Weekly Update – 3 June 2018 – LS Trader

The long-term trend remains bullish for US stocks. The Nasdaq 100 has seen bullish price action this week and may head back to test all-time highs. The S&P 500 remains weaker but may also breakout this week.

A look at the monthly and weekly charts confirms that the uptrend is still intact in spite of what the perma-bears will say, who will no doubt be complaining this week that the market is wrong. It’s a mistake to fight the trend because the market is where it is because that is where it is supposed to be, and it’s supposed to be where it is because that’s where it is!

Stocks

From last week on the Nasdaq 100: “The current market pattern is that of a massive failed head and shoulders pattern, which if correct would give targets of over 800 points above current price levels. That move could get underway with a breakout this week, which if successful may lead to a test of the March 13 all-time highs.” We did get the breakout and Friday saw very bullish price action combined with a decisive move above 60 on the RSI. The next target is for a retest of the March all-time high.

Also from last week on the S&P 500: “The upper boundary of the triangle from above has been tested, and the market remains above the triangle. The RSI is funding resistance at the 60 level, but a break above last week’s highs may see the RSI move decisively above 60 and the bull market resume.” The S&P 500 continues to probe resistance on price and RSI, and a breakout to the upside could be seen this week.

Commodities

Cotton rallied to its highest level in over four years this week. The trend remains bullish but volatility is reaching an extreme and sentiment is also highly bullish so a short-term pullback may be forthcoming in the next week or so. However, the long-term trend is well established, and we may see a further rally in the longer-term.

Gold remains in a long-term downtrend and has traded in a near $20 range for the past two weeks. A break to the upside from that range will indicate that the downtrend is over for now, whereas a break to the downside through the May lows would point towards further weakness to around $1250, approximately $50 lower than Friday’s close.

Currencies

The Dollar Index ran into resistance at the November highs at just over 95.00 and has been unable to break through so far. The Euro, which is the inverse of the Dollar Index has been weaker (stronger dollar) and made its lowest print since July last year. The long-term trend continues to favour the dollar, although sentiment had become extremely negative against the Euro and bullish for the Dollar that a correction was due.

Interest rate futures

Last week on interest rate futures: “The COT bullish commercials profile proved to be bang on, and interest rate futures rallied sharply. However, price action was a bear market rally, and the long-term trend is still down. We may see a resumption of that downtrend over the coming weeks.”

The rallied stalled at resistance from the early April high and turned lower. Commercials have a near-record net long position on the 10 Year T-Note in the COT report so there may yet be higher to go to the upside before the downtrend fully resumes.

Good trading

Phil Seaton

LS Trader

Weekly Update – 27 May 2018 – LS Trader

This coming week will be a shortened trading week due to the Bank Holiday in the UK and the Memorial Day holiday in the US. As of Friday’s close, the long-term trends remained up for US stocks, up for the Dollar, down for interest rate futures and mixed for commodities.

Stocks

The Nasdaq 100 continues to grind higher. The current market pattern is that of a massive failed head and shoulders pattern, which if correct would give targets of over 800 points above current price levels. That move could get underway with a breakout this week, which if successful may lead to a test of the March 13 all-time highs.

The S&P 500 has consolidated since breaking out of a large symmetrical triangle pattern. The upper boundary of the triangle from above has been tested, and the market remains above the triangle. The RSI is funding resistance at the 60 level, but a break above last week’s highs may see the RSI move decisively above 60 and the bull market resume.

Commodities

The energy markets moved sharply lower this week, stopping us out of our long Crude Oil trade. We remain long the remaining markets in the sector but have tight stops. A breach of last week’s lows will likely usher in a deeper correction.

From last week on Lumber: “It’s possible that the top may have been seen on Friday with the daily charts printing a key reversal day and ending the day limit down. This may be the beginning of a corrective decline. However, it’s been a hugely successful trade, and the market remains above support. Price action early next week will be critical, or this market may unravel swiftly.”

Last week’s comments were right on target, and the Friday mentioned was the top, at least for now. The market did unravel sharply with a couple of limit-down moves, which resulted in us exiting a hugely profitable long trade, which was also our most profitable trade of 2018 to date.

Corn made its highest print in almost two years but has printed a long-legged doji pattern on the weekly chart, which reflects indecision. The trend remains up, and the market is above well-defined short-term support.

Currencies

Last week on the British Pound: “Bullish divergence appears in downtrends. The more critical factor is the test of support. If support is broken, there is room for a further decline to the $1.3150 area.” The Pound broke support and has continued lower following the breakout. The trend remains down. Two potential bullish factors are bullish momentum divergence setup (no trigger) and very bearish sentiment. The last time sentiment was this negative against Sterling the Pound was almost 1000 pips lower against the dollar.

Interest rate futures

Last week on interest rate futures: “The only bullish thing for the sector at present is the near-record net long position for commercials on the COT report. With commercials near record net long and large speculators near-record net short, there is the possibility of a sharp move to the upside.”

The COT bullish commercials profile proved to be bang on, and interest rate futures rallied sharply. However, price action was a bear market rally, and the long-term trend is still down. We may see a resumption of that downtrend over the coming weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update – 20 May 2018 – LS Trader

The past week has seen stocks consolidate but has also seen continued strength in the energy markets and the dollar, and weakness in metals. The long-term trends remain up for US stocks, down for metals and interest rate futures, up for energies and sideways to up for the dollar.

Stocks

Strength remains evident in the US stock markets, where the long-term trend is still up. As mentioned in last week’s update, one possible interpretation of the Nasdaq 100 is that of a large failed head and shoulders pattern, which if correct would give targets of over 800 points above current price levels.

The S&P 500 has also broken out of a large symmetrical triangle pattern during last week’s trading and tested the upper boundary of the triangle from above this week. However, the S&P 500 is considerably weaker than the Nasdaq 100 in terms of chart construction and proximity to their respective all-time highs.

Commodities

Gold moved sharply lower on Tuesday this week following the failure to break resistance the previous week. This week’s decline took prices to their lowest level this year, and the long-term trend remains down.

Lumber continued to make new all-time highs with a series of limit up moves. We cautioned in last week’s update that a top was likely due based on extreme bullish sentiment, bearish momentum divergence and other factors that we measure at LS Trader. It’s possible that the top may have been seen on Friday with the daily charts printing a key reversal day and ending the day limit down. This may be the beginning of a corrective decline. However, it’s been a hugely successful trade, and the market remains above support. Price action early next week will be critical, or this market may unravel swiftly.

Currencies

From last week: “There was insufficient strength in the Dollar Index to complete a trend change to up, and the Pound has held up just above the key trend change level. However, if dollar strength resumes this week, both trades could get triggered.” The Dollar Index did complete a change of trend to up as the rally continued, printing the index’s highest price since mid-December.

The British Pound has so far held support, and there has been a lessening of momentum as the decline has persisted. There is very slight bullish momentum divergence setting up on the chart but as we have said many times before that does not mean a bottom is imminent. Bullish divergence appears in downtrends. The more critical factor is the test of support. If support is broken, there is room for a further decline to the $1.3150 area.

The Australian Dollar has been unable to break resistance so far but came very close to doing so. A short-term head and shoulders pattern is forming which will either mark the bottom of fail and indicate a much lower move. We will know soon enough.

Interest rate futures

Interest rate futures all remain in long-term downtrends, and all US futures moved to new lows for the current move. However, there was some bullish price action on Friday, but the long-term trend is down. The only bullish thing for the sector at present is the near-record net long position for commercials on the COT report. With commercials near record net long and large speculators near-record net short, there is the possibility of a sharp move to the upside.

Good trading

Phil Seaton

LS Trader

Weekly Update – 13 May 2018 – LS Trader

US stocks have continued to recover from the sell-off earlier this year and show signs of renewed strength. It’s possible that we will see further strength and breakouts to new all-time highs over the coming weeks.

Stocks

The US stock indices remain in a long-term uptrend and have shown renewed strength this week. The S&P 500 has this week broken out of a large 3-month descending triangle. This breakout has been accompanied by a move above 60 on the RSI, which places the RSI back in the bull range for the first time since February. Volatility is at low levels and is starting to expand again which suggests this market has higher to run to the upside.

The Nasdaq 100 is stronger still and this weeks strength, which has also occurred on expanding volatility from low levels and a return to the bull range on the RSI suggests that further strength and new all-time highs will be seen in the coming months. This week’s price action has also completed the failure of the head and shoulders top, which if correct, projects a rally higher towards 7828, over 800 points higher than current levels.

Commodities

It’s important to always remember that we trade a market of commodities, not a commodities market. This means that each market must be assessed and traded on its own individual merits and chart structure. Some commodities can move up whilst others can move down.

The energy markets moved sharply lower on Tuesday but recovered to hit new highs for the current move on Thursday and all remain in uptrends. Natural Gas, which has been the laggard in this sector for a long time, is within range of an upside breakout.

Lumber remains a very strong market and has hit new all-time highs again. However, there are some reasons to have one eye on the exit. Sentiment has been and remains extremely high, and there is bearish divergence momentum setup that could potentially trigger this week. However, even if this trade does get stopped out it has been a huge winner for the LS Trader system.

Currencies

From last week: “The dollar continues to gain ground against many of the majors and we could see changes of the long-term trend against the British Pound and Euro, as well as in the dollar index itself over the next few weeks.” The dollar did complete a change of trend against the Euro, but some strength has been seen since the breakout. There was insufficient strength in the Dollar Index to complete a trend change to up, and the Pound has held up just above the key trend change level. However, if dollar strength resumes this week both trades could get triggered.

Interest rate futures

Interest rate futures moved slightly lower this week having been unable to clear resistance during the prior week. These markets, therefore, all remain in long-term downtrends.

Good trading

Phil Seaton

LS Trader

Weekly Update – 6 May 2018 – LS Trader

This week has seen continued dollar strength and we now have the dollar in a new long-term uptrend against a couple of the majors with possibly more to come this week.

The stock markets remain mixed, as do commodities. Interest rate futures are consolidating near their recent lows and remain in a long-term downtrend.

Stocks

The US stock indices have had a mixed week but the Nasdaq 100 ended higher by 1.61%, but both remain some way off their recent all-time highs and need considerable further strength before the uptrend resumes if indeed, it does.

The Dax and Nikkei, the two stock indexes that we trade which are already in long-term downtrends are roughly in the middle of the range from their January highs and February lows. A breakout in either direction is currently out of range.

Commodities

The energy markets shrugged off their recent correct, rallying from just above a key support level and went on to make new highs for the current move. Light Crude Oil came just 3 cents short of printing $70 for the first time since November 2014. Brent Crude remains the stronger of the two in terms of price, having hit $75.61 this week. The long-term trend remains up for the sector, but Natural Gas continues to lag.

Gold and Silver broke to the downside having broken support but have so far been unable to press further to the downside. The long-term trend is now down for all four metals that we trade at LS Trader.

From last week: “Lumber continues to run and shows no sign of stopping at present. There is no bearish divergence in momentum. The only negative is that sentiment is extremely bullish.” Lumber rallied to new all-time highs again. Sentiment remains extremely bullish, yet volatility is moderate and there is no momentum divergence, so we could have further to run.

Corn made its highest print in almost two years as several of the grains markets resume strength. Cotton also made its highest print in almost a year.

Currencies

From last week: “However, dollar strength is becoming evident against several of the major currencies, having already broken out against the Swiss franc this week. A change of long-term trend is within range for the Australian dollar this week, where major support is likely to be tested.” The Australian dollar broke support as expected to complete a long-term trend change to down, but so far without follow through.

The dollar continues to gain ground against many of the majors and we could see changes of the long-term trend against the British Pound and Euro, as well as in the dollar index itself over the next few weeks.

Interest rate futures

Interest rate futures continued their short-term corrective rally this week and came close to testing resistance, which has so far held firm. The long-term trend remains bearish and the RSI is in the bear range, where it has been since September last year.

Good trading

Phil Seaton

LS Trader

Weekly Update – 29 April 2018 – LS Trader

This week sees the 2-day FOMC meeting begin on Tuesday so we may see a quiet start to the week followed by an increase in volatility on Wednesday.

From last week: “Further breakouts and resumptions of the primary trend could follow this week, especially in the interest rate futures sector, where new lows for the year are within range.” This past week did see further breakouts, which included the 10 Year T-note. The 30-year T-Bond is one of several markets within range of breakout this week.

Stocks

Stocks have had another volatile but ultimately indecisive week as we have a second consecutive indecision bar printed on the weekly charts. Volatility has been higher on the Nasdaq 100 than it has been on the S&P 500 but both markets have closed the last two weeks roughly where they began them in spite of a couple of sizeable round trips.

The commitment of traders data shows that commercials have their biggest long position since late 2011 on the Nasdaq 100, and are net long where large speculators are net short. This is a fairly rare position and is typically bullish. The long-term trend remains up for US stocks but down for the Dax and the Nikkei.

Commodities

From last week: “Lumber, which is currently in a huge bull market, printed new all-time highs again this week and still has potentially further to run.” Lumber continues to run and shows no sign of stopping at present. There is no bearish divergence in momentum. The only negative is that sentiment is extremely bullish.

Several commodities are within range of breakouts this week with a mixture of long and short breakouts in the offing. Grains are turning bullish again and may test key resistance, whereas metals are looking weak and may test support/breakout to the downside this week.

Currencies

From last week: “The Dollar Index is once again pushing up towards that key level of resistance which if successfully taken out may lead to a period of dollar strength. However, the long-term trend remains against the dollar.” The Dollar Index finally broke resistance but remains in a long-term downtrend.

However, dollar strength is becoming evident against several of the major currencies, having already broken out against the Swiss franc this week. A change of long-term trend is within range for the Australian dollar this week, where major support is likely to be tested.

Interest rate futures

From last week: “Both the 10-year and Long bond could also make downside breakouts this week. The trend remains down for the sector.” The 10 Year T-Note did break to new lows for the current move as yields crossed above 3%. The long-term trend is down for the 10 Year Note. However, there is potential bullish divergence evident on the daily chart but as yet no trigger. The 30-year T-Bond rallied from support but remains in a long-term downtrend, and the trend remains down for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 22 April 2018 – LS Trader

From last week: “Many markets have corrected against their primary trends over the past few weeks, but several looks set to resume their longer-term moves as early as this week.” This past week has been more active than the recent few weeks as multiple markets did breakout as expected. Further breakouts and resumptions of the primary trend could follow this week, especially in the interest rate futures sector, where new lows for the year are within range.

Stocks

The Nasdaq 100 ended the week higher by 0.5% but has printed a doji on the weekly charts with a long upper shadow. This has bearish implications for the short-term as a doji is an indecision bar, and the long upper shadow shows that the highs of the week are strongly rejected after the run-up of the past three weeks. The long-term trend is still up for the Nasdaq 100, but we’re now in the middle of the range with no short-term trend evident.

Price action in the S&P 500 has been very similar, and no short-term trend is evident. The same is true for the Dax and the Nikkei, but both are weaker than their US counterparts due to having fallen sufficiently in February to complete long-term trend changes to down.

Commodities

From last week: “Heating Oil and RBOB Gasoline could breakout this week.” Both Heating Oil and RBOB Gasoline did breakout this week but as yet have had little in the way of follow through. Both of these markets continue to lag the stronger Crude Oil Markets, with Brent Crude being the strongest at present.

Gold continues to coil in a range just below a key resistance level (neckline of a large inverted head and shoulders). The market could break either way at this stage but the breakout, when it comes, is likely to yield a big move. Silver was the stronger of the two precious metals but remains in a long-term downtrend for now. A change of trend to up is within range.

Lumber, which is currently in a huge bull market, printed new all-time highs again this week and still has potentially further to run.

Currencies

From last week: “The area around 90.50 is significant resistance for the Dollar Index as that level represents a change of polarity resistance from the September 2017 lows and also the high of this year.” The Dollar Index is once again pushing up towards that key level of resistance which if successfully taken out may lead to a period of dollar strength. However, the long-term trend remains against the dollar.

Interest rate futures

From last week: “Friday closed below the 50-day MA on the Long Bond, and we may see prices head back towards the February lows. The shorter-term markets in the sector remain weaker and could test support as early as this week. The long-term trend remains down across the sector.” The shorter-term markets did test support as expected and both the 3-month Eurodollar and 5 Year T-notes broke to new lows for the current move. Both the 10-year and Long bond could also make downside breakouts this week. The trend remains down for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 15 April 2018 – LS Trader

The past week has been a continuation of the calm before the storm. Many markets have corrected against their primary trends over the past few weeks, but several looks set to resume their longer-term moves as early as this week.

The long-term trends remain mixed for stocks and commodities, but down for the dollar and interest rate futures.

Stocks

From last week: “The S&P 500 has closed right on its key 200-day moving average and remains perilously positioned above MA support and the February lows. For now, the trend remains up, but that picture could quickly change.” The 200-day MA held, and the market ended the week higher. However, Friday printed an indecision pattern on the daily chart with the high for the day just below the 50-day MA. Prices currently are sandwiched between the two MAs and could go either way.

The Dax’s recovery continued, crossing both the 50 and 200-day MAs this week, but finding resistance at the later and turning down on Friday. The long-term trend remains up for US stock indexes and down for the Dax and the Nikkei.

Commodities

Gold reached a high of $1369.4 this week before pulling back but remains within the range of a potential key breakout. There is an inverted head and shoulders pattern evident on the weekly chart which dates back to 2013 which if completed would give a target in the region of $1720, large upside potential.

The energy markets have got back on track, and their recent correct declines have come to an end, with both Light Crude and Brent Crude breaking out to new highs for the current move. Both markets made their highest print this week since late-2014. Heating Oil and RBOB Gasoline could breakout this week.

Currencies

From last week: “The area around 90.50 is significant resistance for the Dollar Index as that level represents a change of polarity resistance from the September 2017 lows and also the high of this year.” This resistance area continues to hold, and as long as it does the focus is towards lower prices for the Dollar Index.

The inverse is true for EUR/USD, which remains above its key support zone and may push higher this week. The British Pound continues to advance and may be set to test its January high soon. The RSI remains in the bull range, and the long-term trend remains up.

Interest rate futures

The long bond tested resistance again around the 147 level and once again turned lower, keeping the long-term downtrend intact. Friday closed below the 50-day MA on the Long Bond, and we may see prices head back towards the February lows.

The shorter-term markets in the sector remain weaker and could test support as early as this week. The long-term trend remains down across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 8 April 2018 – LS Trader

Volatility in stocks has continued. The S&P 500 has closed right on its key 200-day moving average and remains perilously positioned above MA support and the February lows. For now, the trend remains up, but that picture could quickly change.

Stocks

US stocks ended the week lower and had big down days on Friday. For now, the long-term trend remains up but key trend-defining support are within range of being tested this week, and it’s possible that we could see a change of long-term trend to down completed in the next week or so.

The Dax finished the week higher by 0.49% but remains in a long-term downtrend, and the same can be said for the Nikkei. At present, the long-term trend remains up for US stocks but down for international stocks.

Commodities

The grains markets had a volatile week this week on speculation of tariffs affecting a few markets in the sector. However, the markets quickly shrugged that off and price action was strong on Friday. The long-term trend remains up, and we could see Corn and Soybean Meal breakout to the upside this week.

The energy markets have continued to decline this week, but for now, the long-term trend remains up for the sector.

Lumber resumed its long-term uptrend by breaking out to new all-time highs this week and could yet have further to run.

The metals markets remain mixed. Palladium has closed the week lower for six consecutive weeks, and for ten of the last twelve weeks. Silver remains in a long-term downtrend and is trading near support with a breakout to the downside possible. According to COT data, the small speculator as the most bullish it has been since 2009. Lasting rallies rarely commence when the small speculator is more bullish than commercials and large speculators.

Currencies

The Dollar Index has continued to make its counter-trend move but is at medium-term resistance, with the long-term trend remaining down. The area around 90.50 is significant resistance for the Dollar Index as that level represents change of polarity resistance from the September 2017 lows and also the high of this year.

The inverse, of course, is true for the Euro, which is now testing key support.

Interest rate futures

From last week: “The long bond is now in the zone between the 38.2 and 50% retracement levels of the decline from the December high, which is about the level that normally sees a correction of this degree fizzle out. The 50% retracement level is at 147.37.” The long bond turned lower at the expected resistance zone and traded lower until Friday. The long-term trend remains down for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 1 April 2018 – LS Trader

The past week was a shortened trading week due to Good Friday, and Thursday’s close also saw the end of the first trading quarter of the year. The first quarter has been far more volatile in many markets than recent quarters but has also been profitable to trade in spite of some large swings in the markets. That volatility is expected to continue for the foreseeable future and should bring with it plenty of large moves and profitable trading conditions.

The long-term trends remain mostly as before, mixed for stocks, up for commodities (with a few exceptions), down for the dollar, and down for interest rate futures.

Stocks

From last week on the Nasdaq 100: “Additionally, sentiment has become extremely negative with only 10% bulls. The last time sentiment was this low was the end of the early February sell-off. A substantial rally followed.” Stocks bounced this week as suggested in last week’s update from extremely negative sentiment readings.

The long-term trend for US stocks is still up at monthly and weekly chart level but is turning negative on the daily timeframe. However, a change of trend to down for either the S&P 500 or the Nasdaq 100 has yet to be completed.

The Dax fell to new lows for the current move but reversed higher. However, the trend remains down, and the market is below resistance. The Nikkei also rallied and was strong enough to take out short-term resistance. The long-term trend remains down for the Dax and Nikkei but still up for the Nasdaq 100 and S&P 500.

Commodities

Brent Crude completed its highest monthly close in almost three years in spite of a bit of a pullback this week. The long-term trend remains up for both Crude markets, and new multi-year high monthly closes are not bearish.

After a few weeks of selling, some of the grains markets had extremely bullish days on Friday, namely Corn, Soybeans and Soybean Meal. This may indicate that the correction in these markets is over and the local top may be tested, with possible breakouts this week.

One important observation in the commodities markets is commercial buying of many commodities markets as reported in the COT data (Commitments of Traders Reports). This indicates that commercials are expecting inflation and higher prices and a likely bull market in commodities. Commercials are often early, so we have to wait for trend confirmation and buy triggers, but once these moves get going, they are likely to be big.

Currencies

The currency markets continue to consolidate, much as they have since the middle of January. The long-term trend remains against the dollar.

Interest rate futures

Interest rate futures have continued their short-term counter-trend rally this week and are now approaching levels that could provide resistance and a possible turn lower to resume the long-term downtrend.

The long bond is now in the zone between the 38.2 and 50% retracement levels of the decline from the December high, which is about the level that normally sees a correction of this degree fizzle out. The 50% retracement level is at 147.37.

Good trading

Phil Seaton

LS Trader