Weekly Update 21st October 2013 – LS Trader

The past week has seen the dollar weaken and stocks rise, with 2 of the indices we trade at LS Trader reaching new all time highs, the S&P 500 and the German Dax. It has also seen some commodity markets begin pushing higher and interest rate futures rise. The long-term trends are still up for stocks, mostly down for the dollar, down for interest rate futures and still mixed for commodities.

Stocks

The relief rally that we wrote about in last week’s update did materialize and it took the S&P 500 to new all time highs. This rally was good for a 2.21% advance for the week and meant that the S&P 500 had rallied 100 points in just 2 weeks.

The Nasdaq 100 continues to be the strongest of the indices that we trade at LS Trader on the basis of recent price advance and momentum. This week has seen a large 3.61% advance and has meant that the Nasdaq has advanced some 232 points in just 2 weeks to reach new 13 year highs.

The Dax, still the strongest of the European indices, rose to new all time highs having cleared the previous all time high that was posted on the 19th September at 8779 basis the December contract. This week saw the index post new highs at 8869 on Friday before pausing for breath and closing slightly lower.

Commodities

Commodities have had a mixed week with some of the sector declining and some markets making decent moves to the upside. There are some early signs that the recent commodity bear market may be taking a pause as some markets are showing signs that they may have bottomed out and may be in the relatively early stages of a decent advance.

Both gold and silver had fallen to new lows for the current move, but both were once again subject to a sharp reversal as the metals sector moved higher. For now the trend is still down across the metals sector but dollar weakness may limit further declines, should the dollar continue with recent weakness.

Currencies

The U.S. dollar index did test the recent low at 79.72 as expected and indeed fell through that level to reach, by a single tick, its lowest level since November 2011. The trend for the index is clearly down and there is no evidence yet to suggest a bottom is in place, so on the basis of this index alone, lower still looks to be the game.

However, the Euro, which makes up 57% of the index is close to its high of the year posted February 1. Considerable resistance can be expected here, which may put a lid on the dollar’s decline should that resistance level hold. Similarly, the Pound is also close to its local top and not that far away from its high of the year, so there is some overhead resistance for both of these currencies to clear. The dollar index is the invert of the Euro, and with the Pound being highly correlated, resistance on both equates to support for the dollar.

Interest rate futures

Interest rate futures advanced for the week with the 5-year T note crossing the 200 day moving average and exceeding the 61.8% retracement of the sharp decline from May. The longer term 10 and 30 year markets are lagging the 5s, with the 30 year T bond still below the 38.2% retracement of the same move. These rallies are still therefore corrective and the long-term trend is still down in spite of short-term strength.

Good trading

Phil Seaton

Weekly Update 13th October 2013 – LS Trader

It’s been a volatile week in many markets, where large swings in both directions have been seen. Much of this volatility appears to be due to the various political evens in the U.S., which going on the basis of price action seen on Thursday and Friday appear to be heading towards at least a short-term resolution.

The long-term trend remains up for stocks, mixed for the dollar and commodities and down for interest rate futures.

Stocks

The S&P 500 ended the week higher by 0.85% but had been significantly lower on Wednesday, where the index fell to its lowest level since early September. In last week’s update we wrote: “The long-term trend remains up and a push to slight new highs can as yet not be ruled out, especially if a resolution is reached in the next week or so in Washington, ahead of the October 17 deadline for raising the debt ceiling. Such an agreement seems highly likely and this will probably lead to a relief rally for stocks.” The relief rally may have begun on Thursday and we shall see how long it continues.

The Nasdaq 100 is still the strongest of the indices we trade at LS Trader and following a strong recovery rally is back within range of new highs for the year. The Dax, the strongest of the European indices is also back within range of new all time highs and may breakout higher this coming week. All time highs for the Dax were posted at 8779 on 19th September basis the December contract.

The VIX had a hugely volatile week, initially rising to its highest level since July but then ending the week lower. Moves such as this highlight the market’s uncertainty as it shows extremes of fear followed by relief.

Commodities

Gold led the metals markets lower this week, breaking down to new lows for the current move and reaching its lowest price since July. This move has so far been unconfirmed by silver, which as yet has not taken out support. Copper, one of the most reliable economic indicators, hence the name Dr Copper, is also in a long-term downtrend and may break lower soon in spite of some strength seen at the end of the week. With the trend remaining down for all markets in the sector, new lows for the year are still a possibility.

On balance the trend for commodities is down. There are a few exceptions, one of which is sugar, which has made a bullish run from the low posted in July, completing a change of trend to up this week with strength. Although this move runs counter to the majority of commodity markets, there is plenty of upside potential here over the coming months. Another exception is feeder cattle, which this week completed five straight weeks of gains, advancing by 2.01% this week. The next target is resistance at 171.80 basis the November contract.

Currencies

The U.S. dollar index rallied mid-week, briefly poking above resistance but then tapering off into Friday’s close. The trend remains down and another test of the recent low at 79.72 may yet be seen. However, as we wrote last week, should dollar strength continue the recovery might continue higher to close the gap at 81.51. Currently trading in the currency markets is mixed with the trend favouring the dollar in some markets but moving against the dollar in others.

Interest rate futures

Interest rate futures ended the week virtually flat across the sector with some indecisive doji/spinning top patterns printing on the weekly charts. This is consistent with our view that the recent rally, which has now changed to sideways price action, is corrective. With the long-term trend still being down the odds favour a resumption of the downtrend, particularly if the local top posted a couple of weeks back continues to provide resistance.

Good trading

Phil Seaton

Weekly Update 7th October 2013 – LS Trader

Stocks and the dollar continue to trade in tandem, which is not the normal historical pattern where there is normally an inverse relationship between the two. This week saw stocks and the dollar weaken for most of the week but then both reversed and gained on Friday. The long-term trend remains up for stocks but is mixed for the dollar, as it is also for commodities, although the majority of commodities are currently in a long-term downtrend. Interest rate futures are also still in a long-term downtrend.

Stocks

The S&P 500 ended the week lower by 0.10% but had been considerably lower on Thursday, where it tested the 50 day moving average as expected. Friday saw a decent bounce with a bullish engulfing pattern printing on the daily chart. The long-term trend remains up and a push to slight new highs can as yet not be ruled out, especially if a resolution is reached in the next week or so in Washington, ahead of the October 17 deadline for raising the debt ceiling. Such an agreement seems highly likely and this will probably lead to a relief rally for stocks.

It was a similar story for both the Nikkei and the Dax, although their respective reversals were not quite as convincing as the S&P 500’s.

The Nasdaq 100 remains the strongest of the 4 stock indices that we trade at LS Trader and is the only one to have held above short-term support. As with the other indices, the Nasdaq 100 also printed a bullish reversal candle on the daily charts on Friday and remains the closest to its yearly highs. For now the trend remains up for all 4 indices.

The VIX had a good week in spite of considerable weakness on Friday, but the fear index still ended the week higher by 8.28%, which is not really surprising considering the political struggles across the pond. Basis the cash VIX, the highest price was registered since the end of June, which coincided with the start of the recovery rally in stocks following their steep sell-off from the end of May.

Commodities

Commodities remain mixed but the majority are still in long-term downtrends. The grains markets in particular remain under pressure as they have for much of the year to date. There are a few commodities that are in uptrends and these come from the softs and agriculture sectors and include cotton, feeder cattle and lean hogs. Sugar, which has been bullish since posting a low back in July of this year is on the verge of a change of long-term trend to up and may continue higher should a change of trend be confirmed.

The energy sector remains mixed but no leaded gas and natural gas continue to lead the way lower whereas the remainder of the sector is still in a long-term uptrend.

Metals have been quite volatile of late but the trend remains down for the sector. This week saw the weakest two markets of the sector, gold and silver, break to new short-term lows but neither has as yet been able to continue lower. New lows below the lows of the year are still a possibility.

Currencies

In last week’s update we wrote that the odds favoured a weaker dollar over the near term and that the next downside target for the dollar index was at the 2012 Q3 lows around 79.50. This past week saw the index fall to its lowest level since January at 79.72 basis the December contract, before reversing higher on Friday. The trend remains down for the index but should dollar strength continue and move above near-term resistance, the recovery may continue higher to close the gap at 81.51. However, with the long-term trend being down, lower prices cannot be ruled out.

As before, the long-term trend is against the dollar in all but 3 of the currency markets that we trade at LS Trader, the Aussie, the loonie and the Yen.

Interest rate futures

Interest rate futures pushed to slight new highs for the recent corrective rally but for the most part traded in a fairly narrow trading range, probably waiting on some agreement out of Washington. We still view the rally as corrective and whereas the shorter-term 5 & 10 year T-notes are pushing towards the 50% retracement of the decline from May, the 30-Year T-bond still remains well shy of the 38.2% retracement of the same decline. Whether the long bond reaches that level before resuming the downtrend remains to be seen. The trend for the sector is still down across the board.

Good trading

Phil Seaton

Weekly Update 29th September 2013 – LS Trader

Both stocks and the dollar have shown weakness during the past week but the trend for stocks remains up across the board of indices that we trade at LS Trader, whereas the trend is mostly down for the dollar. Commodities remain mixed and have not really benefitted from a weaker dollar as many would have expected they would.

Stocks

The S&P 500 failed to find support at the 1700 level, which it should have done if the trend was still good near term. This calls the sustainability of the recent rally to new all time highs into question. The weekly charts show a bearish engulfing pattern which may lead to slightly lower prices over the coming days and possibly a test of the 50 day moving average.

The Dax has traded sideways to lower for the week and may now test support in the days ahead. The Nikkei continues to struggle with resistance at 15000. Friday saw a bear sash pattern printed on the daily charts which confirms the resistance level at the top of the pattern. However, as we have mentioned previously and as was the case a few weeks ago in this market, often the best use of candlestick patterns is when they fail and move above the top of a reversal pattern, especially on a closing basis. A close above last week’s high and 15000 in particular would be bullish. Should resistance hold, then a move back to the 50 day moving average may follow.

Only the Nasdaq 100 was able to produce a higher weekly close, but even that was below the daily highs produced the week prior.

Commodities

Commodities have seen mixed price action over the past week, which is consistent with the long-term trends amongst commodity markets, some of which are up but most of which are down. The downtrend that commodities remain in overall is amply demonstrated by the CRB commodity index, which has seen the index decline from 691.09 in April 2011, to its current level of 518.96, a bear market by anyone’s standard. Grains, metals and energies all still remain under pressure with the majority of markets from each of these sectors in well established downtrends, several of them near to their lows of the year.

Currencies

The dollar index ended the week slightly lower again and came close to testing the low set the previous week. Should that low be taken out the target for the dollar index remains at the 2012 Q3 lows around 79.50. The trend for the dollar index remains down so the odds favour a weaker dollar over the near-term. The long-term trends favour the dollar in only 3 of the currency markets that we trade at LS Trader, the Aussie, the loonie and the Yen.

Both the Euro and cable pushed higher again to within a few pips of the highs they posted the previous week. The next target for cable is still the $1.63 area, a level that capped the entire 2012 period and thwarted several rallies. The target for the Euro is $1.37, the high posted in early February.

Interest rate futures

Interest rate futures were higher; continuing their recent rallies, once again led by the 5 and 10 year T notes. Due to the extent of the decline from May, the current strength is still corrective and has yet to reach the 38.2% retracement of the same. It is possible that the rally may continue to the 38.2% and possibly even the 50% retracement level before resuming the long-term downtrend.

Good trading

Phil Seaton

Weekly Update 23rd September 2013 – LS Trader

The past week was dominated by two events: the first was Larry Summers ruling himself out of the running to be the next Fed Chairman and the second was the Fed announcement that the tapering that the markets had expected was not going to happen, at least not within the expected timeframes. The first of these is largely irrelevant since nobody really knew what Summers’ policies would or would not have been so the reaction was not really due to any real change and is really a knee-jerk reaction. The second is perhaps more important but again, its long term relevancy is in question.

 

The Fed had previously claimed that it would be more transparent by giving forward guidance but then reversed its previously stated position of tapering, a position that it had only announced in June. Bernanke’s willingness to reverse his previous guidance so quickly is perhaps what surprised more than the event itself, with the whole episode making forward guidance the exact opposite! This surprised many and amply highlights the foolishness of Fed watching and even forward guidance itself. The near-term impact was a weakening of the dollar and a rise for stocks and many commodities, moves which have largely been erased in the 2 days following. The longer-term impact of this is as yet unknown but the impact on long-term trends has been negligible apart from a continuation of the recent shift towards dollar weakness, a shift that was underway ahead of either of this week’s events. Stocks remain in a long-term uptrend while bonds remain down. The trend for commodities and the dollar is mixed.

 

Stocks

The S&P 500 rose to new all time highs this week, easily clearing the 1700 level. New all time highs were posted on Thursday at 1726.5 basis the December contract. However, following Thursday’s high some weakness has been seen and there was a weak close on Friday. This close was just above the key 1700 level, which in theory should now act as support due to change of polarity (prior resistance acts as support once resistance is broken). Whether it does or not will be answered quickly on Monday.

The Nasdaq 100 also had another good week, trading in similar style to the S&P and reaching new 13 year highs (highest level since late 2000), but as with the S&P 500, had a weak end to the week. In effect, U.S. stocks have all but erased the Fed’s no taper rally.

The Nikkei and Dax also rose but both also ended the week with selling. As we wrote last week, the long-term trends are therefore still very much up for global stock indices and the odds therefore favour higher prices over the coming weeks. This still applies. The VIX fell again, reaching new 5-week lows so complacency remains high, which as we also noted last week is often a precursor to sharp declines.

Commodities

A glance at the weekly metals charts, in particular that of gold, show how volatile the past week has been, but also shows that come Friday’s close, the most important price of the week, nothing has changed. Gold printed a long-legged doji on the weekly chart which represents total confusion in a week that has seen wild swings higher and lower during the week, only for the market to close pretty much where it began. Silver was the most volatile, but the rally following the Fed meeting has almost completely been erased and silver may break to the downside again as early as this coming week. Both gold and silver’s failure to clear the August highs may prove telling over the coming weeks.

The important thing is that the long-term trends remain intact and that often the biggest up moves happen in bear markets. Metals are still in a bear market set up and may yet move to new lows for the year.

Currencies

Last week we wrote: “For the uptrend to remain intact, the dollar index needs to resume higher from current levels.” The dollar index did not resume higher and instead took out support, changing the trend for the index to down. In spite of a small recovery on Thursday and Friday, lower prices look to be on the cards with the next target being the 2012 Q3 lows around 79.50.

In last week’s update we wrote that following its recent breakout, GBP/USD may push higher to test $1.60. It did and eventually pressed higher to $1.653 basis December. The next target will be the $1.63 area, a level that capped the entire 2012 period and thwarted several rallies.

Interest rate futures

Interest rate futures continued their recent corrective rallies, led by the shorter-term markets. Further strength may be seen in the next week or so but the longer-term trends remain unaffected by the recent moves and lower prices will likely follow with a resumption of the long-term downtrend later in the year.

Good trading

Phil Seaton

Weekly Update 16th September 2013 – LS Trader

We have written in recent weeks and many times over the past few years about the unreliability of seasonality and stated that seasonality alone should never be used to form the basis of trades and that ultimately, trends and price action were far more important. This sentiment has been confirmed once again by price action seen so far this month, which has run counter to seasonal tendencies.

From the beginning of the month, stock indices have continued to press higher in the direction of the long-term trend, in what is historically the weakest month of the trading year. The dollar has been less decisive and is mixed, whilst commodities are mostly pushing lower in the direction of their longer-term trend.

This week sees the 2-day FOMC meeting. The key to remember is that it is not the news itself that is important, but the markets’ reaction to the news that drives price action.

Stocks

The S&P 500 had a good week, advancing by 2.14% and pressing once more back towards its all time highs at just ticks below the 1700 level, basis the December contract. The index shot higher from the open on Monday, moving decisively back above the 50-day moving average.

The Nasdaq 100 also had a good week and is still the leader of the indices we trade at LS Trader by way of being the only one of the four that is at its highs of the year. Cleary though from a much longer-term perspective the Nasdaq is weaker since it is still a long way below its all time highs posted 13 odd years ago, whereas the other indices are just points below their respective all time highs.

The Daxalso had an excellent week, advancing by 3.03% and taking out the top of the recent range, suggesting that a test of the year’s highs and possibly higher is the game over the coming weeks.

The December Nikkei had another strong week, gaining another 3.99% to add to the previous week’s 4% advance, keeping the uptrend very much intact. Last week we wrote: “Of short term interest is the evening star 3-day bearish reversal pattern that has formed right at resistance. Often the best use of candlestick patterns is for when reversal patterns fail, and the markets break out above the high of the pattern (in the case of bearish reversal patterns). A move above last week’s high, particularly on a closing basis, would be bullish.” As anticipated, the market did break out above the pattern, and strength followed, keeping the long-term trend intact.

The long-term trends are therefore still very much up for global stock indices and the odds therefore favour higher prices over the coming weeks. The VIX however, known as the fear index, has fallen to 4-week lows, indicating that complacency is reaching new high levels, often a precursor to sharp declines.

Commodities

Soybean meal and soybeans, the only two markets from the grains sector still in a long-term uptrend had very volatile weeks, with large swings seen in both directions. In both markets the rising windows mentioned in the last two weekly updates have held firm on a closing basis, so the bottom of the gap is still providing support for both markets. The other grains markets are not faring so well and have either resumed or are on the cusp of resuming their respective long-term downtrends.

Considering recent dollar weakness, the weakness that has resumed in the metals sector suggests that new lows may be forthcoming over the coming weeks, as commodities being priced in dollars generally move inversely to the dollar. This suggests that once the dollar resumes strength, commodities and metals in particular will come under further pressure. The trend for the entire metals sector is down and the corrective rallies seen over the past couple of months or so look to be over.

Currencies

Indecisive trading remains characteristic of the currency markets and the dollar in particular in recent weeks. The longer-term trend still slightly favour the dollar, but the dollar index is perilously close to support. For the uptrend to remain intact, the dollar index needs to resume higher from current levels.

In last week’s update we wrote about a possible test of key resistance in GBP/USD and the market did test and exceed resistance, giving another change of trend against the dollar. Following the breakout the pound continued higher and may now test $1.60 soon.

Interest rate futures

Interest rate futures pushed marginally higher as their recent corrective rallies have continued. The longer-term trend still remains down but as we wrote last week the steps to new lows are not in a straight line.

Good trading

Phil Seaton

 

 

Weekly Update 9th September 2013 – LS Trader

Stocks did bounce higher as expected last week, possibly due to some seasonal upside bias. As we also wrote last week, that positive seasonal upside bias gives way to historically the weakest month of the year from the middle of last week onwards. We can therefore expect an up-tick in volatility for stock indices over the next few weeks, which may continue on from Friday’s long-legged doji pattern, which indicates confusion and indecision in the short-term amongst traders.

Stocks

Our focus now shifts to the December contract for stock indices so the below comments now relate to December futures. The December S&P 500 rose by 1.37% this week but remains well off the pace set by the Nasdaq. The index still remains below the 50-day simple moving average, which it tested on Friday. As we wrote last week, if this month does develop along the week path that is seen historically, we can look for a move lower towards the 200-day moving average, currently at 1550, almost 100 points below Friday’s close.

The December Nasdaq 100 posted very slight new intra-day highs on Friday but was unable to push on, pulling back to close lower. The Nasdaq still remains the strongest in terms of strength this year and is nearest to its year’s high.

The Daxrecovered some of its recent losses but is still range bound. The long-term trend here remains up but should recent lows be taken out, further short-term weak retracing the entire advance from June 24th at 7660 over the coming weeks remains a possibility.

The Nikkei had a strong week, advancing by 4% even after Friday’s sell off. Of short term interest is the evening star 3-day bearish reversal pattern that has formed right at resistance. Often the best use of candlestick patterns is for when reversal patterns fail, and the markets break out above the high of the pattern (in the case of bearish reversal patterns). A move above last week’s high, particularly on a closing basis, would be bullish. The long-term trend for the Nikkei is still up, as indeed it is for all four indices that we trade at LS Trader. However, of the 4, the Nikkei is closest to a change of trend to down should sustained weakness be seen.

Commodities

In last week’s update we wrote about the importance of the rising windows on both soybeans and soybean meal. On a closing basis both of these windows held, so they remain open and therefore still provide support. From the grains sector, only these 2 grains remain in uptrends, whereas the remaining 5 grains markets are all still in long-term downtrends. One of these is oats, which fell to new lows for the year this week, in line with our expectations of lower grains prices. Wheat came to within just over a point of its lows for the year, so the downtrend may resume this week on new lows. Corn, rice and bean oil all remain entrenched in long-term downtrends and a resumption of their respective downtrends looks to be only a matter of time.

Crude prices have experienced some volatility this week but both Light Crude and Brent Crude have rallied strongly from their respective lows of the week and remain in long-term uptrends.

The trends for gold and silver still remain down, as indeed they do for copper and palladium.

Currencies

The dollar has been very mixed again this past week, beginning with strength and ending with weakness. Three of the currency markets broke out of their respective ranges last week as expected, but have so far been unable to push on. So far the long-term trends still mostly favour the dollar. Of particular interest this week will be GBP/USD, which may once more rise to test key resistance, something that it has been close to in 3 of the past 4 weeks, each attempt being unsuccessful.

This week sees quarterly currency expiration and a roll to the December contracts from September.

Interest rate futures

Longer-term interest rate futures declined to new lows this week but all bounced higher on Friday. The trend is still down and lower prices are expected on the longer-term horizon, but the steps to new lows are not in a straight line. Friday’s strength may be the start of a short-term corrective bounce before longer-term weakness resumes. Short-term interest rates were stronger still, and the short-term downtrend looks to be under threat this week in both the Euribor and 3-month Eurodollars.

Good trading

Phil Seaton

Weekly Update 2nd September 2013 – LS Trader

Monday is Labor Day in the U.S. so many markets will be closed, leading to a shortened trading week. Stocks have continued lower since the 2nd August high but may bounce a little over the next few days due to some seasonal upside bias. That seasonal upside bias then gives way to historically the weakest month of the year, after the middle of next week. The dollar could be poised to resume strength following recent corrective price action, which may trigger further weakness for commodities. Profitable trading opportunities look to be plentiful as we move into the final third of the year.

Stocks

September often begins with strength, for 2-3 days following Monday’s Labor Day and then deteriorates into the weakest month of the year for US stocks. As we have written many times in previous years, the current trend is of far more importance that seasonal tendencies. In the short-term the S&P 500 has continued with weakness since posting the all time high on the 2nd August. This week has seen the index move and close the week below the 50-day simple moving average. Weakness may continue through this weak month down towards the 200 day moving average, currently at 1550, which also represents a key support level basis the September contract.

The Nasdaq 100 has held up better than the S&P 500 and in fact made a slight new high this week intra-day but was unable to push higher and a swift sell-off followed. The tech index remains above the its 50 day moving average, but continued weakness for the S&P 500 will likely see that level tested by the Nasdaq.

The Dax was unable to breakout higher from the box range and instead broke lower in what was one of the most bearish weeks in recent times with the index shedding 3.56%. The long-term trend here remains up but last week’s technical damage suggests further short-term weakness ahead, possibly retracing the entire advance from June 24th at 7660 over the coming weeks.

Commodities

Both soybeans and soybean meal gapped higher at the open Monday and continued recent bullishness until Tuesday, at which point selling returned which retraced much of the week’s gains.  We can now look for the gap to provide some support for both of these markets and for strength to resume. However, if the rising window (gap) is broken, further weakness may be seen. Similar price action was seen in the other grain markets, the exception being that the trend for the remaining markets is still down.

Gold reached a 15-week high this week and silver reached a 20-week high, both moves that show the extent of the recent counter-trend price action. However, the trend for the sector as a whole is still down so the current strength in the longer-term timeframe is still viewed as corrective. Considerable further strength, particularly for gold and silver will be required before a change of trend is confirmed, something that at this stage looks less likely. If last week’s highs hold, the possibility of further weakness possibly to new lows increases over time.

Currencies

In last week’s update we wrote about the importance of the June low at 80.61 on the dollar index and said that as long as that level holds the trend remained up for the dollar index and the dollar overall. Well that level did hold and the index pressed higher and now looks to be on the cusp of an up-side breakout and a resumption of the longer-term dollar bull market, should the breakout be successful.

We also wrote that the failure of GBP/USD to take out critical resistance and a truncated rally pointed to a resumption of the long-term downtrend and acceleration lower. We did in part see that this week but the decline was halted by support at $1.5400. A break of this level may lead to lower prices and a test of the next support level at $1.52. Further out we are still looking for the July lows around $1.48 to be taken out.

Interest rate futures

Bonds and T notes rolled from September to December this week. The past 2 weeks has seen mostly corrective, counter-trend price action which may continue near term. The long-term trends for the sector remain unaffected and are down across the board. The longer-term view still points to lower prices and higher yields over the coming months but a moderate correction higher may be seen first.

Good trading

Phil Seaton

Weekly Update 26th August 2013 – LS Trader

Stocks have had another mixed week, and although the long-term trend for stocks is still clearly up, short-term price action is less clear. For US stocks the Nasdaq 100 remains the strongest and may breakout again to new highs soon, with a slightly upward seasonal bias between now and the first few days of September.

Stocks

The S&P 500 fell below the 50 day moving average and continued lower, finding some support at 1631 before moving higher once more. The trend remains up but as August draws to a close and the weakest month of the year for stocks, September, being just a week away it remains to be seen as to whether we will see new highs again this year or whether weakness will resume and take stocks lower. September often begins with strength, for 2-3 days following Labor Day (2nd September) and then deteriorates into the weakest month of the year for US stocks. However, price action is far more important that seasonal tendencies, with the current trend being all-important.

The Nasdaq 100 traded in similar fashion to the S&P, this time finding support at just over 1650 basis the September contract. The trend here is still up and the Nasdaq remains stronger than the S&P 500 with new highs and a resumption of the trend looking more likely.

The Dax remains the strongest of the indices that we trade at LS Trader, but continues to trade sideways within a box range. A break to the upside above 8464.5 basis September could prove interesting and would likely lead to a test of the highs of the year. The long-term trend remains up for the whole sector at present.

Commodities

From last week on grains: “With the strongest 2 markets in the sector being soybean meal and soybeans, these 2 will most likely be the first to breakout to the upside should short-term strength continue.” Both these markets made explosive moves to the upside, with soybean meal advancing 8.59% for the week and soybeans advancing 5.46%. The trend for these markets is clearly up and both remain bullish. Soybeans may encounter some resistance at 1333 basis the November contract, but if this level can be cleared a continuation to the 2012 highs may follow. The rest of the grains sector remains entrenched in a long-term downtrend and lower prices are still expected.

The metals sector has seen continued short-term bullishness. However, the trend for the sector as a whole is still down so the current strength in the longer-term timeframe is still viewed as corrective. Considerable further strength, particularly for gold and silver will be required before a change of trend and a more bullish outlook would be in place. Palladium and copper for now look the most likely to complete a change of trend to up, but further strength is required in these 2 markets also.

Currencies

The currency markets have become increasingly volatile in recent weeks and for the most part without trend. Overall the long-term trend favours the dollar, the Euro being the exception, where the trend is now up. What is of critical importance for the dollar is the June low at 80.61 on the dollar index. As long as this level holds, the trend remains up for the dollar index and indeed the dollar overall.

GBP/USD is perhaps the most interesting currency market at present. Having failed to follow the Euro higher and also failing to take out critical resistance to give a change of trend to up, the trend remains down with a truncated rally, which may lead to an acceleration lower and a resumption of the longer-term downtrend. This scenario will be voided should the June high be broken to the upside.

Interest rate futures

Interest rate futures have had a mixed week with all markets in the sector continuing the downtrend and ending the week lower with the exception of the long bond. The trend is down across the board with the longer-term markets near their lows of the year. We continue to look for lower prices and higher yields over the coming months, with some corrections higher along the way.

Good trading

Phil Seaton

Weekly Update 19th August 2013 – LS Trader

In last week’s update we wrote that the major indices were between all time highs and near-term support and that one of those levels was likely to give way. That turned out to be correct as the S&P 500 broke through near term support and moved lower. The longer-term trend is still up for stocks but there is definite weakness in the near term. Whether this continued sufficiently to give a change of trend to down over the coming weeks remains to be seen. August is, as we have mentioned many times before, often a treacherous month for stocks.

Stocks

The S&P 500 was unable to push to new highs and sold-off through decent short-term support, bringing the trend to an end for the time being. The longer-term trend is still very much up but weakness is evident over the past 2 weeks. This was the second consecutive down week for the S&P 500, this week closing lower by 2.08%, which has led to the index closing right on the oft-watched 50-day simple moving average. It is now possible that we will see a further slide over the next 2 weeks towards the June lows and major support at 1553 basis the September contract.

The Nikkei 225, still the weakest of the indices we trade at LS Trader, managed a small advance for the week and the trend is still up. However, the Nikkei will, as we wrote last week, almost certainly be the first of the indices we trade to break lower and give a change of trend to down.

Commodities

The longer-term bear market in the grains markets is still in effect (exceptions being soybean meal and soybeans) in spite of large up-side moves this week. With the exception of wheat, which remains firmly entrenched in a downtrend, the remaining grains markets all moved higher for the week, some making sharp moves higher. With the strongest 2 markets in the sector being soybean meal and soybeans, these 2 will most likely be the first to breakout to the upside should short-term strength continue. For now, strength seen in other markets in the sector is viewed as corrective.

The energy sector has continued with recent strength, led once more by the strongest markets in the sector, Brent and Light crude. The other markets in the sector still remain in long-term downtrends but both heating oil and no leaded gasoline could confirm change of trend as early as this week should strength continue.

Cotton has another explosive week higher, easily taking out the highs of the year, as we indicated may happen in last week’s update.

Currencies

As we wrote last week, the long-term trend has been up for the dollar index and for the dollar for the majority of the year to date, and it still is. However, recent dollar weakness has pushed several markets, including the index to the cusp of a change of trend. The dollar index though still remains above the August lows of 80.89 basis September, and more importantly the June low at 80.61. As long as these levels hold, the trend remains up for the dollar.

As before, critical resistance at $1.3423 basis the September Euro contract continues to hold. This level, as with the levels mentioned above for the dollar index, is key to near term price direction. The Euro and the dollar index are almost a perfect inversion due to the heavy weighting of the Euro in the index, so with both markets near critical support and resistance levels respectively, we should get a resolution soon for the dollar which will filter through to other major currencies. If the weakness that has been seen this week in stocks continues, it is likely that dollar strength will resume.

Interest rate futures

In last week’s update, we wrote that in spite of recent short-term strength, the odds slightly favoured lower prices and a resumption of the downtrend as that was still the direction of the long-term trend. The entire sector broke lower, led by the long-bond, which fell to new lows for the year and also the lowest level since late 2011. This sector still has plenty of potential to move lower over the coming months, with yields looking set to rise longer-term, prices, which are the inversion of yields, should continue lower.

Good trading

Phil Seaton