Weekly Update 10 July 2016 – LS Trader

The past week has seen the S&P 500 make a new all-time weekly closing high as global stocks have continued their recovery from the Brexit shock. Commodities have had a mixed week, as have currencies. Interest rate futures remain in long-term uptrends with yields falling to record lows.

Stocks

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. Volume has not increased as much as we would like to confirm the breakout, but that could quickly change if the market rallies further to new all-time highs, something that would likely lead to significant short-covering by those trying to call a top in the market.

In terms of the cash S&P 500, the all-time high printed at 2134.72 back on the 22nd May 2015. Friday’s high at 2131.71 is the highest print in the S&P 500 in just under a year. There is an old rule in trading that says never sell stocks on a Monday because Mondays are usually bullish. It will only take a bit of strength on Monday to see new all-time highs. If we do get the breakout, rally to 2150 may swiftly follow, and possibly 2200.

The Nasdaq 100 has also been bullish, having moved further above its 50 and 200-day moving averages. The RSI has closed at 59.47, just a fraction below the key 60 level. If the RSI decisively breaks 60 this week, we should see further strength in price to test the April high at a minimum.

Commodities

Our target for Silver at 21.63 was almost reached this week when we saw a huge spike day on Tuesday that rallied all the way up to 2122.5 before closing near the low of the day. The market has since moved slightly higher, but there are long upper and lower shadows on the daily candles throughout the week, which represents indecision. Silver is the front runner in the precious metals.

The energy markets are starting to look under a bit of pressure. Prices have fallen across the board this week. RBOB Gasoline, which has been the weakest market in the sector having failed to complete a change of trend to up during the February to May rally, has already resumed its long-term downtrend. Natural Gas, which has been the strongest market in recent weeks, also pulled lower but found support from the 200-day moving average.

Currencies

The British Pound fell to a new 30-year low this week as expected and the trend remains down. How much further this market has to go remains to be seen. 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 dollar overall has had a mixed week, advancing against some of the majors and falling back against the others. This is indicative of the current long-term trend position in the currency markets, which remains mixed.

Interest rate futures

Interest rate futures moved higher this week but with the exception of the 30 Year T-Bond remain below the extreme high printed on the 24th June. The spike high printed on the 24th represents considerable resistance, and we may see some weakness in interest rate futures in the near term. However, once these markets work off their recent excesses, we could see further substantial rally across the board as yields continue to decline to record lows.

It would not surprise me in the least to see yields go much lower than people can imagine over the coming months, which suggests that the long-term rally in this sector is far from done.

Good trading

Phil Seaton

LS Trader

Weekly Update 3 July 2016 – LS Trader

It’s been another volatile week in many markets as the marketplace continues to digest Brexit and what it means for global financial markets. The initial sharp move lower on the 24th saw some follow through on Monday to new lows, before a very strong reversal pattern that retraced a significant percentage of the prior decline. Typically when a retracement reaches more than the 78% level, the recovery continues to reach new highs. That would suggest further strength next week.

Note that US markets are closed on Monday due to the 4th July Independence Day holiday.

Stocks

As mentioned above, stocks continued with weakness at this week’s open before putting in a very sharp reversal. In the case of the FTSE 100, which is not a market that we trade at LS Trader due to its lack of trending characterises, the market completely retraced the prior week’s declines and soared to its highest level since August last year. This is likely a response to market expectations of a rate cut and further QE from the Bank of England over the coming months. From a technical perspective, Thursday’s bullish breakout through the neckline of the inverted head and shoulders pattern suggests further strength towards the 7000 level. In terms of strength and momentum, the FTSE is currently the strongest of the global indices.

Following the FTSE, next up in terms of strength is the S&P 500. The S&P 500 has recovered following a bullish engulfing pattern on Tuesday and could now move higher to test the recent high. The RSI remains bearish but could also rise to test the 60 level if strength continues.

Both the Dax and the Nikkei, the two weakest stock indices of the four we trade at LS Trader, have both moved higher this week, but both remain in long-term downtrends. The Nikkei’s rally this week has been on decreasing volume as the rally has progressed. This indicates a loss of sponsorship for the rally and a turn lower to test the recent low looks likely. The trend remains down, and the RSI is in the bear range.

Commodities

Several commodities markets made decent moves this week. Silver leads the way with a hugely bullish move since Tuesday’s low. We now target a crucial swing high printed two years ago at 21.63. This rally has been accompanied by rising volume, which is bullish. Silver is now the lead market in the precious metals, with Gold lagging considerably.

Coffee’s bull trend got back underway after a bit of weakness seen during the previous week and at the beginning of this week. A three-bar bullish reversal pattern completed on Tuesday and the market pressed higher to reach its highest level in almost a year. We may yet see further strength to 160.

The grains markets have seen continued weakness with Rough Rice and Wheat breaking down. Wheat has fallen to its lowest level in 6 years and is just above a critical support level. Corn, which has collapsed in recent weeks is also set to test a critical support level and may complete a change of trend to down this week.

Currencies

The currency markets have seen mixed trading this week. For the most part, some of the moves seen on the 24th June have been at least partially retraced. This has resulted in a bit of weakness in the dollar index, which has fallen back to close right on its 200-day moving average.

The British Pound fell to a new 30-year low on Monday but has consolidated since. A new test of those key lows looks likely this week.

Interest rate futures

Interest rate futures soared higher this week as yields fell to record lows. Several markets in the sector pushed to extreme levels and printed potential reversal candles with long upper shadows, which indicates rejection of the highs in the short term. This could lead to a mean reversion lower over the next few days, but the long-term trends are very much intact, and we could see significantly higher prices over the next few months.

Good trading

Phil Seaton

LS Trader

Weekly Update 26 June 2016 – LS Trader

The EU Referendum delivered a shock to the financial markets, and we saw on Friday one of the most volatile days ever seen. Volatility will likely continue this week, particularly in currencies, stock indices and interest rate futures, but will not likely continue at such elevated levels as were seen on Friday. When volatility reaches extremes, it rarely lasts for an extended period.

Many markets moved on huge volume. When such high volumes are seen it is usually either at the start of the next move or indicates exhaustion at the end of a move. Price action this week may give us an indication as to whether Friday’s moves were overdone hysteria or the start of much deeper trend moves.

Stocks

The S&P 500 rallied to new highs as markets had priced in a Remain win and the risk-on rally got underway. What then followed was a massive reversal, taking 120 points off the S&P 500 at one stage, before the market rallied somewhat to close at 2018, just a couple of points above its 200-day moving average. Incredibly, that one-day reversal engulfed the price action of the past three months.

The Nasdaq 100 was also extremely bearish, closing well below its 200-day moving average and right on a support line from the May lows. There is an enormous potential head and shoulders top in the process of being formed that could play out over the coming months.

The Dax, which had rallied through to Thursday’s close, put in a massive reversal having gapped lower hundreds of points at the open. At one point, the Dax was almost 1200 points lower than its high of the day. These are not moves to get in front of, and we can expect further wild swings this week.

Commodities

Gold had a huge turnaround on Friday, having earlier drifted down through short-term support. Friday’s recovery from the lows was a massive one-day rally that took the market its highest level since March 2014. However, the was quite a firm rejection of the highs and a $40 pullback followed. Silver followed suit but also experienced a significant pullback following the strong rally. The trend remains up for both metals.

The biggest trends of the year to date, Soybeans and Soybean Meal, which resulted in the most profitable trades in 2016 for the LS Trader system, both came to an end this week. Soybean Meal broke support and continued lower to test its 50-day moving average, and we saw very similar price action in Soybeans.

Currencies

Huge moves have been seen in the currency markets. In last week’s update, we said to expect volatility to be at least two to three times higher than normal levels and also stated to look for 500+ pip swings in either direction on a daily basis. As it turned out, that was conservative!

The British Pound broke the 30-year support level on Friday before bouncing sharply higher. The price action on Friday alone engulfed the entire trading year to date.

The Euro also had a large reversal day but not on the same scale as the Pound. Here the Euro reversed from its high of the day at 1.1455 down through both its 50 and 200-day moving averages, through the May low and on down to 1.0947. This move included a break of the trend line from the December 2015 low. For now, the long-term trend is still up for the Euro. The RSI narrowly held the 40 level as well, but this could all change during the week ahead.

Interest rate futures

From last week: “We could see some swings in interest rate markets, particularly in the UK Long Gilt as the EU Referendum draws near.”

The interest rate futures delivered some monstrous moves, even larger than expected. The Long Gilt, which represented a high-risk trade due to it not being a 24-hour market, gapped from Thursday’s close of 123.70 to Friday’s open at 127.02. Anyone trading this market was exposed to unnecessary risk. We went into the second-half of the week flat Long Gilts for this very reason.

Very large moves were also seen in the US interest rate markets, which all rallied to significantly new highs before pulling back into Friday’s close. The trend remains up across the sector. Yields could yet fall to much lower levels as the sector rallies to new highs. Prices could go higher over the coming months, and yields fall lower than anyone can imagine. Let’s see what happens.

Good trading

Phil Seaton

LS Trader

Weekly Update 19 June 2016 – LS Trader

The past week has seen some significant moves in numerous markets, but the focus this week will shift towards Thursday’s EU Referendum. We saw another shift late this week back in favour of the Remain camp, but that could still change.

Price movements in GBP/USD give an excellent indication towards the current sentiment and expected outcome, with Pound strength pointing to a Remain victory, and weakness pointing towards Brexit. We could see several wide swings in this and other current markets this week as the markets attempt to assess the likely outcome.

Stocks

Our single long stock index position, long S&P 500 was exited as expected this week. The S&P 500 is the only one of four stock indexes that we trade that remains in a long-term uptrend. The other three all remain in downtrends, and each moved lower this week.

The RSI on both the Dax and the Nikkei broke the 40 level this week, which suggests further weakness once the corrective bounce that began on Thursday runs its course.

The Nasdaq 100 closed below its 200-day moving average on Friday, and the RSI also broke the 40 level. We may see additional weakness over the next few days towards the next level of support at the May lows.

Commodities

Soybeans came within a hair of ending its current highly profitable trade but was saved by buyers returning to the market at Thursday’s low. Follow through was seen on Friday, which printed a bullish engulfing pattern. This makes Thursday’s low a key level for the bulls. If it holds, we may yet see a rally to new highs and possibly as high as the 1260 area.

Very similar price action was seen in our biggest winning trade of the year to date, Soybean Meal, which also narrowly held on to support, which kept the trend alive.

Sugar had another volatile week, which included a wide induction bar on Thursday, before closing the week up by 6 cents. We continue to target the 21.00 level, but a decline in volume shows that the up move is losing sponsorship at current levels. Volatility has also declined slightly, although remaining above fair value.

Currencies

All eyes will be on GBP/USD this week as the EU Referendum nears. There was a sharp turn in favour of the Pound from Thursday’s low, where a 398 pip rally followed from just three pips above support. The outcome of the Referendum could be good for a swift 500 pip move, up in the event of remain or down in the case of leave.

One of this week’s biggest movers was the Yen, which rose to its highest level against the dollar since August 2014. The dollar index has consolidated this week, as it trades around its 50-day moving average. The long-term trend remains down for the dollar index as it does for the dollar against most of the majors. The May low on the index remains a key level.

Interest rate futures

From last week; “The long bond rallied to and exceeded the 168.09 high and may now continue higher to our next target of 171.81.” We saw further rally this week to 171.21, 60 points shy of our next target. Seeing was evident on Thursday with some follow through on Friday so we may see additional weakness this week, possibly back to top/bottom support from the February high. If support there is broken then we could see a deeper correction and the top may be in.

We could see some swings in interest rate markets, particularly in the UK Long Gilt as the EU Referendum draws near. Gilts saw yields fall to new record lows this week. For now, the long-term trend is very much up across the sector, and it will take considerable weakness for that to change.

Good trading

Phil Seaton

LS Trader

Weekly Update 12 June 2016 – LS Trader

The past week has seen some big moves in commodities and interest rate futures but has also seen mixed trading in the currency and stock markets.

The long-term trends continue to turn bullish for commodities, although there are still numerous commodity markets in long-term downtrends. The long-term trend is also up for interest rate futures but is down for the dollar and the stock markets on the whole.

Stocks

The S&P 500 rallied to a new high of 2110.75 basis September futures but has so far been unable to press higher. Thursday and Friday saw lower prices accompanied by significant volume, which suggests that the uptrend will come under further pressure next week.

The other three stock indices that we trade at LS Trader have all seen weakness. These three indexes remain in long-term downtrends and could breakout to the downside in the coming days and weeks.

Commodities

There have been some big moves in the commodities markets this week. Soybeans rallied to a new high for the current move, but as with the previous Friday’s candle, showed significant selling to end the day near the low of the day. Soybean Meal was weaker than beans this week having been unable to make a new high. Price has actually consolidated this week but has seen some large daily swings. The long-term trend remains up for both of these markets, and the RSI is still very much in the bull range. There is a bearish divergence on both charts which shows a loss of momentum, but that does not necessarily mean that the trend is over, merely that we may be due a correction before seeing higher prices.

Sugar moved higher again this week in relatively volatile trade, and we remain focussed on our next target at the 21.00 area over the coming months. The RSI printed 80.88 on Thursday, its highest print since October 2010. However, there is no bearish divergence for the current move as the new momentum high was accompanied by a new high in price. Volume has also been high as the rally has continued, and we have seen six consecutive high volume days before a decline on Friday.

The energy markets had rallied to their highest price levels this year before pulling back towards the end of the week. Crude Oil closed just above its 200-day moving average, a level that will likely be tested this week.

Natural Gas made a significant rally this week, testing its 200-day moving average for the first time since November 2014. A change of trend to up is within range. Thursday’s RSI print of 73.40 was its highest since January 2014.

Currencies

The currency markets have had a very mixed week which saw continued dollar weakness through the first half of the week followed by a recovery on Thursday and Friday. The dollar index printed a bullish engulfing pattern on Thursday and had had follow through to the upside, with the 50-day moving average being tested on Friday. The long-term trend remains down for the dollar, and the RSI is still in the bear range.

The big moves came in NZD/USD and GBP/USD. The kiwi gapped higher at Thursday’s open to reach its highest level in just over a year before pulling back on Friday.

Cable had a volatile week with large price swings in both directions. Friday’s low was a hard retest of the neckline of the head and shoulders bottom printed easier this year. The neckline was broken to the upside back in April, and the price has held above the neckline since. Friday’s weakness has seen the RSI test the 40 level, which along with Friday’s low will be a key level next week. The long-term trend is still down.

Interest rate futures

From last week; “The long-term trend is up across the board for interest rate futures, and we could see further breakouts this week.” The interest rate futures sector rallied as expected.

Also from last week: “The long bond …may now move higher to test the February spike high at 168.09. Based on the head and shoulder bottom pattern, where the neckline was broken on Friday, the target could run as far as 171.81.” The long bond rallied to and exceeded the 168.09 high and may now continue higher to our next target of 171.81.

Good trading

Phil Seaton

LS Trader

Weekly Update 5 June 2016 – LS Trader

The past week has seen the dollar turn sharply lower and has seen numerous commodity markets move higher. The S&P 500 tested its recent high but has so far been unable to break through. Interest rate futures look to be resuming their long-term uptrends and may breakout to new highs for the year soon.

Stocks

In last week’s update, we suggested that the S&P 500 may test its recent high, and it did, but has so far been unable to break through. As before, volume remains low and has been in decline since March. However, there is no question that the trend is up for the S&P 500 and a decisive breakout, particularly above 2120 would likely lead to short-covering and fresh buying, so as unlikely as it may seem, there is potential for a rally from current levels.

As before, the long-term trend for the other three stock indices that we trade at LS Trader remains down, with both the Dax and the Nikkei trading lower this week. The Nasdaq 100 ended the week higher and is within the range of a change of trend to up. A breakout above the April high would negate the possible broadening top formation that we have written about here for several weeks.

Commodities

Several commodities are still moving higher. This week has seen both Soybean Meal and Soybeans move to new highs for the current move, and both continue to clock up huge gains for the LS Trader system. With Friday’s close of 414.30, gains on Soybean Meal are now almost 1200 points since we entered at 297.50 back on the 14th April.

The short-term position is a little mixed on both these Soybean markets, with a big up day on Thursday confirmed by decent volume, followed by a bearish day on Friday, where the large upper tail indicates that sellers took control of the market. However, the long-term trend is unquestionably still up, and considerable further weakness will be required in both markets for that to change.

Longer-term, both of these markets could move significantly higher over the coming months. Let’s keep in mind that only two years ago we saw prints of 500 on Soybean Meal and 1500 on Soybeans, still a long way above current prices. So, whereas it may be correct to say in the short-term that these moves may be a little over-extended, a longer-term view shows that there is still potential for much higher prices.

This week has seen a breakout in Lean Hogs, with three consecutive large up days, all confined by decent volume. Additionally, the RSI has broken through the 60 level, re-entering the bull range. We’re looking for a further advance towards the next resistance level at 88.57 and also 88.73, where the 200-week moving average currently sits.

Sugar moved sharply higher this week, with two big up days confirmed by heavy volume. As before, we continue to follow the 14-month head and shoulders bottom that is evident on the weekly charts, which suggests further advance towards the 21.00 area over the coming months.

Currencies

It’s been a big week in the current markets with a sharp reversal seen against the dollar. It appears that the counter-trend move of dollar strength seen since the key reversal day back on the 3rd May could have run its course. Heavy selling, particularly on Friday, which printed a long down day with heavy volume against most of the majors suggests further dollar weakness and a resumption of the long-term downtrend remains ahead.

Interest rate futures

The 30 Year T-Bond and Long Gilt both broke higher from their consolidations that we wrote about last week: “a breakout from this consolidation should yield a decent move in the direction of the eventual breakout.”

The long bond broke out through the top of the consolidation pattern and may now move higher to test the February spike high at 168.09. Based on the head and shoulder bottom pattern, where the neckline was broken on Friday, the target could run as far as 171.81, over 500 points above Friday’s close.

The UK Long Gilt broke out to its highest level since 2011. The long-term trend is up across the board for interest rate futures, and we could see further breakouts this week.

Good trading

Phil Seaton

LS Trader

Weekly Update 29 May 2016 – LS Trader

Monday is a Bank Holiday in the UK and Memorial Day in the US, so nearly all markets will be closed.

Stocks have moved higher this week and the S&P 500, currently the strongest of the indexes we trade, is closing in on a new all-time high. The past week has also seen the dollar continue its recovery, as well as further strength in numerous commodities.

Stocks

The S&P 500 remains bullish and in a long-term uptrend. The potential head and shoulders top formation that we wrote about last week was violated by Wednesday’s move above the right shoulder. This week saw a sizeable up move, confirmed by a break above 60 on the RSI, which is bullish. This suggests that a test of the April high is imminent. Volume, however, continues to decline, which indicates that the current rally is lacking sponsorship. However, if we get a break to new highs this can quickly change, and there’s no reason that we can’t see a rally in the S&P from current levels.

The trend remains down for the other three stock indices that we trade at LS Trader, but strength has been seen there too. The Nasdaq 100 traded well through both its 50 and 200-day moving averages and looks set for a test of the April high. If that April high is breached, that will put paid to the possible broadening top formation that we have discussed here in recent weeks, and would shift the weight of the evidence and the long-term trend to bullish.

Commodities

Soybean Meal made another big move this week, taking our gains on this trade to well over 1000 points since we entered at 297.50 back on the 14th April. However, there are a few signs that are concerning in the short-term for the bull case. Thursday’s long-legged doji, which also closed in the bottom half of the day could have marked the top for now, especially since Friday pushed below Thursday’s low on an intraday basis. The RSI also reached 82.56, which indicates a slight bearish divergence on the daily chart.

However, the trend is unquestionably still up and bullish and as yet there is insufficient evidence to confirm that the trend is over, so we remain long and continue to give the trade a bit more room to breathe. If support is breached and we get stopped out, this trade will still have locked in huge gains and will be the most profitable trade of the year to date.

The energy markets continue to grind higher. Currently, Crude Oil is trading within an 18-week channel that began in the last week of January. The top of this channel has been tested three times in the last two weeks, but as yet, no upside breakout. With the long-term trend being up and the RSI in the bull range, the odds favour a breakout from this channel. If the breakout does occur, we could see further rally towards our next target around 58.00. Brent Crude is in a similar pattern and Thursday’s price printed above $50 for the first time since November last year.

Sugar continues to move higher and has this week reached its highest level since January 2016. The 14-month head and shoulders bottom that is evident on the weekly charts suggests further advance towards the 21.00 area over the coming months.

Currencies

The dollar’s continued recovery continues to suggest that the low printed on the 3rd May on the dollar index was a key reversal low, and that price will continue to grind higher. The dollar index is now holding above the 5-day moving averaged may test the 200-day, currently at 96.07 this week. The RSI is also testing the 60 level on the RSI. A decisive move through this level would also indicate further strength. For now, the long-term trend remains down for the dollar against all the majors.

Interest rate futures

Interest rate futures continue to consolidate in a 16-week descending triangle pattern, basis the 30 Year T-Bond. For now, the long-term trend remains up, but a breakout from this consolidation should yield a decent move in the direction of the eventual breakout.

Good trading

Phil Seaton

LS Trader

Weekly Update 22 May 2016 – LS Trader

The dollar has continued to advance over the past week, but the long-term trend is still down. There is potential for further dollar strength in the short-term, but we will need to see quite a bit more strength over the coming weeks for a change of long-term trend to be completed.

The commodity markets are continuing their early stages of a recovery from a deep and multi-year bear market, and stocks are consolidating just above critical support levels. It is, therefore, likely that the consolidation phase that has been present in many markets in recent months will be resolved soon, and there is potential for some very large moves in a handful of markets.

Stocks

The stock markets continue with indecisive trade in what is clearly a consolidation before the next significant move. With the exception of the S&P 500, the long-term trend for global stock indexes is down, so the odds favour a downside resolution to the current trading range.

The S&P 500 is forming a possible head and shoulders top formation which would be confirmed on a break of Thursday’s low at 2022. If that level is broken, we will likely see the 200-day moving average tested, and the 40 level on the RSI should also be tested. If the head and shoulders pattern is to reach its measured target of 1943, price will have gone well below the long-term moving average and will be deep in the bear range on the RSI. However, the change of long-term trend to down levels remain out of range, so this pattern will likely fall short of its target.

Due to the long-term trend already being down, the Nasdaq 100 is weaker than the S&P 500 and when shorting its best to sell short the weakest market. That suggests that the Nasdaq 100 will be the first to break down and also has more downside potential, with the major support being not far below current levels. We still have the broadening top formation possibly setting up, which, as we have covered in recent weeks would result in a significant device for this index, moving well below the February low at 3853.

Commodities

It’s all really about Soybeans and Soybean Meal in the commodity markets at present. Although there is a return to strength in a number of commodities markets at present, the two soybean markets are the only ones making large moves and large moves they are. Our current Soybean Meal position has open profits of just short of ten times initial risk, a ten-bagger, and as of now, the trend is not over. Our target of 375 was easily reached and exceeded, as meal rallied higher to 395.40 on Friday, before closing at 392.70 basis the July contract. That’s almost 1000 points higher than our entry price of 297.50 back on the 14th April.

Although it’s much less bullish in terms of price action, Soybeans, due to the current set up may move considerably higher yet and could be stronger than Mean over the coming weeks. Soybean Meal’s advance is almost parabolic, but Soybeans has consolidated for a few days. Based on the completed bull flag pattern and other measuring techniques, July Soybeans may push towards 1202 over the coming weeks.

Currencies

The dollar’s recent recovery has continued this week, with price on the dollar index moving back above the 50-day moving average for the first time since early March. When viewed at weekly chart level, the lows from 2015 represent major support. The brief dip below that support level and subsequent reversal to regain that support level, followed by further advance since suggests that the low printed on the 3rd May could well have been a key reversal low and that the dollar may continue higher from here over the coming weeks. For now, the long-term trend is still down for the dollar.

Interest rate futures

The long-term trend remains up across the interest rate futures sector, but strength seen in recent weeks ran out of steam at just below key resistance levels, so the breakouts that we were looking for did not occur. Currently, price is back in the middle of the range that has contained price for the past few months. A breakout in either direction could yield a significant move.

Good trading

Phil Seaton

LS Trader

Weekly Update 15 May 2016 – LS Trader

The past week has seen stocks move slightly lower whilst the dollar has continued its recent recovery. The long-term trends are mostly down for stocks already ( the exception being the S&P 500) and are also down for the dollar. Whether the dollar rallies sufficiently over the summer to complete a change of long-term trend to up remains to be seen.

Stocks

The stock markets ended the week lower. The S&P 500, currently the strongest of the four indexes that we trade at LS Trader, and the only one of the four in a long-term uptrend, fell to test its 50-day moving average this week. For now, price remains above both its 50 and 200-day moving averages and the RSI is also in the bull range. If we see additional weakness this week, with support at 2030.5 broken, we may also see the 40 level broken on the RSI. This would indicate further weakness over the coming weeks.

The Nasdaq 100 remains weaker and is also below both of its moving averages, and, more importantly, the RSI is already in the bear range. To continue to monitor the potential brooding top formation in this index, which if the stop competes would indicate sharply lower levels over the coming months. It’s possible that we will see critical support tested this week.

Commodities

The commodity markets continue to show signs of strength, although not yet anywhere near across the board. This week may see a critical change of long-term trend to up in more of the energies sector as most markets in this sector look set to test trend-defining resistance. Crude Oil already completed a change of trend to up for the first time in a couple of years, but as yet has been unable to break decisively higher.

The grains markets, particularly Soybean Meal and Soybeans have seen further strength this week. Soybean Meal reached and exceeded our 363 target and may yet continue higher towards our next target at 375. Based on the weekly chart we have a new high in price accompanied by a new high in momentum, which keeps the focus towards higher levels. Things are less bullish at daily chart level, where there is bearish divergence evident between price and RSI, and where volatility remains elevated.

Silver looks as though it will fall short of our 1850 target at this time. The market fell below the 60 level on the RSI, which is something that we did not want to see if our target was to be reached. The market has tested support on Friday and has held above it, but we will likely see support tested again this week. It’s possible that we will see further weakness this week before the long-term trend resumes.

Gold has also shown weakness along with Silver, and the RSI also dropped below 60. Here the market is also holding above support, but that level may also be tested this week. The long-term trend for both precious metals is still very much up, and we can look for our 1350 target in Gold and our 1850 target in Silver to be reached over the coming weeks after the current correction ends.

Not all metals are in long-term uptrends. Copper, which failed to breakout to a new long-term uptrend back in March has resumed its long-term downtrend this week, falling to its lowest level since mid-February. The RSI here has fallen back into the bear range. This does not bode well for the global economy, and we may see further weakness down to major support at 194.70 over the summer.

Currencies

The dollar has continued its recent recovery, but for now, it remains in a long-term downtrend against all the majors with the exception of the British Pound.

Interest rate futures

Interest rate futures are edging higher towards a test of critical resistance. We could see several markets in this sector breakout this week and print their highest levels since the spike high in February. The long-term trend remains up across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 8 May 2016 – LS Trader

The past week has been a good week for the dollar, where several key reversals have been seen. It has also seen stocks continue lower. The stock indexes that we trade at LS Trader may resume their long-term downtrends this week. Currently, only the S&P 500 remains in a long-term uptrend. The commodities markets, on the whole, continue to move higher. The CRB index this week reach 409.75, its highest level since July last year, and significantly above its 351.90 low print in January of this year.

Stocks

The S&P 500 continued lower this week, breaking support and moving briefly below its 50-day moving average. Friday saw a bit of a reversal day, taking the market back above the 50-day MA. The long-term trend is still up, and the RSI is still holding above bull market support at 40. If we see 40 give way on the RSI, then we will likely see further weakness down towards a test of the 200-day moving average.

From last week: “Price has moved below both its 50 and 200-day moving averages. Additionally, the RSI has broken below the 40 level for the first time since February. This all points to lower prices and a resumption of the long-term downtrend over the coming weeks.” Price has seen further weakness this week, and the Nasdaq continued to move lower. A resumption of the downtrend will be confirmed if prices break the next level of support. The possible broadening top formation that we have written about in recent weeks indicates a significant move lower over the coming months to well below the February low.

The Nikkei has consolidated this week, but that may just be a pause before the selling, and the long-term downtrend continues. The RSI is just about holding above bull market support at 40, but a test of the next level of support at the April lows will be expected if the RSI moves below 40, and possibly a test of the February lows to follow.

Commodities

Silver reached a new high for the current move on Monday but pulled back over the next few days. The long-term trend is still up and even with recent weakness, the RSI is above the 60 level. It’s a bullish sign if the RSI can hold above 60 and as long as that continues we can expect a rally back above last week’s high and possibly higher towards our 1850 target calculated from the breakout from the 16-month wedge and the neckline of an inverted head and shoulders pattern.

Gold has had a mixed week, having first printed a new high for the current move before pulling back. The RSI dipped briefly below the 60 level but has since regained it. As with Silver, we’d like to see the RSI remain above 60, and if it does, we might see further strength towards the 1350 level.

Soybean Meal reached the first of our targets at 349.50 and, in spite of highly volatile trading, remains on course to continue higher towards our next target at 363 further out.

The energy markets were mostly lower this week but stayed within range of a change of long-term trend to up. This could be very significant if completed, as the long-term trend has been down for almost two years, a time when the price was still above the $100 level in the Crude Oil markets.

Currencies

The dollar index put in a key reversal having found support from just below the critical level that we wrote about last week. This was highlighted by the bullish reversal candle printed on Tuesday, where a long lower shadow is very evident on the daily chart. This move indicates that the bulls took over with a rejection of new lows and strong buying. The index continued higher for the rest of the week but remains in a long-term downtrend. The RSI is also in the bear range.

This dollar strength was also seen against the other majors, which includes the Euro, a near perfect inversion of the dollar index. It was also evident against the Yen but on a smaller scale. Whether this dollar strength continues over the next week or so remains to be seen. The long-term trend is still against the dollar almost across the board.

Interest rate futures

Interest rate futures moved higher this week, having found support on the RSI around the 40 level. The week began with a bullish engulfing pattern completing on Tuesday and strength seen through to Friday until new highs were rejected.

The long-term trend remains up across the sector, and there is a possibility of a resumption of the long-term uptrend with a breakout to the highest price levels seen since the spike high back in February.

Good trading

Phil Seaton

LS Trader