Weekly Update 18 September 2016 – LS Trader

The past week has seen stocks mount a bit of a recovery, but they remain below their recent highs. The Dollar has had a decent week and may be poised to breakout higher against some of the major currencies.

This week sees the two-day FOMC meeting begin on Tuesday.

Stocks

The Nasdaq 100 is the strongest of the four stock indexes that we trade at LS Trader and has put in quite a strong recovery this week, helped by Apple stock rising to a nine-month high. This rally has taken the Nasdaq 100 within touching distance of resistance and a possible breakout to new all-time highs.

The S&P 500 has been considerably weaker than the Nasdaq and has had a much more muted recovery. The index appears to be finding support around the 100-day moving average.

The Nikkei, which is the weakest of the global stock indexes that we trade, has moved back below its 50 and 200-day moving averages and remains in a long-term downtrend. The RSI has closed a touch below the 40 level, which is bull market support. A decisive move below 40 on the RSI would point to further weakness.

The Dax also finds itself at a key support level and is testing multiple support levels that are closely bunched. These include the 40 level on the RSI, the 200-day moving average, and the top of the downward sloping trend line from the April 2015 high. If all of these levels fail to hold, we should see the psychological round number 10,000 tested.

Commodities

The energy markets have moved lower this week with the exception of Natural Gas and RBOB Gasoline. Both Crude Oil markets are showing persistent weakness and may fall further to test key structural support levels over the next week or so.

Gold has closed lower in seven of the last eight trading days and has closed right on its 100-day moving average. This is seasonally a pretty strong time of year for the yellow metal, but not so this year so far. Price is currently just above a key short-term support level so we may see some strength. Price is also right on a trend line from the December 2015 lows. If that support level fails to hold, further weakness back towards the 200-day moving average, currently at 1271 may follow. This coincides with the low of the Brexit day rally, which was a rally day fuelled by massive volume. This is likely to represent a very high volume footprint which should provide significant support if the market falls that far

Currencies

It’s been a decent week for the Dollar, which has seen strength returning to the market this week, particularly on Friday. The Dollar Index moved through both its 50 and 200-day moving averages on Friday on decent volume and may continue to press higher this week, certainly in the run-up to the Fed meeting, which always has the potential to move the currency markets around. Volatility is trading at around fair value on the Dollar Index, which means that a breakout is due.

The British Pound has moved back below all its moving averages and had a large down day on Friday. The market has effectively consolidated in a sideways range since the 24th June and looks poised for a breakout to new lows. If Dollar strength is seen elsewhere, the Pound is likely to come under further pressure and the 1.28 area may be tested.

Interest rate futures

Interest rate futures remain in a wider trading range that has been in place for several months. Price remains between the 50 and 200-day moving averages on the 5 & 10 Year T-Notes, and the 30 Year T-Bond. The long-term trend in all three markets is up, as it is also for the UK Long Gilt. The trend is down only for the 3-month Eurodollar.

Good trading

Phil Seaton

LS Trader

Weekly Update – 11 September 2016 – LS Trader

The past week was a shortened trading week due to the US Labour Day holiday on Monday. It also delivered what may be the beginning of a change of trading landscape for the next few months following a well overdue move in the stock markets, which broke out of their incredibly narrow, low volume trading range on Friday with significant moves.

Stocks

From last week: “Rather amazingly, the entire trading range for a month and a half has been contained within 50 S&P points. That’s not something that will continue for long, and a volatility breakout beckons.” Volatility picked up right on cue, with a huge move down, certainly by recent standards, on Friday. The breakout to the downside was sufficient to take price through the 50-day moving average and the 40 level on the RSI, which means the RSI has now entered the bear range for the first time since late June.

Of more importance was the volume with which the move occurred. On the S&P 500, average volume has been around the 1.5m mark, but Thursday saw just shy of 3m, and Friday, 4.87m. This will be hard for bulls to overcome. However, the long-term trend is still up, and considerable further weakness will be required before we get a change of long-term trend and a meltdown.

The Nasdaq 100 moved in a very similar fashion, and for now, the trend remains up for both US indexes. The Nikkei, which is still the weakest of the four indexes we trade at LS Trader, remains in a long-term downtrend and may move sharply lower this week having been unable to stay above its 200-day moving average. The Nikkei might open sharply lower on Sunday night

We also wrote last week: “It should be noted that September is the weakest month of the year for stocks based on historical data going back to 1950. That does not mean that this month will be a down month for stocks, only that there has been a historical tendency for weakness during September on average.” It is a month of weakness, as we noted in last week’s update. It’s going to be fascinating to see how the stock markets trade over the next few weeks following Fridays volatility and volume breakout.

Commodities

Crude Oil continues to work a possible head and shoulders bottom pattern on the weekly chart. Whether this resolves itself in a break of the neckline, or as a failure pattern remains to be seen. The long-term trend remains up for the energies market with the exception of RBOB Gasoline.

The metals markets remain mixed, but weakness is evident in the short-term. Copper remains the weakest of the metals and is hovering just above trend-defining support.

Orange Juice completed a breakout to new multi-year highs, rallying through resistance to print its highest price since February 2012.

Currencies

We also wrote last week that patience is still required in the currency markets with the knowledge that once we do get a decisive breakout from this seemingly endless consolidation, either up or down, the resultant breakout should be massive. This breakout has yet to happen, but it’s possible that the significant move in stocks seen on Friday could be the catalyst that takes many other markets out of their long-term consolidations.

The dollar index is currently positioned roughly in the middle of a wide trading range and continues to trade around its 50 and 200-day moving averages. The Euro is in a similar, albeit inverted position. The time duration of the consolidation pattern suggests that the eventual breakouts in these markets will result in some very large moves. For now, we wait for the market to point the way.

Interest rate futures

Interest rate futures have made a breakout of their two months+ consolidation, but as yet without confirming a change of trend. There was quite heavy selling seen on Thursday and Friday, and on above average volume, so there could be further weakness ahead. For now, the long-term trend remains up in the sector for all markets, except for the 3 Month Eurodollar, which completed a change of trend to down a few weeks ago, albeit so far without any follow-through.

Good trading

Phil Seaton

LS Trader

Weekly Update 4 September 2016 – LS Trader

Monday is Labour Day in the US so most markets will be closed, leading to a shortened trading week. Volume and volatility should return to the markets from Tuesday as traders and fund managers return to their trading desks following the summer break. Typically, the next 3-4 months are the best trading months of the year.

Stocks

The S&P 500 dropped to its lowest level since early August on Thursday but had recovered the week’s declines by Friday’s close and remains close to breaking out to a new all-time high. There has been an increase in volume over the past three days, and that may start to increase further over the next few weeks. Rather amazingly, the entire trading range for a month and a half has been contained within 50 S&P points. That’s not something that will continue for long and a volatility breakout beckons.

The position in the Nasdaq 100 is almost identical, although the Nasdaq remains further above its 50-day moving average, and the RSI remains above 60, making the tech index slightly stronger by these technical measures.

The Dax has recovered sufficiently to suggest that it will test its August high this week. The long-term trend remains up here as well, and a move above 60 on the RSI would likely lead to bullish price action and a break of resistance.

Even the Nikkei, which is the only one of the four stock indexes that we trade at LS Trader still in a long-term downtrend, has been displaying strength, this week closing above its 200-day moving average for the first time since April. The RSI has moved decisively above 60 this week, indicating further strength ahead.

It should be noted that September is the weakest month of the year for stocks based on historical data going back to 1950. That does not mean that this month will be a down month for stocks, only that there has been a historical tendency for weakness during September on average.

Commodities

The energy markets continued with weakness that began during the previous week and have all moved back below their long-term moving averages with the exception of Natural Gas, which is by far the strongest market in the sector.

Copper came close to a downside breakout and may resume the long-term downtrend this week. The other metals remain in long-term uptrends in spite of recent weakness.

The overall bias for commodity markets remains to the downside with the vast majority still in long-term downtrends.

Currencies

The currency markets continue with their long consolidation phase, which is amply highlighted by the dollar index trading sideways around a flat 200-day moving average. It’s a similar story in the Euro, and most currency markets remain rangebound. Patience is still required in the currency markets with the knowledge that once we do get a decisive breakout from this seemingly endless consolidation, either up or down, the resultant breakout should be massive.

Interest rate futures

Interest rate futures are also in a consolidation phase which has been in place for the past couple of months. Most markets in this sector are trading sideways in proximity to their respective 50-day moving averages, with the RSI also hovering around 50, indicating no trend. The long-term trend in the sector is still up with the exception of the 3-month Eurodollar, which remains below its 200-day moving average.

Good trading

Phil Seaton

LS Trader

Weekly Update 28 August 2016 – LS Trader

The past week has seen a continuation of light summer trade, with low volumes and low volatility continuing. That should start to change over the next week or so as we move into September.

Stocks

The S&P 500 hit a new all-time high on Tuesday but ended the week lower following a break of support on Friday. The S&P 500 has traded in an incredibly narrow range for most of the past couple of months. The long-term trend remains up, and the RSI is still in the bull range. Therefore, a breakout to new highs cannot be ruled out.

The Nasdaq 100 has also been trading in a tight range and was also subject to a break of support on Friday. As with the S&P 500, the trend remains up, and new highs remain very much within range.

The Dax had a spike lower on Monday, forming a very wide range day, the range of which remained intact for the remainder of the week. The low of the week was just below key support but did just about hold the trend line. The trend remains up here too, and the RSI remains in the bull range.

Commodities

The energy markets backed off from their recent highs this week, but with the exception of RBOB Gasoline, remain in long-term uptrends. We could quite possibly see upside breakouts this week in a few of the energy markets, particularly Natural Gas.

Copper has moved sharply lower this week, accelerating away from its 50-day moving average. A resumption of the long-term downtrend could be seen soon. The other metals have all seen continued weakness, but remain in long-term uptrends. The strongest metal continues to be Palladium, which has held above support this week.

The grains markets remain weak and in long-term downtrends. Wheat has already broken to a new low for the current move and other markets in the sector could follow suit this week.

As has been the case overall for much of the past couple of years, there is little to be bullish about in the commodities sector, with the majority of commodity markets still in long-term downtrends. Most of the best trading opportunities in these markets remain from the short side.

Currencies

The dollar put in a big move higher on Friday against many of the majors. This move was also seen clearly in the dollar index where the market close above its 50-day moving average. We may see a test of the 200-day moving average this week, which is currently at 95.83.

The Euro, which is a close inversion of the dollar index, moved sharply lower on Friday and closed below both its 50 and 200-day moving averages. The long-term trend is still up for the Euro, but a change of long-term trend to down is within range. A break of the sideways consolidation that the Euro has remained within for many months will likely result in a large move once the breakout is completed/

Interest rate futures

Interest rate futures moved lower this week, with the shorter-term markets being the weakest. The 3-month Eurodollar moved below its 200-day moving average and broke a key level of structural support, indicating lower levels ahead. The 3-month Eurodollar is the first market in the sector to complete a change of trend to down. The trend remains up for the remaining markets, but that could change over the coming weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update 21 August 2016 – LS Trader

Stocks briefly hit new highs this week but have been unable to decisively move higher on the back of low volume and volatility. These low volume conditions are quite typical of summer trading, which should see an increase in volume as traders and fund managers return to their trading desks at the beginning of September.

Stocks

The S&P 500 hit a new all-time high again this week but closed just one and a half points up for the week on Friday. Volatility is low, as is volume, but the trend remains bullish until proven otherwise.

The Nasdaq 100 hit an all-time high as well basis the cash index but has yet to hit the same high on the basis of the continuous futures contract. Price action in the tech index is very similar to that of the S&P 500, low volatility and volume. The long-term trend remains very much up in both indexes.

The long-term trend is also up in the Dax, but having moved above 10800 for the first time this year, gave back the recent gains, falling back to the breakout level. This level should act as support, which it has so far on a closing basis. Further below that there is also potential support should we get a retest of the trend line from the April 2015 high. If both of those levels give way, then we will likely see further decline down towards the 50-day moving average, but for now, the trend is up.

Commodities

The energy markets have continued their recent recovery, and some of the markets in the sector are on the verge of breakouts to the upside. This includes a potential head and shoulders bottom evident on the weekly Crude Oil continuous chart, which if completed would indicate significantly higher prices for Crude and the sector overall. The long-term trend is up for four of the five energy markets that we trade at LS Trader, the exception being RBOB Gasoline.

The grains markets continued their recovery as we indicated could be the case in last week’s update. A few markets in the sector had put in short-term reversal patterns, and we got confirmation of that in Wheat and Rough Rice this week.

Soybean Oil has been extremely bullish since printing the low back at the end of July and has now rallied to within range of a change of long-term trend to up. There is some weakness on the last two daily candles, known as a hanging man. This shows that the market is using up its buying power just to stay flat, and no real advance has been made. There could be some short-term weakness before this market launches further upwards to test trend-defining resistance.

Currencies

The currency markets, for the most part, are continuing their consolidation with very little in the way of trending conditions evident in any currency market at present. The dollar index fell to an eight-week low but has yet to breakout of the current consolidation pattern. Once it does, there will likely be some explosive moves, not just in the dollar index, but in other currencies as well.

The Euro remains in a consolidation that has now been in effect for 19 months, dating back to February 2015. Once this market breaks out, the resulting move could be huge.

Interest rate futures

The long-term trend remains up for all markets in the sector with the exception of the three-month Eurodollar. The longer-term interest rate futures markets are all trading around their 50-day moving averages in a fairly narrow range with low volatility. A volatility expansion, which should trigger an increase in all the key metrics, volume, momentum and price should result in a breakout from the range and a new trending phase over the next few weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update 14 August 2016 – LS Trader

The past week has seen strength in stocks sufficient for the S&P 500 to print new all-time highs. The Nasdaq 100’s rally has continued and is within touching distance of new all-time highs as well. The other sectors have seen mixed trading. The long-term trend is up for stocks and interest rate futures, and mixed for the dollar and commodities.

Stocks

The Dax broke through resistance formed at the April highs and from the trend line that has been in place since April 2015. The breakout completed a change of long-term trend and price continued higher following the breakout. The move has been confirmed by a decisive break of the 60 level on the RSI, which puts the Dax back into the bull range.

The Dax was not the only stock index displaying strength. The S&P 500 also reached new highs but has had little in the way of follow through and is trading in a very tight range. Volatility remains very low in the S&P 500, and this will not likely remain the case for much longer. Volume remains low.

The Nasdaq 100 also reached new highs for the current move and is now very close to reaching a new all-time high. The long-term trend is now up for three of the four stock indexes that we trade at LS Trader and remains in a long-term downtrend only in the Nikkei.

Commodities

The energy markets have continued their recovery from the sell-off that lasted from early June through to the start of this month. The long-term trend is still up for all markets in the sector with the exception of RBOB gasoline, which is the weakest market in the sector by quite some distance.

The grains markets, most of which have been in deep bear markets in recent times are showing signs of a potential bottom. For now, the long-term trend is down across the sector but there is a possibility that some of the short-term reversal patterns that were printed this week will be completed with upside confirmation over the next week or so.

The metals markets have again seen mixed trading. Both Gold and Silver continue to consolidate at not that far below their recent highs. Silver remains the strongest and is narrowly holding on to its uptrend. Palladium, which has been the strongest of the sector in recent weeks reached its highest level since June last year on Friday but a sharp reversal followed the next day to take the market back to test key support. Last week’s low needs to hold to keep the trend intact or we could see further selling. The long-term trend remains up and will likely do so for a considerable time yet.

Currencies

The dollar index continues to consolidate and trade mostly sideways as it has done for months. The index has in fact been in a consolidation since March 2015 and. This is one sector where breakouts are well overdue, as with the exception of moves seen in GBP/USD and USD/JPY, there has been little in the way of trending conditions in these markets. Once the dollar index does breakout from its range we should see some very large moves.

Interest rate futures

Interest rate futures continue to consolidate in what is quite a narrow range for these markets. The consolidation has gone on for about month. Such conditions rarely last for long, so we can expect a breakout from this range in the not too distant future. The long-term trend remains up for all markets in the sector with the exception of the 3 month Eurodollar.

Good trading

Phil Seaton

LS Trader

Weekly Update 7 August 2016 – LS Trader

The S&P 500 posted new all-time highs again this week and may be poised for a breakout higher even though there is little volume fueling the move and that we are in seasonally the weakest month of the year. The Nasdaq 100 is closing in on its all-time highs posted in March 2000.

The dollar has had a mixed week but could be heading for a long-term trend change to up, with the opposite move a possibility for the Euro. Interest rate futures have moved lower and commodities remain mixed.

Stocks

The S&P 500 broke short-term support on Tuesday but then rallied for four days to test the high of the year, closing just one point below that level. There is a good chance of a breakout to new highs this week. Volume remains low, as does volatility. The RSI has moved back above 60 and remains bullish.

The Nasdaq 100 continues to be the leader regarding recent strength. This week’s high of 4797.75 is now only 86.25 points below the all-time high for Nasdaq 100 futures, printed all the way back in March 2000. There still appears to be higher for this index to run, and we could see all-time highs soon.

The Dax reached its highest level since April this week but has been unable to clear resistance from the April high. It has also been unable to break the trend line from the 2015 high. There is therefore significant overhead resistance, but if price can break through, that would be bullish. The RSI is in the bull range, but the long-term trend is still down and requires a break of resistance for that to change.

The Nikkei regained its 50-day moving average this week, but the long-term trend remains down, and the RSI is in the bear range. The Nikkei continues to be impacted by a strong Yen and is the weakest of the four stock indexes that we trade at LS Trader.

Commodities

The energy markets put in a bit of a reversal this past week. This makes last week’s lows key swing levels in the crude oil markets. These lows should now provide some support, but if broken they may lead to significant selling and further weakness. The exception is Natural Gas, which still looks like it could be in the early stages of a new leg higher in spite of finishing lower this week. There are a couple of key resistance levels that need to be taken out, but if they are we could be off to the races.

The metals markets have seen some weakness this week. Copper has moved below both of its 50 and 200-day moving averages and remains in a long-term downtrend. Gold and Silver have also moved lower, with both markets possibly set to test support this week. Even Palladium, which has been the strongest of the metals markets in recent weeks has displayed some weakness and may also test support soon. For now, the long-term trend is up for all metals with the exception of Copper.

Currencies

From last week: “The Euro rallied to take out the 50-day moving average and should test the 200-day moving average this week.” The Euro did rally and test the 200-day moving average, but was unable to break through, printing a two-day bearish reversal pattern right at the long-term moving average. The long-term trend remains up for now but a test of some key support levels looks to be in the cards.

The dollar index, which is a near-perfect inversion of the Euro, regained its 200-day moving average on Friday. The long-term trend is still down for the index, but a change of trend to up is within range. The RSI remains in the bear range but could reach the 60 level soon.

Interest rate futures

Interest rate futures fell this week, but the sector remains in a long-term uptrend. The shorter-term markets were the weakest, and both the 5 & 10 Year T-notes fell to test their 50-day moving averages.

The 3-month Eurodollar is currently the weakest in the sector and is already below its 50-day moving average and set to test the 200-day moving average this week. The RSI has entered the bear range already, and it looks like we might have a top in on this market.

Good trading

Phil Seaton

LS Trader

Weekly Update 31July 2016 – LS Trader

The past week has seen the dollar reverse lower following the US Federal Reserve meeting and has seen the S&P 500 make a new all-time high, but also continue to trade in a very tight range. Commodities markets have been mixed, and interest rate futures have moved higher. The long-term trends remain as before across all market sectors.

Stocks

The S&P 500 has traded within a very narrow range this week. Trading for the past two weeks has been contained within a very tight 21.5 point range, which historically is around the average daily range in this market. Trading within such a narrow range will not continue for long, and we will likely see a breakout in one direction or the other and an increase in volume soon. The long-term trend is clearly up, with the market holding just below all-time highs, but also just above short-term support. One of these barriers will likely give way this week.

From a seasonal perspective, August has been the worst month of the year for the S&P 500 and the Dow 30 between 1988 and 2014.

By contrast, the Nasdaq 100 rallied almost 70 points this week, exceeding our target of last year’s high at 4716.5 in the process. The market closed the week above this key level, which is typically bullish. The RSI has also risen to 72.62 very much in the bull range. The two negatives are that volume remains below average, and that volatility has reached a level not seen since March 2015.

The Dax managed to break the 60 level on the RSI for the first time in a few months, but there has been no follow through in price, which remains below key resistance. This keeps the long-term trend down for now.

The Nikkei turned lower, falling through the 50-day moving average and remaining in the bear range on the RSI. The long-term trend remains down.

Commodities

Further weakness has been seen in the energy markets, which, with the exception of a very bullish Natural Gas, have continued to decline this week. So far, only RBOB Gasoline is in a long-term downtrend, but other markets in the sector could soon follow suit.

Natural Gas shot higher on Thursday, taking price back above its 200-day moving average, and the September contract now looks poised to break its early July high, and should continue north of the 3.000 level.

Silver, which has been consolidating since its spike high printed back on the 5th July, rallied this week from just above support. This strength keeps the focus higher in the short-term. The RSI fell to test the 60 level and bounced higher, which is typically bullish and suggests 2122.5 will be taken out.

Currencies

The currency markets have had quite a volatile week this week, particularly from midweek onwards, where both the US Federal Reserve and the Bank Of Japan had their respective meetings. Following the meetings, the dollar was mostly weaker. The Yen advanced as the latest round of easing from the BOJ fell short of market expectations.

Dollar weakness this week has seen the dollar index turn lower below levels that would have confirmed a change of long-term trend to up. The long-term trend, therefore, remains down for the dollar index.

The inverse of the dollar index is the Euro, and Dollar weakness resulted in Euro strength this week. The Euro rallied to take out the 50-day moving average and should test the 200-day moving average this week. The long-term trend remains up for the Euro.

Interest rate futures

Interest rate futures moved higher this week, and all markets in the sector have moved or stayed above their respective 50-day moving averages. This keeps the short to medium-term focus higher. All five interest rate futures markets that we trade at LS Trader are all also well above their 200-day moving averages, and the long-term trend remains up across the board.

Good trading

Phil Seaton

LS Trader

Weekly Update 24 July 2016 – LS Trader

The S&P 500 made new all-time highs this week, but the other global stock indexes continue to lag the S&P. The dollar’s recent recovery continues, and we could see some long dollar breakouts this week as the long-term trends look to be in the process of favouring the dollar once more against several of the major currencies.

Stocks

From last week: “Both volatility and momentum are increasing, which suggests that the uptrend will continue. However, the one negative, and it is possibly a significant one, is that volume has been in continual decline as the rally has progressed.”

The S&P 500 printed new all-time highs again this week but only managed to advance 15 points for the week. Momentum is decreasing slightly, and we continue to see lower than average volume go through the market. Volume continues to decline steadily, as it has since the huge volume day on the 24th June. This indicates a lack of sponsorship for the current rally.

The Nasdaq 100 reached its highest level since last year and may yet reach the next resistance level at 4716.5, the 2015 high. This rally also shows shrinking and below average volume, by the RSI is still pushing gradually higher, printing 67.49 on Friday. This week’s RSI high is the highest RSI level since the 1st April.

The Nikkei and the Dax continue to lag their US counterparts, and both remain in long-term downtrends. The Nikkei is still below its 200-day moving average, but the Dax has moved above it this week. The Dax continues to struggle against the 60 level on the RSI, which is bear market resistance, a level that the index has not crossed since May.

Commodities

The energy markets continue to show weakness, lead by RBOB Gasoline, the weakest market in the sector and currently the only market in a long-term downtrend. Crude Oil’s weakness is bringing a change of long-term trend to down within range. The RSI this week broke below bull market support at 40, which indicates lower prices ahead.

The grains markets have continued their recent decline, and both Corn and Wheat have made new lows for the current move. The long-term trend is now mostly down for the grains markets, remaining up only in Soybeans and Soybean Meal, due to their recent massive rallies.

Currencies

Things are starting to look up for the dollar. The dollar index has rallied to its highest level since March, and a change of long-term trend to up is now within range.

A change of long-term trend is also very much within range against the Canadian dollar and the Swiss Franc. The Canadian dollar, in particular, has an excellent set-up which could see a significant move in favour of the US dollar if the breakout is successful.

The British Pound has consolidated this week and remains roughly in the middle of the range between this month’s highs and the 31 year low printed back on the 6th July.

Interest rate futures

Interest rate futures have continued to move lower during the week before closing flat or slightly up by Friday. The 30 Year T-Bond almost tested the 50-day moving average before rallying higher to close the week almost flat. The shorter-term markets did drop slightly below their 50-day moving averages before moving higher. The long-term trend remains up for the entire sector, and the RSI is still in the bull range. We can’t as yet rule out new highs in these markets later in the summer.

Good trading

Phil Seaton

LS Trader

Weekly Update 17 July 2016 – LS Trader

The past week has seen the S&P 500 rally to new all-time highs and has seen the Nasdaq 100 complete a change of long-term trend to up. The week has also seen mixed moves in the currency and commodities markets and also saw a pullback in interest rate futures.

Stocks

From last week: “The S&P 500 rallied to a new high for the current move and made a new all-time high weekly close. From the standpoint of technical analysis, this cannot be bearish.”

We got the expected breakout to new all-time highs in the S&P 500, and the index rallied to print a record high of 2168 basis the September contract on Thursday. Both volatility and momentum are increasing, which suggests that the uptrend will continue. However, the one negative, and it is possibly a significant one, is that volume has been in continual decline as the rally has progressed.

The Nasdaq 100 broke through the April high that we wrote about last week, completing a change of long-term trend to up in the process. The RSI also broke above 60, entering the bull range in the process. The Nasdaq 100 continues to lag the S&P 500 and declining volume is present in this index, too. The long-term trend is now up for both US indexes but remains down for the other two indexes that we trade at LS Trader, the Dax and the Nikkei.

Commodities

Our target for Silver at 21.63 has yet to be reached. All metrics since the spike high on the 5th July have been in decline; volume, volatility and momentum have all pulled back with price. This suggests that there may be some more weakness for this market before the uptrend resumes and the high from the 5th July is exceeded.

Gold, which has remained significantly weaker than Silver, has declined further. Here the RSI has dropped back below 60, printing 54.31 on Friday as opposed to Silver’s print of 72.63. Volume has also contracted and volatility, along with price are almost back to an area of fair value, so we may see Gold and Silver resume their rallies over the next week or so. The long-term trend for both is still very much up.

Currencies

From last week on the British Pound: “Volume has been in decline almost every day since the 24th, which suggests that the selling pressure may be running out of steam and that a corrective rally higher may be due.” The Pound found support from just above the 31-year low and rallied higher as expected, moving back to fair value around 1.35. Friday saw a reversal back lower again, and the long-term trend remains down. Volatility is also declining back to a more reasonable level.

The currency markets, on the whole, are going through a quiet period, and the long-term trends are currently mixed. The dollar index continues to find support at the 200-day moving average but has yet to make a significant move to the upside to lead to a change of long-term trend to up. The RSI continues to test the 60 level, and if that level can be decisively broken then, we may see some movement to the upside and increased volatility, which would likely result in a few more breakouts in the currency markets.

Interest rate futures

From last week: “The spike high printed on the 24th represents considerable resistance, and we may see some weakness in interest rate futures in the near term”. Interest rate futures moved sharply lower this week as expected. The 5 Year T-Note has pulled back to the 50-day moving average but has done so on lower than average volume.

The 10 Year T-Note has followed a similar pattern but had almost a 200% volume day on Friday, which suggests there may be further to go in the pullback before the long-term uptrend resumes. The long-term trend remains up across the sector at present, and quite a large sell-off will be required for that to change.

Good trading

Phil Seaton

LS Trader