, there is no guarantee this pattern will hold this year, but it does have a very high strike rate.

From last week on the Dollar Index: “A bounce can be expected soon here, but the trend is firmly down”. A small bounce has been seen in the Dollar Index, and resistance could be tested this week.

If the January effect in the Euro holds, and we have seen the low of the year in the Euro, the inverse of the Euro is the Dollar Index. This would suggest that the Dollar Index has put in it’s high of the year (note, the Euro makes up 57% of the index, so this pattern is less reliable). That high currently stands at 92.36 (basis March. contract).

Interest rate futures

Interest rate futures collapsed this week as the hugely profitable downtrend continued. However, it should be noted that sentiment has become extremely bearish, registering in a rare single-digit reading. Sentiment has not been this negative since December 2016, from where a significant rally ensued.

The long-term trend remains down across the sector and is likely to continue so for a considerable time, even if we do get the expected short-term bounce.

Good trading

Phil Seaton

LS Trader

Weekly Update – 28 January 2018 – LS Trader

2018 continues to show signs that it’s going to be a great year for trend following as multiple markets continue to trend well. There are also markets that have yet to break out but are in the process of building favourable setups. The grains markets, in particular, are starting to look very interesting. More on that below.

The long-term trends remain up for stocks, up or turning bullish for most commodities, down for the dollar and down for interest rate futures.

Stocks

Unless we get a crash during the last three trading days of the month, stocks are going to close the month well up. Based on the January barometer, this points to a full year of gains for stocks. Both the S&P 500 and the Nasdaq 100 closed the week out at new all-time highs, both printing a marabozu pattern (closing at the top of the candle with no upper shadow). This shows momentum into the close and is often followed by strength at the opening.

There are bears everywhere calling for a top, just as there have been since November 2016 and all of 2017. Eventually, they will be right, but for now, these markets just keep on truckin’. Trying to pick tops against such strong momentum usually results in bears getting made into rugs! As long as the markets remain above support, and they do, there is no reason to bail out of longs and certainly no need to short.

The Dax broke out to new all-time highs as expected but has so far been unable to push on. The Nikkei had a bit of a pullback and broke short-term support, but remains in a long-term uptrend and may hit new highs again soon.

Commodities

The grain markets overall look as though they may be in the process of putting in a long-term bottom and there is huge rally potential for several markets in the sector. Market sentiment in the sector is low, as is volatility, which continues to awaken. Most importantly perhaps, there is huge commercial buying. The grains markets could enter a huge bull market this year.

The energy markets remain strong with new highs for the current move being printed this week. There is, however, bearish divergence in the Crude markets, so momentum is waning. However, markets remain above support, and the trend is bullish.

Natural Gas completed a change of trend to up for the first time since 2016, and now the entire energy sector is in a long-term uptrend.

Lumber prices made their highest print since 1993 as the bull market continues and closed within a dollar of all-time highs. Expect a new al-time high print this week.

Currencies

The Euro made a new high for the current move on Thursday but that day also saw an indecision bar printed. It’s looking increasingly likely that the Euro has put in its low for January. If that is the case, then the January effect suggests that the low for the Euro may be in for the year. However, sentiment is very high, as is volatility. Commercials again have a record net short position. A pullback would not be surprising, but the market, for now, remains bullish and above support.

The British Pound is now trading above pre-Brexit lows, and except the commercial position, which is only slightly net short for the Pound, a similar case can be made for a correction in the Pound.

Given the above comments, it’s no surprise that the Dollar Index continues to collapse. Sentiment is very bearish, with only 10% bulls. Commercials have gone slightly net long having unwound a large short position. A bounce can be expected soon here, but the trend is firmly down, and buying here is the equivalent of catching a falling knife.

Interest rate futures

Interest rate futures remain weak with all markets in the sector making new lows for the current move. The UK Long Gilt has held up better than US markets in recent weeks, but that too broke support as expected and has resumed its long-term downtrend.

Good trading

Phil Seaton

LS Trader