Weekly Update 21 February 2016 – LS Trader

The past week has seen stocks and the dollar both advance, but it’s been a quieter week than we have seen recently. Volatility has also dropped in most of the markets that we trade.

There are a handful of markets that are trading within range of key breakouts, and one or two markets are on the verge of changes of long-term trend.

The long-term trends are still down for stocks and most commodities, mixed for the dollar and up for interest rate futures.

Stocks

The S&P 500 put in a four-day rally this week but ran into resistance exactly at the 50-day moving average. The long-term trend remains down, and the RSI is still in the bear range.

The Nasdaq 100 displayed very similar price action but remains weaker than the S&P 500. The RSI on the Nasdaq 100 has so far been unable to break the 50 level. 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 remains considerably weaker than both US indexes, and the current downtrend remains intact. The RSI here has been unable to break even the 40 level, and, therefore, remains very much in the bear range.

The Dax gapped higher at the open on Monday and traded higher through to Thursday. The rally was sufficient to break the prior support level from the August to January lows, which should now have acted as resistance. The break of that level may have broken the bears’ back in the near term, but the long-term trend and RSI remain bearish.

Commodities

Gold ended the week slightly lower than it began, but also some $35 higher than the lows printed on Tuesday. That low came right at the same level that had previously been resistance in this market, so if the current uptrend is good, that former resistance level should now act as support. This makes last week’s low a key level for this market. If support there fails, then we will likely see some further weakness in this market. For now, the long-term trend is up and the RSI remains in the bull range.

The energy markets have had a mixed week, but the long-term trend remains down across the sector. Brent rallied to test its 50-day moving average but has been unable to break through. The RSI in all four energy markets that we trade at LS Trader remains in the bear range, so as yet, there is no evidence that the long-term trend is going to change anytime soon.

Natural Gas has been very weak and will likely test its December low this week. RBOB Gasoline also remains near its recent low, and it too could push to new lows this week.

Sugar has taken out a recent support level and may complete a change of long-term trend to down in the coming week or so. Price has now moved well below both the 50 and 200-day moving averages, and the RSI is in the bear range. Not much more weakness will be required for a change of trend to down.

Currencies

The dollar has made a bit of a recover this week against several of the majors. The dollar index rallied to test its 200-day moving average, but as yet has been unable to close above it. The RSI remains in the bear range, but the long-term trend is still up.

Interest rate futures

Interest rate futures have had a mixed week, and all five markets that we trade at LS Trader remain below their highs printed on the 11th February, but also above support. The long-term trend is still up across the sector, and the RSIs all remain bullish. Regarding momentum, there is no bearish divergence, and the strength of the rally that began early this year suggests that there will be new highs yet to come. Whether those new highs occur in the current move or a bit later in the year remains to be seen.

Good trading

Phil Seaton

LS Trader

Weekly Update 14 February 2016 – LS Trader

The markets have been very active once again this week, with large moves being seen in virtually all market sectors. Stocks, currencies, metals, interest rate futures and energies have all delivered significant price moves over the past few days.

The long-term trends remain as before overall, but there have been changes of long-term trends in a couple of individual markets. Currently, the long-term trends are down for stocks, up for interest rate futures, mostly down for commodities (Gold being the notable change this week), and mixed for the dollar.

Monday is Presidents’ Day in the U.S., so many U.S. markets will be closed.

Stocks

Each of the four stock indexes that we trade at LS Trader fell to new lows this week, but all have bounced higher having found some support. This has resulted in some momentum divergences, so we may see a bit more upside follow through next week, but the long-term trend is down across the board for stock indexes.

The S&P 500 tested support but was unable to break below the prior low. The long-term trend remains down, and the RSI is in the bear range, so we may yet see another test of the recent lows.

The Nasdaq 100 continued with weakness and completed a change of long-term trend to down as expected. However, having printed its lowest level since October last year, the Nasdaq subsequently bounced higher. As with the S&P 500, the trend remains down in spite of the bounce.

The Dax dropped to its lowest level since October 2014 but managed a bit of a recovery from Thursday’s new low for the move. In spite of the recovery, the Dax still ended the week lower by over 300 points.

Commodities

There are signs that some commodities markets may be forming a bottoming process, led higher by precious metals.

Gold short higher for a second consecutive week, and strength seen this week was more than sufficient to complete a change of long-term trend to up. This week’s high was the highest level that Gold had reached in a year. This week’s Gold RSI print was its highest since October 2010; such has been the extent of recent strength. Thursday’s move higher of over $60 was one of the biggest daily moves in recent times. From Thursday’s high, there has been a bit of weakness, but the long-term trend is firmly up, and there is no bearish divergence or a slowing of momentum, and the market remains well above support.

Silver has also moved higher, but remains weaker than Gold, and has as yet fallen short of completing a change of long-term trend to up. That could follow over the next week or so if the precious metals rally persists.

The energy markets have had another highly volatile week, making large percentage swings on an almost daily basis. This week has seen some of the energy markets fall to new multi-year lows, but an aggressive bounce was seen during the latter part of the week. The long-term trend remains down for the sector, and it remains to be seen as to whether we have seen the bottom in these markets.

Currencies

The dollar index has seen continued weakness this week, moving further below the 200-day moving average. The RSI has also moved further into the bear range, but as yet there has not been sufficient weakness for a change of long-term trend.

Other currency markets have seen mixed trading. The Euro, which is a close inversion of the dollar index, rallied to its highest level since October, but as yet has not completed a change of long-term trend to up.

The biggest move once again came in USD/JPY, where the Japanese Yen rallied sharply against the dollar for a second consecutive week, pushing the dollar to its lowest level since October 2014.

Interest rate futures

Interest rate futures all soared higher this week, making new highs for the current move in each market. Thursday saw a sharp rally which could not hold through the close, and further weakness on Friday. However, there is no momentum divergence as the new high in price was accompanied by a new high in momentum. The RSI is also firmly in the bull range, and the long-term trend remains up, with all the markets still well above support. As long as these factors remain true, the uptrends remain intact.

Good trading

Phil Seaton

LS Trader

Weekly Update 7 February 2016 – LS Trader

The past week has seen stock indexes, and the dollar move lower. Precious metals benefitted from dollar weakness and have rallied to their highest level in several months. Interest rate futures rallied to new highs, and energy markets have seen mixed trading.

Stocks

Stocks have had a mixed week. Strength seen early in the week soon evaporated and the major indexes ended the week considerably lower than where they started, and well off their highs of the week.

The long-term trend remains down in three of the four stock indexes that we trade at LS Trader, currently remaining up only in the Nasdaq 100. However, weakness was seen last week, which included a 3.27% decline on Friday, suggests that critical trend-defining support will be tested this week, with a change of trend to down looking increasingly likely.

The Dax has been the weakest of the major indexes, dropping to a slight new low for the current move, and printing its lowest price since December 2014.

Commodities

Gold rallied sharply this week, moving well through its 200-day moving average. The RSI also accelerated, moving easily through the 60 level and entering the bull range in the process. Friday’s RSI print of 74.08 is the highest in over a year. For now, the long-term trend remains down, but that could change over the next week or so if we see continued strength.

Silver also moved higher but has been far less convincing than Gold. Silver remains below its 200-day moving average, and the RSI is grappling with bear market resistance at 60. The best moves happen in these two markets when both markets move together. As yet, Gold’s strength has not been matched by Silver.

The energy markets have seen mixed trading but remain very much in a long-term downtrend. RBOB Gasoline remains the weakest of the energy markets and fell to new lows for the current move on Friday. The other markets, in spite of high volatility and a short-term rally, may test their recent lows again soon.

Currencies

The dollar index failed to break resistance and reversed sharply lower. The RSI was also unable to break through the 60 level after multiple attempts and also moved sharply lower, falling below bull market support at 40. Price also moved through the 200-day moving average for the first time since October. For now, the long-term trend for the dollar index is up and further weakness will be required for that to change.

The Euro, which is a near perfect inversion of the dollar index, rallied through its 200-day moving average and reached its highest level since October last year.

The dollar had another wild week against the Yen, more than reversing the gains seen during the prior week. The sharp reversal keeps the trend for USD/JPY down, and a test of major support looks likely next week.

Interest rate futures

Interest rate futures rallied this week, making new highs for the current move. The 30 Year T-Bond made a new high for the current move this week, accompanied by a new high in momentum, which negated the bearish divergence that we noted last week. The long-term trend remains up for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 31 January 2016 – LS Trader

The past week has seen the FOMC meeting, the Bank of Japan move interest rates to negative, and has seen stocks move higher. The energy markets rallied, but all remain in long-term downtrends. The dollar has had a mixed week but is close to testing a key level against the Swiss Franc, as well as a potentially significant breakout on the dollar index.

Stocks

Stocks have had a second consecutive bullish week, but still finished the month sharply lower than where it began. Based on the historical record known as the January Barometer, down Januarys point to down years, or at the very least, years in which stocks can be purchased later in the year at much lower levels. This indicator has an 87% accuracy since 1950.

From a trading perspective, a more useful indicator is a monthly S&P 500 close either above or below the high and low of January. Based on the current futures data, that means a monthly close above 2043.5 would be considered long-term bullish, and a monthly close below January’s low at 1804.25 would be regarded as bearish. For now, the long-term trend is down in spite of the recent rally, and the RSI is still in the bear range. However, resistance will likely be tested very early this week and Friday’s bullish day suggests strength may continue at the open.

The Dax had a volatile week but has been less bullish than the other stock indexes that we trade at LS Trader, and remains below resistance and still in a downtrend. However, resistance is not far above Friday’s close, and in volatile trading could easily be tested early this week.

The Nikkei, benefitting from the BOJ’s negative interest rate move, already broke resistance last week but remains in a long-term downtrend. The rally brought the trend to an end for now, and the system exited the trade on Friday for a nice 770 point profit, having been short for most of January.

Commodities

The energy markets rallied, with both Brent and Light Crude breaking resistance. Heating Oil and No Leaded Gas also moved higher, but the latter has so far been unable to break resistance.

Metals have once again seen mixed trading. Gold rallied to test its 200-day moving average, which it has been beneath since October but has nonetheless reached its highest price since November. The yellow metal is now in the middle of its trading range.

Lean Hogs moved higher again this week and may continue higher towards age October 2015 high at 75.65 over the coming weeks.

Currencies

The currency markets have been mixed this week with the dollar climbing against some of the majors and declining against others. The big move came in USD/JPY, where the market shot higher on Friday and moved well through both the 50 and 200-day moving averages. The RSI also moved through the 60 level, which suggests further strength ahead.

The dollar did fall against the Canadian dollar, which has continued to decline since its high printed back on the 20th January. This move resulted in the system exiting a very profitable long trade, banking 691 pips in the process.

The dollar index remains in a long-term uptrend, and if the RSI make a decisive move through the 60 level, may rally to test the December high, a level which, if exceeded, could have significant implications for several markets.

Interest rate futures

Interest rate futures all moved higher this week, and the long-term trend is up across the board. The 5 Year T-Note fell just short of its early October high, and that level may be tested this week. The RSI has risen to a bullish 77.07, which is the highest RSI print since January last year.

There is minor bearish divergence in the 30 Year T-Bond, where Friday made a new high in price without a new high on the RSI. That may be negated if Friday’s high is exceeded.

Good trading

Phil Seaton

LS Trader

Weekly Update 24 January 2016 – LS Trader

The past week has delivered some large moves in the markets, particularly in stocks and energies. At present these moves are corrective and have not been sufficient to do any damage to the long-term trend picture, which remains intact.

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

Stocks

The S&P 500 briefly pierced its 24th August low but rallied sharply after that. The long-term trend is still very much down, and the RSI is still deeply in the bear range. It’s a long way back to the January open, so unless we see a spectacular rally this week, January will end as a down month, which based on the historical record known as the January Barometer, will point to a down year for stocks.

The Nasdaq 100 remains the strongest of the four stock indexes that we trade at <span style="text-decoration: underline;">LS Trader</span>, and has as yet not completed a change of long-term trend to down, and, therefore, remains in a long-term uptrend. However, in spite of last week&rsquo;s strength from the low of the week, a downside breakout and trend change is still in range, whereas significant rally is required for an upside breakout.

The Nikkei dropped to its lowest level since October 2014, but reversed sharply from the low of the week, which was almost exactly at the level of the 200-week moving average, and has managed to close just above its August 24th low. The long-term trend is still down, and the RSI remains in the bear range.

Commodities

The energy markets have had a rare good week, rallying sharply from their lows and reporting a weekly gain. However, in spite of the rally from Wednesday&rsquo;s lows, all the energy markets with the exception of Natural Gas remain deep in a long-term downtrend and the RSI remains in the bear range in each market.

<p>Gold and Silver continue to trade mostly sideways as they continue to build up for their next big move. For now, the long-term trend in both precious metals is down, as it is also in Copper and Palladium.</p>

<p>Lean Hogs continues to rise, and this week moved further above its 200-day moving average, and the RSI is also back in the bull range. This week see the contract roll forward to April, and we may see the April contract move higher towards the 75 area over the coming weeks.</p>

<p><strong>Currencies</strong></p>

<p>In last week&rsquo;s update, we suggested that the dollar may test August the 24th high against the Yen, and that did happen, with the dollar moving just a few pips above that high. However, the market was unable to push beyond the high and the market reversed sharply lower and tested support, which will likely be tested again early next week.</p>

<p>The British Pound made another multi-year low but has fallen short of our $1.4015 target so far and has subsequently bounced higher. However, the two-day rally has not been overly convincing, and the Pound closed the week lower. The long-term trend is firmly down, and the RSI remains in the bear range. New lows cannot be ruled out as yet in this market.</p>

<p><strong>Interest rate futures</strong></p>

<p>Interest rate futures continued initially with recent strength but saw some weakness in the second half of the week. The long-term trend is now up for the entire sector following the breakout to new highs for the current move in the long bond.</p>

<p>However, the long bond was unable to hold on to early gains, and has, perhaps critically, closed back below prior resistance, which is indicative of a reversal. Unless the long bond can regain last week&rsquo;s highs in the next few days, we will likely see a continuation of the weakness that began in the latter half of the past week.</p>

<p>Good trading</p>

<p>Phil Seaton</p>

Weekly Update 17 January 2016 – LS Trader

The brilliant start to the year for the LS Trader system has continued this week, with several markets making significant moves. This has resulted in the system generating excellent profits after only two trading weeks of the year.

Stocks have continued their decline, as their very poor start to the year continues to get worse. The same goes for the energy markets, which, with Crude Oil moving below $30, are now at twelve-year lows. The dollar has gained against most of the majors and remains in a long-term uptrend overall. Interest rate futures have also rallied and may be headed for a test of their 2015 highs.

Stocks

Stocks have continued sharply lower this week and are now close to testing their August 24th lows. The January Barometer, which states with an 87.7% accuracy ratio that as goes January, so goes the end of the year, cannot be assessed until January ends. However, unless we see a major turnaround over the next two weeks in the stock markets, it’s highly likely that stocks will end the month lower, which points towards a bear market in stocks this year.

However, much more important that any seasonal historical tendency is the current market trend, which is firmly down for all the stock indexes that we trade at LS Trader with the exception of the Nasdaq 100. The Nasdaq 100 has been the strongest index for much of the past year, but even that is calling sharply and is heading for a test of trend-defining support.

The Nikkei, which is the weakest of the four stock indices that we trade at LS Trader, has already fallen below its 24th August low and printed its lowest price since October 2014 this week. The area around last week’s low could represent significant support, which if broken could yield considerable further declines.

Commodities

The energy bear market has continued this week with Crude Oil moving below $30 per barrel. With the exception of Natural Gas, all the energy markets fell to new multi-year lows this week. Crude Oil made its lowest print since late 2003.

Heating Oil dropped to its lowest level since 2004, but RBOB Gasoline is still above its late 2008 low. That low basis the continuous contract is at 0.8210, still some 2000 points below Friday’s close. The RSI has dropped to 29.47, which is a bearish reading, but far from an extreme level. There is still, therefore, further room for decline.

In spite of an increased level of fear in the markets due to declining stock and energy prices, gold has not seen any significant rally and remains in a long-term downtrend, as do the other metals. Palladium and Copper, in particular, have been weak, both falling to multi-year lows.

Currencies

It’s been a good week for the dollar with gains being seen against nearly all the majors. The dollar fell against the Yen to its lowest level since August the 24th, and that level could be seen this week. The dollar also had a mixed week against the Euro, and this kept a lid on gains for the dollar index.

The British Pound saw further weakness this and remains on course for our target, the 2010 low at $1.4015. We will reassess lower targets should that level be reached.

Interest rate futures

The interest rate futures made further gains this week as the long-term uptrend continues for the sector. The long-term trend remains down only for the 30 Year T-Bond, which continues to lag the other markets in the sector. However, a change of trend for the long bond could be seen this week. Whether we see the sector rally further towards their 2015 highs remains to be seen.

Good trading

Phil Seaton

LS Trader

Weekly Update 10 January 2016 – LS Trader

The new trading year got off to a flying start as several markets made some significant moves. Stock indices made their worst start to a year in decades, and in the case of the S&P 500, the worst start ever.

The long-term trends are down for commodities and stocks, up for the dollar against the majority of currencies, and mixed for interest rate futures. If strength continues in the interest rate futures sector this week, we will likely see a change of trend to up for the entire sector.

Stocks

We have covered in recent weeks how the last five trading days of the year and the first two of the New Year form the traditional Santa Claus rally period. We also wrote last week that the markets were going to struggle to reach their rally target. When this happens, the historical records show that when the rally does not materialise, the new trading year is often a bear market. Certainly the year has begun on a very weak note for stock markets.

At LS Trader, although we look at the historical and season tendencies for markets, we never place trades based on this information as it is only a tendency and is not reliable enough to make trading decisions based on it. Subsequently instead of being long as many were, we were short the stock indexes and racked up very quick profits from our short positions this week. The long-term trend is down for three of the four stock indexes that we trade, and is only up still for the Nasdaq 100, where we are currently flat.

Commodities

Commodities have had an eventful week. The energy markets, in particular, have been volatile. Monday saw these markets move sharply higher with a price spike through resistance. They then reversed and moved sharply lower through to Friday, where a small bounce was seen.

The long-term trend is still down for the entire sector, but Natural Gas is currently the strongest having rallied to its highest level since mid-November, moving decisively above its 50-day moving average and also moving through the 60 level on the RSI for the first time since May last year.

Currencies

The dollar had a mixed week, and in spite of gains against some majors, the dollar index ended the week lower.

One of the weakest currencies against the dollar was the British Pound, which contained recent declines and reached and exceeded our downside target of 1.4544. This saw the Pound print at its lowest level against the dollar since mid-2010. The next level of structural support is another 500 pips lower at $1.4015, which was the 2010 low. Whether the Pound declines that far over the coming weeks remains to be seen.

The Japanese Yen continued its recent sharp advance against the dollar, moving well above its 200-day moving average to reach its highest level since August.

Interest rate futures

The interest rate futures sector rallied this week, and the long-term trend remains up for four of the five markets we trade in this sector. The long-term trend remains down only for the weakest market in the sector, the 30 Year T-Bond, and that may change this week if further strength is seen.

All markets in the sector are now above their respective 50 & 200 day moving averages, and the shorter-term markets have seen their RSIs move through the 60 level, returning to the bull range, which is indicative of further gains over the coming weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update 3 January 2016 – LS Trader

The past week, which was a shortened trading week due to the New Year’s Day holiday, was another quiet week. This was as expected and is very much the norm for the two-week period around Christmas and New Year. This week ahead should see a significant uptick in trading activity and volume, and several markets are within range of testing key support and resistance levels, so we should see some markets breakout during the first trading week of the year.

As 2016 begins, the long-term trends started the year down for commodities, up for the dollar and mixed for interest rate futures. Stock indexes remain mixed, with two of the global stock indexes we trade currently trading just above critical support.

Stocks

Seasonally, this is a bullish time of year for stock indexes with the last five trading days of the year and the first two of the New Year forming the traditional Santa Claus rally period.

So far there has been no sign of this historical bullishness, and with just two trading days to go for this bullish period, stocks remain lower than when they entered the so-called Santa rally period.

Therefore, a decent rally will be required on Monday and Tuesday, or the Santa rally will have failed to materialise. The historical chart records show that when this rally does not materialise, the new trading year is often a bear market.

The LS Trader system does not place trades based on seasonal historical tendencies, as it focuses on price action and trend. The system is currently flat the stock markets and has been so for the past couple of weeks. That could change this week though as some key support and resistance levels are close to the market and will likely be tested in the coming days.

Commodities

The Crude Oil markets, which have been very bearish of late, ended the week lower but are trading in what must be considered quite a narrow range. Consequently, they are trading between key resistance and support from the recent lows. It’s unlikely that this tight range will continue for much longer, so one of these levels will likely be tested in the coming days. These markets remain very much in long-term downtrends and continue to be very profitable for the LS Trader system, which remains short.

Heating Oil, which has been even weaker, has been more profitable still, and we currently have 3581 points profit on this trade since we entered short back on the 12th November at 1.4820 (last close at 1.1239).

Natural Gas continued with strength this week as expected, and the recent downtrend has ended, at least for now. The long-term trend is still very much down and will be for quite some time yet. The current rally is likely a bear market rally and just a pause in the larger downtrend.

As we begin the new trading year, both Gold and Silver remain in long-term downtrends and are just above key multi-year lows.

Currencies

The dollar displayed a bit of strength this week and moved back above its 50-day moving average. The long-term trend remains up for the index.

The British Pound continues its decline, and this week fell to new lows for the current move and is now at its lowest level since April. The RSI has fallen to a bearish 33.87 and the focus remains lower towards what could potentially be significant support at 1.4544.

The Japanese Yen has rallied against the US dollar and has tested its 200-day moving average this week. The long-term trend still favours the Yen and we could see a bullish breakout this week.

Interest rate futures

Interest rate futures have continued with choppy, rangebound trade. The 30 Year T-Bond finished the week lower and closed right on the 200-day moving average.

The shorter-term interest rate futures markets are weaker still. The 3-month Eurodollar has this week closed below its 200-day moving average for the first time since September 2013, basis the continuous chart.

Good trading

Phil Seaton

LS Trader

Weekly Update 27 December 2015 – LS Trader

Overall it’s been a quiet week, as is to be expected during the holiday period. Two consecutive shortened trading weeks due to and light trading due to the holidays generally results in little in the way of market moves, even though this is historically a bullish few days of trading in the stock markets. Another quiet week probably lies ahead before we see a big uptick in trading activity during the first week of January.

As we enter the final trading week of the year, the long-term trends remain pretty much as they have for most of the year to date, down for the commodities, up for the dollar and mixed for interest rate futures. The only real change has been in stocks, where the long-term trend has been up for most of the year but is now mixed since weakness seen at the end of August.

Stocks

The S&P 500 had a bullish week, rallying from above support and moving back above its 200-day moving average. The long-term trend, however, remains down, and the RSI is still in the bear range. As we mentioned last week, this is a bullish time of year with the last five trading days of the year and the first two of the New Year forming the traditional Santa Claus rally.

The Nasdaq 100 traded in almost identical fashion to the S&P, but the Nasdaq remains the stronger of the two indexes. The tech index is considerably above its 200-day moving average, and it has remained so since early October. Here the long-term trend is up and the RSI is in the bull range.

The Dax and the Nikkei both remain considerably weaker than their US counterparts and are both still in long-term downtrends.

Commodities

Both Crude Oil markets, Brent and Light Crude, traded at new lows early in the week before a bit of a recovery during the remainder of the week. Light Crude closed the week above Brent, which is unusual as Brent historically trades at a significant premium over Light Crude.

Natural Gas had a very strong week, rallying sharply from the new sixteen year lows that were printed during the prior week. It looks likely that the downtrend is coming to an end, at least in the short-term, although the long-term trend will remain down for the foreseeable future.

Currencies

The dollar index moved lower this week, trading back below its 50 day moving average, but still above the 200. The long-term trend is still up for the index, and the RSI remains in the bull range.

The dollar has been weak against most of the majors this week, losing ground against all of the commodity-based currencies. Changes of the long-term trends to up are within range for both NZD/USD and AUD/USD. Even the currency against which the dollar has been strongest of late, the Canadian dollar, gained ground on the greenback.

Interest rate futures

The uncertainty in the interest rate futures markets that has been present for quite some time continued this week. Trading in this sector can only be described as sloppy and choppy and without overall trend.

These interest rate markets continue to move mostly sideways, but towards the lower end of their recent trading ranges. RSI readings hovering around the 50 level indicate an almost complete lack of trend at present. However, this is one sector where things can get moving very quickly and breakout levels are not that far from current prices, so we should see some action in these markets early in 2016.

Good trading

Phil Seaton

LS Trader

Weekly Update 20 December 2015 – LS Trader

The past week has seen some decent moves in several markets and has also seen the US Federal Reserve finally raise interest rates for the first time since 2006.

Stocks had a mixed week with some reasonably large price swings, but the long-term trends remain intact, which is down with the exception of the Nasdaq 100. The long-term trends remain down for commodities, most of which are still in a deep bear market, and continue to favour the dollar.

Stocks

The S&P 500 had quite a volatile week. Having opened lower, it rallied through to Thursday and then turned sharply lower, trading back below its 200 day moving average. The RSI is also back below the 40 level, so we may see further weakness in the coming days. However, this is a very bullish time of year for stocks, with the much-fabled Santa Claus rally due to hit the markets on Wednesday, based on historical data.

The Santa Claus rally has generated a 1.5% average rally each year since 1950 for the last five trading days of the year and the first two in January. Let’s see if it materialises this year.

The Nasdaq 100 has seen similar price action to the S&P 500 but remains stronger. Here the long-term trend is still up, and the RSI remains above bull markets support at 40, which it has since September.

The Dax rallied for most of the week but turned lower on Friday. The index finds itself at an interesting juncture, as price, and both the 50 & 200-day moving averages are all pretty much at the same level. The long-term trend remains down, and the RSI is in the bear range.

Commodities

Weakness in the energy markets has continued this week even though we have seen some attempted rallies. Light crude oil fell to a new multi-year low on Friday and may yet test its 2009 low, which was at 33.55 basis the back-adjusted continuous futures contract. Price action in Brent Crude was a near perfect image of US Crude, and the spread between the two (Brent historically trades at a significant premium) has all but disappeared.

Natural Gas has moved sharply lower, continuing its long-term bear market trend, and this week printed its lowest prices since March 1999.

Currencies

The dollar index rallied this week, moving back above its 50 day moving average and remaining well above its 200 day moving average. The long-term trend is still up, and the RSI remains in the bull range. Whether we see sufficient strength to test the early December high remains to be seen.

The dollar was at its strongest against the Canadian dollar, where it reached its highest level since June 2004. The dollar also pushed the British Pound down to its lowest level since April, but as yet without downside follow through. As we have written several times in recent weeks, a decisive move below support on a closing basis would support the idea of a continued decline down towards the April low, which is almost 400 pips lower than current prices.

Interest rate futures

The long-term trends remain mixed in the interest rate futures sector and are still up for the shorter-term markets but down for the long bond. All five markets that we trade at LS Trader remain above their 200-day moving averages, but most remain bearish according to the RSI. This uncertainty is evidenced by a complete lack of trend in this sector at present.

Good trading

Phil Seaton

LS Trader