Weekly Update 1 May 2016 – LS Trader

The past week has seen some big moves in commodities, where metals and grains markets have made large moves higher. The energy markets are also showing continuing signs of strength, and there may be a change of long-term trend in the energy sector this week. Commodities, on the whole, continue to move higher as we see further evidence that the commodity bear market is over. Commodity strength has been boosted by a resumption of the long-term downtrend for the dollar, where the dollar index has dropped to its lowest level since August.

Stocks

The S&P 500 has been unable to make any headway above all-time highs and appears to be rolling over. For now, the long-term trend is still up, with the RSI holding above bull market support at 40. Price is also above short-term support and the 50-day moving average. However, with the weakness seen in other global stock indexes, we may see both of these tested in the coming week.

We continue to monitor the broadening top formation on the Nasdaq 100, which has long-term bearish implications if the setup is completed. This week has seen short-term support broken and price move 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.

The Nikkei is also showing considerable weakness having been unable to hold above the 200-day moving average. Price dropped sharply on Thursday, moving well through the 50-day moving average. The RSI has also fallen to the 40 level, and we will likely see that level decisively broken this week, which would result in a return to the bear range for the Japanese index and would suggest a resumption of the long-term downtrend was imminent.

Commodities

Silver has traded higher throughout the week and continues to head 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 also seen strength this week, breaking above the March high, with the breakout confirmed by the RSI breaking the 60 level. In recent weeks, we’ve mentioned the possibility of a head and shoulders top formation in Gold. This week’s break above the right shoulder and subsequently the head means that pattern has failed. Using standard failed head and shoulders price projections indicated further strength towards the 1350 level.

Soybeans and Soybean Meal have shot higher again this week, with Soybean Meal both markets recovering from the sell-off on the previous Friday to reach new highs. Soybean Meal is the stronger of the two, and we’re targeting the next level of resistance at 349.50 and possibly 363 further out.

Currencies

The dollar’s long-term weakness resumed this week, and the dollar index has fallen to a precarious position just above the next level of critical long-term support at the August low. If this level is decisively broken on a closing basis, we could see an acceleration lower as any remaining longs are likely to capitulate. The RSI sliced through the 40 level this week and remains in the bear range, with the long-term trend still down.

Dollar index weakness always correlates inversely with EUR/USD strength. The Euro has, therefore, risen right up to test key resistance and we could see a breakout this week in EUR/USD, which would be a resumption of the long-term uptrend.

Interest rate futures

Interest rate futures continue to trade around the 50-day moving average. The RSI briefly dipped below the 40 level but did not break it decisively, which just about keeps the RSI in the bull range. The long-term trend remains up for the sector, but price is effectively range-bound as it has been for the past couple of months since the spike high in the middle of February.

Good trading

Phil Seaton

LS Trader

Weekly Update 24 April 2016 – LS Trader

The S&P 500 rose to a new high for the year, but as yet without follow through. The week has also seen quite a considerable recovery for the dollar against several of the major currencies, and has, for the most part, seen a continuation of the recovery from a deep bear market in several commodities, some of which completed a change of long-term trend to up this week.

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

Stocks

The S&P rallied to take out the high of the year and to complete a change of long-term trend back to up in the process. In terms of the back-adjusted continuous contract, last week’s high was a new all-time high for the index. The weekly RSI also rose to 60.15, which is the first time since 2014 that the weekly RSI has been above 60. However, that is not yet a decisive enough break of 60 to consider that weekly RSI has entered the bull range.

The S&P 500 is currently the only stock index of the four that we trade at LS Trader that is in a long-term uptrend. So far, we have seen the S&P 500 struggle to move clear of the highs and resistance has been seen, as expected. However, if we do get a decisive breakout, the market will again be at all time highs, which brings with it the likelihood of considerable short covering, which has the potential to carry the market higher.

The Nasdaq 100 has been considerably weaker than the S&P 500, and prices may test the 50-day moving average. From a classical technical analysis standpoint, the Nasdaq 100 could be setting up a broadening top formation, which has long-term bearish implications if the setup is completed. For now, the long-term trend remains down, and considerable rally will be required for that to change.

The Dax broke through the 200-day moving average and broke through resistance at 60 on the RSI for the first time since November last year. However, a change of long-term trend is a long way above current levels, and unless something extraordinary happens, that change will not be seen for the next couple of months, at least.

The Nikkei also called this week but remains in a long-term downtrend, below its 200-day moving average and still below 60 on the RSI.

Commodities

Silver put in a huge upside move this week following the recent breakout from a 16-month wedge and the neckline of an inverted head and shoulders pattern that we wrote about last week. As before, these patterns give a longer-term target of around 1850 but expect wild swings along the way. Volatility is extremely high in Silver.

The grains markets have also seen some significant moves and usually high volatility this week. Soybean Meal ended the week higher by 5.39% in spite of giving back around half of its gains. A similar, but smaller move was seen in Soybeans. The long-term trend is now up for all three Soybean markets. Corn also completed a change of trend to up this week but ended the week lower after a sharp reversal on Thursday.

Currencies

It’s been an excellent week for the dollar, which has seen strength against nearly all the major currencies. However, in spite of recent strength, the long-term trend for the dollar remains down against all the majors. The best measure of overall dollar strength is the dollar index, which continues to be very much in a long-term downtrend, well below its 200-day moving average, and with the RSI still below 60, where it has been since December. If the RSI moves decisively above 60 on the index, then we may be due a period of sustained dollar strength.

We wrote last week about the possible head and shoulders bottom that was setting up on the British Pound. The neckline of that pattern was broken this week, which suggests further strength, possibly up to around the $1.50 level. However, as we wrote last week, the long-term trend is still down.

Interest rate futures

Interest rate futures have been weak this week, trading lower for five consecutive days and falling below the 50-day moving average. Prices are still well above the 200-day moving averages, and the long-term trend is still up. However, bull market support at 40 is going to be tested this week, and if this level is broken, further weakness may lie ahead.

Good trading

Phil Seaton

LS Trader

Weekly Update 17 April 2016 – LS Trader

We continue to see signs of strength returning to the commodities markets, and it’s possible that we have seen the bottom for many markets in the sector. If the commodities markets have bottomed, there is potential for some very large moves to the upside over the coming months. However, it’s important to wait for confirming price action not to jump the gun. These moves, when they come, will present very profitable opportunities.

Stocks

The S&P 500 continues to grind higher but as yet has been unable to break resistance and confirm a change of trend to up. There is no question that there is significant resistance at just above current prices, but should the market breakout to new all time highs it’s possible that we could see considerably higher prices. There are numerous traders that have tried and failed to call a top over the past few months, and there is still sufficient short interest in the market to suggest that a breakout would likely lead to a raft of short covering and further rally.

The Dax rallied this week but once again has run into resistance at the March high and also at the 60 level on the RSI, which has kept a lid on all rallies since December. The long-term trend remains down, and there is significant price resistance overhead in terms of chart structure and the 200-day moving average.

The Nikkei also called this week but remains in a long-term downtrend, below its 200-day moving average and still below 60 on the RSI.

Commodities

Gold ended the week lower but remains above its long-term moving averages, and more importantly, above bull market support on the RSI. However, there is a possibility of a head and shoulders pattern forming, so a break of the neckline and the March low may see a further pullback here before the long-term uptrend resumes.

Silver, which has lagged Gold this year, finally completed a change of trend to up and registered a gain for the week while Gold fell back. There is some resistance in a zone around 1650, but if that can be cleared, there is room for a considerable further rally. On the weekly chart, Friday’s close completed a breakout from a 16-month wedge and broke the neckline of an inverted head and shoulders pattern on the daily chart. These patterns give a longer-term target of around 1850.

We saw both Crude Oil markets break the 60 level on the RSI this week, but so far without follow through to the upside. The RSI for both Crude markets is in the bull range, but the long-term trend is still down. Brent has a change of long-term trend to up within range, and that could be completed in the next few weeks. However, let’s wait for confirming price action and not jump the gun.

Currencies

The dollar index fell to its lowest level since August last year before putting in a three-day rally and reaching its highest level since March. However, the long-term trend is still very much down, and the RSI remains in the bear range.

The British Pound, currently the only current future that we trade at LS Trader that we don’t have a current open position in, remains in a long-term downtrend. This is the only one of these currency markets where the long-term trend still favours the dollar. The Pound continues to find resistance around the 50 -day moving average and the RSI remains in the bear range. One potential bullish development that could be unfolding is the possible head and shoulders bottom that is taking shape. However, that’s not a trade that we would take if the neckline is broken, as the long-term trend is still down.

Interest rate futures

Interest rate futures ended lower this week, but all remain above key technical levels, and above their 50 and 200-day moving averages. The RSI is also still in the bull range, so the focus remains towards higher levels. The long-term trend remains up for the entire sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 10 April 2016 – LS Trader

Stocks ended the week lower, as did the dollar index, in what has been a relatively quiet week for the markets, certainly regarding the recent volatility.

Several commodity markets continue to look as though they may be at the start of new uptrends, particularly the energy markets, and we just have to wait for the confirmation of these moves in the form of price breakouts. The coming months should deliver some excellent trading opportunities, particularly in the commodities markets.

Stocks

The S&P 500 moved higher on Monday but then moved lower and closed the week down. The rally continues to look tired, and momentum continues to drop off, with the RSI moving back below 60 for the first time since February. The long-term trend remains down, but the market remains above both its 50 and 200-day moving averages, and a change of trend to up is within range. Whether we get there remains to be seen.

The Dax continued lower this week, moving back below its 50-day moving average. The RSI has fallen to test the 40 level, but due to its prior inability to clear the 60 level earlier in the rally remains in the bear range. That, combined with the long-term trend still being down keeps the focus on lower prices.

From last week: “This week saw the Nikkei break lower from a head and shoulders top. Traditional measuring targets suggest further declines to around the 15500 level, but quite likely lower.” The Nikkei moved lower and reached the head and shoulders target and exceeded it. For now, however, the market remains above support, but below both of its major moving averages. The long-term trend remains down, and the focus remains on a test of the critical February low.

Commodities

Gold continues to find support from the 50-day moving average, and the RSI also remains in the bull range, moving higher from above the 40 level. The long-term trend remains up, and the focus remains on higher prices, with another test of the March high expected.

Silver, which ha remained consistently weaker than Gold of late also moved higher this week, regaining both its 50 and 200-day moving averages. The RSI remains in the bull range, having found support from above the 40 level, so a push higher and change of trend to up remains on the cards.

The energy markets have had a bullish week, and they continue to look as though they may have put in a bottom. Both Crude Oil markets (Light and Brent) moved above their 50-day moving averages this week. Brent’s RSI closed at 59.53, just a touch below the 60 level. A decisive move through 60 would indicate further strength, and a change of long-term trend is coming into range.

Currencies

The dollar has mixed trading this week but remains in a long-term downtrend against everything but the British Pound. The dollar index made its lowest close on Friday since October last year, and the trend is still very much down. The index remains well below its moving averages, and the RSI is very much in the bear range, so the focus is towards lower levels over the coming weeks.

The dollar did manage to push the Pound lower, and the market appears to be finding resistance in the vicinity of its 50-day moving average. For now, the market is holding above key support, but that level could be tested this week. The RSI remains in the bear range.

Interest rate futures

Interest rate futures traded higher again this week. The 30 Year T-Bond continues to trade higher and remains above its rising 50-day moving average. We could yet see another test of the February high.

Similar price action is being seen in all markets in this sector at present, and the long-term trend remains up for interest rate futures across the board.

Good trading

Phil Seaton

LS Trader

Weekly Update – 3 April 2016 – LS Trader

Several markets completed a change of long-term trend this week, and there could be more to follow in the days ahead. US stocks continue to rise towards last year’s highs, but other global stock indexes are heading lower. The dollar has turned lower this week, and commodities have seen mixed trading.

Stocks

The S&P 500 has managed to grind out another week of the rally and has reached its highest level this year. From a bullish perspective, the market is above its major moving averages, and the RSI is in the bull range, but there is no question that the rally is tired. Volume continues to decline, as it has as the rally has extended to its current levels. For now, the long-term trend remains down, but a change of long-term trend to up is now within touching distance.

The picture is very similar for the Nasdaq 100, but the tech index remains considerably further below change of trend levels than the S&P 500. Seasonally, we’re still in a strong time of year. Historically, April is the best month of the year for the Dow 30, dating back to 1950. The S&P 500 and Nasdaq 100 are both highly correlated to the Dow, so higher prices certainly can’t be ruled out.

From last week: “The Dax continues to find resistance at the 60 level on the RSI, which suggests that the rally here too is running out of steam and that the market may turn lower again over the coming weeks.” The 60 level held firm on the RSI, and the market has rolled over as expected, back below the psychological 10,000 level. Here, the long-term trend remains down, and the RSI is still in the bear range.

Also from last week: “The Nikkei 225 remains the weakest of the four indexes and the most likely to turn lower first.” This week saw the Nikkei break lower from a head and shoulders top. Traditional measuring targets suggest further declines to around the 15500 level, but quite likely lower. The RSI has fallen through the 40 level, having been unable to break 60 during the earlier rally, and, therefore, remains in the bear range with the long-term trend being down. All this has happened at the same time that the US markets have reached their highest levels this year.

Commodities

Gold ended the week slightly ahead for the week but has seen a range of over $40 from low to high. The yellow metal has twice bounced almost exactly off its 50-day moving average. As we stated last week, if the trend is good, the RSI should hold above the 40 level. So far it has.

Silver has had a volatile week, which has included a big down day on Friday. As noted in previous weeks, Silver has remained considerably weaker than Gold and stays in a long-term downtrend.

All of the energy markets have seen weakness this week, and all remain in long-term downtrends. Whether we see new lows again remains to be seen, but these markets have fallen sufficiently over the past two weeks to suggest that is a possibility.

Currencies

The counter-trend strength seen in the dollar during the previous week reversed this week as expected, and it’s been a bad week for the dollar. This weakness has seen new lows in the Dollar Index, as well as a change of long-term trend for EUR/USD and USD/CHF. It has also seen the commodity-based currencies all move to new highs for this current move.

As we wrote in last week’s update, the dollar does remain in a long-term uptrend against the Pound. This week saw the Pound move above and then back below its 50-day moving average. The RSI has once again fallen short of the 60 level, and, therefore, remains in the bear range, so the focus is still towards a test of the February low at 1.3840.

Interest rate futures

Interest rate futures have moved higher this week, keeping the long-term uptrend intact. As before, all the markets in the sector remain above their major moving averages, and the RSI is also in the bull range. This suggests further strength ahead, but will to a large extent depend on what happens in the stock indexes over the coming weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update 26th March 2016 – LS Trader

The past week was a shortened trading week due to the Good Friday Holiday. Monday is a Bank Holiday in the UK, but US markets will be open as normal.

It has been a good week for the dollar, which has advanced against the major currencies this week. Stocks have moved lower, and commodities remain mixed, but there continue to be signs that the commodity bear market may be reaching an end. Several commodities have already moved into an uptrend, and a handful have a change of long-term trend to up within range.

Stocks

The S&P 500’s bear market rally may finally have run out of steam this week. Having reached its highest level since late December, the S&P 500 rolled over into the long holiday weekend. Based on LS Trader’s proprietary algorithm, the long-term trend is still down for the S&P 500, as indeed it is also for the other stock index markets that we trade.

Similar price action has been seen in the Nasdaq 100, where the price is also above its 200-day moving average. Here the RSI is also above the 60 level, having closed at 61.36. If this trend still has legs, the RSI should find support around the 60 level, and the 200-day moving average should also provide some support. If both of these give way this week, the rally may have already run its course.

The Dax continues to find resistance at the 60 level on the RSI, which suggests that the rally here too is running out of steam and that the market may turn lower again over the coming weeks. Unlike the S&P 500, the Dax has not even rallied sufficiently to test its 200-day moving average.

The Nikkei 225 remains the weakest of the four indexes and the most likely to turn lower first. The Japanese index remains below both its 50 and 200-day moving averages, and the RSI remains in the bear range.

Commodities

Gold moved lower this week and fell below short-term support in the process. We may see further weakness this week that sees the yellow metal test its 50-day moving average, and also the RSI may test the 40 level, which is bull market support. If the long-term focus for gold is correct, we should see the RSI find support around the 40 level and price move back higher again.

Silver spiked to its highest level since October last year but then turned sharply lower, closing back below its 200-day moving average. In spite of the rally seen since the start of the year, the long-term trend is still down for silver.

Currencies

It’s been a good week for the dollar, which has recovered against some of the majors. However, the long-term trend is still against the dollar versus nearly all the major currencies.

The dollar does remain in a long-term uptrend against the Pound, and we may see further weakness for the Pound over the coming week or so. The RSI has been unable to break above the 60 level, and, therefore, remains in the bear trend, so a test of the February low at 1.3840 looks very possible.

Interest rate futures

The long-term trend for interest rate futures remains up. This week has seen the interest rate futures markets consolidate around their respective 50-day moving averages. All the markets in this sector are above their 200-day moving averages, and the RSI in each is above the 40-level, which is bull market support.

Good trading

Phil Seaton

LS Trader

Weekly Update 20 March 2016 – LS Trader

The past week has seen a continuation of the bear market rally in stocks, which has now travelled so far that a change of long-term trend back to up is a possibility over the next few weeks, something that was almost unimaginable only a month ago. Strength in stocks has been accompanied by further dollar weakness and additional commodity market strength. There are further signs that more commodity markets may have put in a long-term bottom, but for now, the long-term trend in commodities remains down overall.

Stocks

From last week on the Dax: “Friday’s close right at the high of the day is bullish and suggests further strength next week, particularly if the RSI breaks the 60 level. If it does, we may see another test of the 10,000 level.” The 60 level held firm on the RSI, but that did not prevent the Dax from reaching the 10,000 level.

However, the Dax has been unable to hold that key psychological level, closing just below it at 9992.5 (basis the June contract). This price action keeps the Dax between its 50 and 200-day moving averages, but more importantly, below 60 on the RSI. This level and the 10,000 level will be the levels to watch this week. For now, the long-term trend remains down.

The S&P 500’s bear market rally continues, with prices this week making a new two and a half month high. Price has now moved well through the 200-day moving average, and the RSI is at a bullish 70.36. As we have written in previous weeks, the rally continues higher on falling volumes, which generally suggests that the rally is based on short covering and is running out of steam. However, there are no signs yet of the rally failing, and with the RSI now at its highest level since late-2104, we may yet see further strength.

Commodities

The bearish divergence that we have mentioned recently on Gold continues to be evident, and this week has seen some volatile trading in the yellow metal. For the first time in a month and a half, Gold has dipped below 60 on the RSI. This key level had previously been providing support, so the market moving back below this level puts a question mark over the rally in the near term. Longer-term, the trend is still very much up, and the focus remains towards higher prices. A break of last week’s lows would indicate additional weakness, possibly back towards the 50-day moving average, currently at 1197.

Interestingly, Silver, which has of late lagged Gold’s advance, moved higher this week, reaching its highest level since October last year. However, the long-term trend remains down, but that may change soon if the RSI can move decisively above the 60 level.

Currencies

The dollar index completed a long-term change of trend to down this week as dollar weakness continues. The index dropped to its lowest level since October last week, and the RSI has fallen well below the 40 level, which is bull market support. With the trend turning negative for the dollar against more major currencies, this dollar weakness could continue. We could see the Euro, Canadian dollar and the Swiss Franc all complete changes of long-term trend this week.

Interest rate futures

Interest rate futures turned higher this week. The long bond found support at the 50-day moving average, and the RSI moved higher from just above the 40 bull market support level, keeping the long-term trend up.

The 5 Year T-Note bounced from just above its 200-day moving average and regained the 50-day MA as well. Additionally, the RSI regained the 40 level.

For now, the long-term trend remains up across the board for interest rate futures, in spite of the considerable weakness seen over the past month since the spike high printed back on the 11th February.

Good trading

Phil Seaton

LS Trader

Weekly Update 13 March 2016 – LS Trader

Stocks and currencies have had an extremely volatile couple of days this week, with large swings up and down in numerous markets. However, none of these moves have changed the long-term trends, which remain down for stocks and mixed for the dollar. The long-term trend is also mostly still down for commodities, but we continue to see strength return to some of the commodity markets.

Stocks

The stock markets have moved higher again this week but have seen some large and volatile swings, particularly on Thursday afternoon following Mario Draghi’s ECB rate announcement that seemed to throw the market a curveball. The Dax, in particular, was highly volatile, with Thursday’s trading range spanning some 602 points, followed by a 4.01% rally on Friday. Friday’s close right at the high of the day is bullish and suggests further strength next week, particularly if the RSI breaks the 60 level. If it does, we may see another test of the 10,000 level.

We wrote last week that the rally in stocks seemed like a bear market rally due to the declining volumes, and with the exception of Thursday’s high volume day, that trend has continued this week. Volume was sharply lower on Friday as the market took out the 2000 level on the S&P 500. The RSI on the S&P 500 remains bullish, holding above the 60 level, but the long-term trend remains down. The presence of a negative reversal setup where price makes a higher low and RSI makes a higher high over the same period indicates that the trend is still down and that we could see a turn lower again

For now, the long-term trend remains down across the sector, and it will still take considerable further rally for that to change.

Note that we are now trading the June contract in stock indexes.

Commodities

Gold rallied to a new high for the current move on Friday before reversing and ending the day lower by 1.7%. Bearish divergence is evident on the chart so we may see a bit more of a correction before the uptrend resumes. For now, the RSI continues to hold above the 60 level, which is bullish.

Copper once again tested its 200-day moving average but was unable to break through. There the same chart formation in Copper that is present on the S&P 500, known as a negative reversal, where we have a new momentum high on the RSI but a lower price dating back to the September high. This is typically very negative and suggests that Copper may turn significantly lower.

Currencies

The currency markets had a hugely volatile week, particularly on Thursday. As mentioned above, that was due to the confusion of the markets following the ECB meeting. It seems that Mario Draghi’s move to negative 0.4% deposit interest rates and an increase in QE from €60 billion per month to €80 billion per month was intended to crash the Euro, which initially it did. Then we saw a huge reversal as the Euro soared higher.

One can only conclude that the markets decided that the ECB had gone ‘all in’ on the move and that there would be nothing else coming in the future, so the Euro strengthened. Whether that turns out to be correct, of course, remains to be seen. Any turn in the tide in financial markets to risk-off will send the Dollar higher and the Euro lower irrespective of what the ECB does.

The Euro’s move was of course inverted on the dollar index, which ultimately ended back below its 200-day moving average and not that far above long-term trend-defining support. For now, the long-term trend remains up for the dollar index, but with the RSI now clearly below bull market support, further weakness may lie ahead.

Interest rate futures

Interest rate futures have continued to decline and this week saw us exit the last of our long trades from this sector, the Long Gilt, which was a very profitable trade in spite us giving back some profits after the market topped out. For now, the long-term trend is up across the sector but continued weakness has taken the markets below their 50-day moving averages and heading towards a test of their 200-day moving averages.

Perhaps more importantly than that, the RSI has fallen through the 40 level, which is bull market support. The failure of this level to hold indicates further weakness ahead and a possible change of long-term trend to down over the coming week or so.

Good trading

Phil Seaton

LS Trader

Weekly Update 6 March 2016 – LS Trader

The past week has seen the move back towards risk-on in the financial markets continue, with stocks and commodities moving higher at the same time as interest rate futures and the dollar have been in decline.

The long-term trends remain down for stocks and down for most commodities, although there are a few exceptions, notably Gold, with Silver not that far behind. The dollar’s weakness has been sufficient to trigger a change of long-term trend in the Aussie dollar, with other currencies still lagging behind. The trend in the currency markets remains mixed. In spite of short-term weakness, all the interest rate futures remain in long-term uptrends.

Stocks

The stock markets have continued their impressive bear market rally this week. The rally is still viewed as a bear market rally and mostly short-covering rather than new buying because volume is decreasing as the rally continues. This indicator suggests that the rally may be mature and might not have that much further to run. Considering that the S&P 500 has rallied above the 200-day moving average this week, it is unlikely that many shorts remain. Further strength will likely require fresh buying, rather than short covering.

So far, only the S&P 500 has been able to move above the 60 level, which is bear market resistance. As yet, that breakthrough has not been decisive, and further strength will be required. The other indexes that we trade at LS Trader are all weaker and are still below that key level. If each of the indexes break above 60, that would indicate further strength, but considerable further rally will still be required for a change of long-term trend. For now, the long-term trend remains down across the sector.

Commodities

Having been in a deep bear market for the past few years, there are signs in some markets that life could be returning to the commodities markets. Gold, in particular, is advancing nicely and is already back in a long-term uptrend. The other metals are still lagging, but strength is evident in Silver, Palladium and Copper. Silver is the next most likely to complete a change of trend to up, with Copper not that far behind. Palladium still has some way to go.

Currencies

The dollar has seen some weakness this week against several currencies. This weakness has already been sufficient to trigger a change of long-term trend in the Australian dollar. The New Zealand dollar could follow suit this week. It’s interesting to note that both of these currencies are commodity-based currencies, which goes to bolster that view that strength is returning to some commodities markets. Such a move is also consistent with a return to risk-on in the financial markets, something that is also being seen in stocks.

In line with overall dollar weakness, the dollar index itself moved lower this week as the RSI once again was unable to break through the 60 level, keeping it in the bear range. This weakness took the index down through its 50-day moving average and further lower to test its 200-day moving average, which has so far held. Next week should be an interesting week for the dollar. It’s also a week that sees quarterly currency expiration, so the March contracts roll forward to June.

Interest rate futures

Interest rate futures have continued their recent weakness this week, which is consistent with the current risk-on mood. However, it should be noted that the long-term trend is still very much up across the sector.

The 10 Year T-Note has fallen to test its 50-day moving average, and the 5 Year T-note has already dropped slightly below it. However, all markets remain considerably above their 200-day moving averages and major trend-defining support. The shorter-term markets in the sector are the weakest and are testing the 40 level on the RSI, which is bull market support.

Good trading

Phil Seaton

LS Trader

Weekly Update 28 February 2016 – LS Trader

Both stocks and the dollar have moved higher this week. The British Pound has fallen to a near seven-year low. Commodities have seen mixed trading and interest rate futures have moved lower. The long-term trends remain down for stocks and commodities, up for interest rate futures and mixed for the currency markets, but slightly favouring the dollar.

Stocks

The S&P 500 continued its recent short-term rally this week, moving well through its 50-day moving average in the process. However, the rally ran out of steam beneath the 200-day moving average, with candle printing a shooting star bearish reversal pattern. The RSI has also failed to reach the 60 level and, therefore, remains bearish. The long-term trend is still down.

The Nasdaq 100 traded in very similar fashion to the S&P 500. The principle difference being that the Nasdaq remains below both its early February highs and its January highs, whereas the S&P 500 has cleared its equivalent levels. The 50-60 level on the RSI is bear market resistance and as long as that resistance zone holds we can look for further price weakness.

The Nikkei also rallied this week but remains below short-term resistance. The RSI also remains below the 50 level so is still very much in the bear range. Due to its proximity to Friday’s close, resistance could be tested this week, but the long-term trend remains down, and it will take a very significant rally for that to change any time soon.

Commodities

Gold has chopped around this week but ended the week lower. Significantly, Gold has remained above the key support level which we highlighted last week. As before, as long as that support level holds, the outlook for Gold remains bullish. Silver, however, has seen considerable weakness this week, moving back below both its 50 and 200-day moving averages. The RSI has also dropped and may test the 40 level this week.

Copper made a spike high on Friday, which was its highest print since mid-November, but the breakout from the range was unable to hold. Interestingly, the RSI turned down from the 60 level, keeping it in the bear range. The long-term trend remains down for the metals sector.

Sugar tested major trend-defining support and rallied sharply higher to test its 200-day moving average. A break of last week’s low would confirm a change of trend to down, but for now, the long-term trend remains up.

Currencies

The dollar index rallied this week to its highest level in three weeks, helped by strong day on Friday, which took the index well through its 50-day moving average. The index also remains above its 200-day moving average, and the long-term trend is up. The RSI, which has been in the bear range since early December, has risen significantly over the past couple of weeks, and we may see a test of bear market resistance at 60 in the next few days. A decisive move through 60 would be bullish for the index, and the dollar overall, and would suggest additional rally for the index towards the January and possibly December highs.

The British Pound broke through its recent lows to fall to its lowest level in almost seven years. The long-term trend is clearly down for the Pound, and the RSI is in the bear range, suggesting that we may see lower levels yet. The only positive for the Pound is that there is bullish divergence between price and RSI as we have a new low in price without a new low in momentum, but this does not necessarily suggest a reversal is imminent.

Interest rate futures

Interest rate futures moved lower this week, but all remain above support with the exception of the 3-Month Eurodollar. Weakness seen in the remaining markets in the sector suggests that we may see support tested in some or all of these markets over the coming week or so. As yet there is still no bearish divergence in any of the markets in the sector, but the RSI has dropped considerably since its high print earlier in the month. For now, the long-term trend remains up, and the RSI is in the bull range.

Good trading

Phil Seaton

LS Trader