Weekly Update – 9 December 2018 – LS Trader

Volatility has been the order of the day over the past week with huge moves and swings seen in many markets. This week has seen a change of long-term trend for interest rate futures, which are now in a long-term uptrend. Gold could also be on the verge of a change of trend to up over the next week or so. Seasonally, we’re in a strong time of year for stock indices and Gold.

Stocks

Stock indices have seen colossal volatility this week as the rally stalled once again almost exactly at the 61.8% retracement level of the September to November decline. The long-term trend remains down for global stock indices, and we could see new lows for the current move completed this week.

This Friday is quarterly stock index futures expiration, so the December contract will roll forward to March.

Commodities

The metals markets continue to show signs that they may have bottomed and are heading for a change of long-term trend to up. Palladium, the only one of the metals currently in a long-term uptrend, continues to lead the way, having printed new all-time highs this week. Gold could be on the verge of an upside breakout and change of trend as early as this week.

Volatility has been high in the energies this week with a series of indecision bars, known as high wave doji. These patterns print when the market has a long upper and a long lower shadow and closes the day reasonably near to where the day opened. It represents total indecision on the part of market participants. If markets break above last week’s highs that will suggest that the downtrend is over for now, but as long as markets remain below those resistance levels, the downtrend remains intact.

The exception to this is Natural Gas, which remains in a long-term uptrend. It’s possible that the market is printing a half-mast pennant, which would project to north of the 6.000 level if completed, depending on where the actual breakout level is.

Currencies

This week saw GBP/USD break to a new low for the current move, printing its lowest level since June 2017. Much of that is to do with Brexit uncertainty ahead of the Parliamentary vote on Tuesday. Volatility remains low, but we can expect to see that pick up this week.

The Dollar Index has seen some weakness this week, as has the dollar against the Euro. The long-term trend continues to favour the dollar against all the majors except for NZD/USD.

This Friday is quarterly currency futures expiration, so the December contract will roll forward to March.

Interest rate futures

From last week: “commercials hold a huge net long position, based on COT data, which means they continue to position for lower, not higher, interest rates (interest rate futures move inversely to rates). For now, the long-term trend remains down, but upside breakouts and changes of trend for a few markets in the sector are within range.” Interest rate futures finally rallied sufficiently to complete a change of trend to up for all markets in the sector except for the long bond. The long-term trend is now up for interest rate futures.

Good trading

Phil Seaton

LS Trader

Weekly Update – 2 December 2018 – LS Trader

Stock indices have continued their recent corrective rally, but all remain in long-term downtrends. Commodities remain weak overall, while the dollar uptrend remains intact. Interest rate futures remain in a long-term downtrend but continue to gain strength, with a possible change of trend to up on the horizon.

Stocks

From last week: “This is a bullish time of year seasonally, but the current technical picture takes precedent, especially the primary trend.” Stocks continued their corrective rally this week, and the Nasdaq 100 broke resistance late on Friday night. December is a strong month seasonally for stocks, but the long-term trend is still clearly down.

Commodities

The energy markets continue to get destroyed, but there are signs that the aggressive downtrend may be about to take a pause, as momentum is slowing, there is bullish divergence between price and RSI, and volatility has remained at elevated levels. However, the long-term trend remains down for all markets in the sector except for Natural Gas.

Currencies

The uptrend for the dollar remains intact. The Dollar Index may rally to test recent highs this week. There are also possible breakouts for the dollar against a handful of majors, which includes GBP/USD. GBP/USD closed on Friday just above a critical support level. The long-term trend is down, and the RSI is in the bear range, where it has been for the past several months. Interestingly, volatility in GBP/USD is at a low level, something that is likely to change over the coming week or so.

Interest rate futures

Interest rate futures continue to show signs that they have bottomed. As we have written several times over the past few months, commercials hold a huge net long position, based on COT data, which means they continue to position for lower, not higher, interest rates (interest rate futures move inversely to rates). For now, the long-term trend remains down, but upside breakouts and changes of trend for a few markets in the sector are within range.

Good trading

Phil Seaton

LS Trader

Weekly Update – 25 November 2018 – LS Trader

The past week was a shortened trading week due to the Thanksgiving Holiday in the US. However, there were some significant moves in stocks, energies and interest rate futures. The current long-term trends remain down for stocks, commodities and interest rate futures, and up for the dollar.

Stocks

We had mentioned a possible head and shoulders bottom setting up on the daily chart of the S&P 500. That potential pattern failed this week as prices moved below what would have been the right shoulder low. Often failed patterns are the best ones to trade. If the October 29th low is broken, the downtrend will resume.

The Nasdaq 100 has already broken its equivalent low to print new lows for the current move, as has the Dax. The Nikkei is holding up slightly better than the other indices, but the long-term trend remains down for global stocks. This is a bullish time of year seasonally, but the current technical picture takes precedent, especially the primary trend.

Commodities

The colossal collapse and bear market for energies continued this week with sharp declines in all markets except for Natural Gas. Natural Gas continues to trade counter to the rest of the sector and is in a bull market, but did end slightly lower this week after some volatile price swings.

Light Crude oil finished the week lower by 11.33%, Brent by 11.92%, Heating oil by 10.28%, and RBOB Gasoline, which was the biggest decliner, finished down by 12.64%. All four of these moves have been captured by the LS Trader system where we remain short these four energies and long Natural Gas, for five extremely profitable trades. The trend is still intact for all of them as of Friday’s close.

Currencies

The uptrend for the dollar remained intact this week with the Dollar Index holding support and the Euro failing at resistance. The dollar remains in a long-term uptrend against all the majors.

Interest rate futures

Interest rate futures have had a bullish couple of weeks as prices have rallied sharply from support in what is, for now, a counter-trend rally. However, the rally has been of sufficient strength to bring a change of long-term trend to up within range for all markets apart from the 30 Year T-bond. As has been the case for several months, the commercials hold a huge net long position in interest rate futures, which means they continue to position for lower, not higher, interest rates (interest rate futures move inversely to rates.

Good trading

Phil Seaton

LS Trader

Weekly Update – 18 November 2018 – LS Trader

This Thursday is the US Thanksgiving Holiday so it will be a shortened trading week as US markets will be closed on Thursday and have a shortened trading day on Friday.

Stocks

Stocks ended the week lower as the long-term downtrend remains in effect. As before, the Dax and Nikkei remain weaker than US indices. It’s possibly significant that the counter-trend rallies in the Nasdaq 100 and S&P 500, were unable to get beyond the 61.8% retracement levels and also did not get to the 60 level on the RSI. This keeps the RSI in the bear range.

However, it should be kept in mind that this is the strongest period of the year seasonally for stocks, so rallies cannot be ruled out. To change the trend back to up, new highs will need to be posted, which at present are out of range.

Commodities

Natural Gas has had a hugely volatile week with wild swings in both directions. However, in spite of the volatility, the trend remains bullish for Natural gas, and the market closed the week at its highest level in almost four years, up 17.88% for the week.

The other energy markets all remain in downtrends, with RBOB Gasoline the weakest, having fallen to its lowest level since August 2017.

The metals markets rallied for most of the week, but except for Palladium, all remain in along-term downtrends. Palladium rallied to a new all-time high.

Currencies

The Dollar Index posted new highs for the current move but ended the week lower. The long-term trend remains up for the index. There is some bearish divergence between price and RSI.

The New Zealand dollar continued its recent rally and is now on the verge of a change of trend to up. This would be the first of the majors to complete a trend change to up against the dollar. The Australian Dollar is also showing some signs of strength.

Interest rate futures

Interest rate futures have had a bullish week, but except for the UK Long Gilts, remain in a long-term downtrend. A change of trend to up for US interest rate futures, which means lower, not higher, interest rates, could be completed in the coming week or so if strength continues.

Good trading

Phil Seaton

LS Trader

Weekly Update – 11 November 2018 – LS Trader

The past week has seen mixed trading in multiple markets, with a change of long-term trend to down being completed in Crude Oil and Brent Crude. Stocks continued their corrective rally and are now at a key price zone. The dollar has resumed recent strength, and interest rate futures remain mixed.

Stocks

The S&P 500 rallied this week, reaching a 61.8% retracement of the October decline. It is possible that if prices decline back to around the 2700 area and find support, that an inverted head and shoulders pattern could be forming. Such a pattern, if completed, would project a rally back to new all-time highs.

The technical damage done at daily chart level recently cannot be disputed, and it has changed the daily and weekly trend to down, but a check of the monthly chart shows that the bull market is still intact at a higher degree of trend. A complete retracement of the October decline and new all-time highs cannot be ruled out over the coming months, particularly given that we are now in a strong period of the year from a seasonal basis.

The other stock indices have seen similar price action, but the Dax, and then the Nikkei, remain the weakest.

Commodities

From last week: “A trend change to down is within range for Crude Oil and Brent Crude, and that could be completed within the next couple of weeks.” The energy markets were weak this week, and a change of trend to down was completed for both Crude Oil markets as expected.

It’s possible to label the rally in Gold from the August low to be a bear channel, which is in keeping with the long-term trend being down. A close below 1200 would bolster this view and suggest that prices would retrace the rally from the August low in full and go on to post new lows.

We mentioned a possible head and shoulders bottom in last week’s update but said that even if the pattern completed that the long-term trend would be down. Prices fell well short of the neckline and have turned lower and may now test the right shoulder bottom. If this price is broken (264.25) that would completed a head and shoulders failure pattern and would project prices lower to around the 235 level.

Silver has already completed the head and shoulders failure and may break to new lows this week. The long-term trend remains down for all the metals except Palladium.

Currencies

The US dollar completed a break out the neckline of a head and shoulders pattern visible on the weekly chart back to July 2017. This breakout, which now has prices at their highest level since May 2017, projects higher to around the 1.1000 area, around 1000 pips higher than current prices.

The dollar index may post new highs for the current move this week.

Interest rate futures

Interest rate futures had a mixed week with the shorter-term markets being weaker than the longer-term. The 30 Year T-Bond began a rally back to the underside of the 5-week flag mentioned last week. If resistance holds, that pattern has a projected downside target in the 130 area.

The long-term trend remains down across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 4 November 2018 – LS Trader

The past week has seen volatile price action in multiple markets, many of which have made corrective price moves against their primary long-term trends. The current trends are down for stocks, up for the dollar, down for interest rate futures and mixed for commodities.

Stocks

Stocks rallied sharply this week in what is corrective price action against the long-term downtrend. The corrective rallies were sufficient to end the trend in the short-term for both the Nikkei and Dax, but for now, the S&P 500 and Nasdaq 100 remain in current downtrends and below resistance.

It’s interesting to note that in spite of the sell-off over the past few weeks, the COT reports that large speculators on the S&P 500 have their highest net long position since 2013. Commercials remain heavily net short.

We’re entering into a seasonally bullish time of year for stocks, but the current technical picture always takes precedent. While there is no question that at monthly chart level stocks are still in a bull market, the weekly charts are less bullish, and the daily charts show a clear downtrend following the substantial technical damage done over the past few weeks.

Commodities

The metals markets have had a mixed week with some strong and weak days seen in all markets. The long-term trend remains down for the metals except for Palladium, which is still the leader. Copper has a potential inverted head and shoulder setup and may test the neckline this week. However, the long-term trend is still down.

The energy markets have seen additional weakness this week, but for now, the trend remains up for all markets except for RBOB gasoline, which completed a change of trend to down two weeks ago. A trend change to down is within range for Crude Oil and Brent Crude, and that could be completed within the next couple of weeks.

Currencies

The dollar saw some weakness this past week, which is also likely corrective against the long-term dollar uptrend. The dollar has been strongest against the Swiss franc, rallying this week to its highest level since May 2017.

Interest rate futures

Interest rate futures moves sharply lower again this week. The 30 Year T-Bond broke to the downside from a 5-week flag pattern which would project targets around the 130 level. The trend remains down across the sector for US markets and only the UK Long Gilts. Gilts were also sharply lower this week having failed to break upside resistance.

Good trading

Phil Seaton

LS Trader

Weekly Update – 28 October 2018 – LS Trader

The stock market sell-off continued this week, and the long-term trend is now down for stocks. The dollar has seen some strength, as have interest rate futures. The long-term trends are currently down for stocks, up for the dollar, down for interest rate futures and mixed for commodities.

Stocks

The depth of the sell-off in global stocks has been sufficient to change the long-term trend to down for all four stock indices we trade at LS Trader. This week’s weakness has seen the Nikkei, Nasdaq 100 and S&P all complete changes of trend to down, joining the Dax, which was already in a long-term downtrend.

Commodities

Palladium hit a new all-time high as forecasted here in recent weeks. Palladium remains the strongest of the metals and currently the only one in a long-term uptrend. Gold also rallied and made its highest print since mid-July.

The energy markets remain mixed but have seen weakness over the last month. RBOB Gasoline completed a change of long-term trend to down and is the first in the energy sector to do so. This week’s low was the lowest print since February.

Grains remain in a long-term downtrend except for Oats, the strongest in the sector, and Rough Rice.

Currencies

From last week: “Breakouts could be seen in favour of the dollar against a few of the major currencies this week, and the dollar index may also test its mid-august high.” Dollar strength resumed this week in several markets, with the Dollar Index breaking out to new highs for the current move. The dollar also broke out against the Euro and Swiss franc. The long-term trend currently favours the dollar against all of the majors.

Interest rate futures

Interest rate futures have rallied this week, moving inversely to stocks as part of a flight to safety. The long-term trend remains down for interest rate futures except for the UK Long Gilt, which remains in a long-term uptrend. Gilts could complete a breakout to the upside this week and continue to be the strongest market in the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 21 October 2018 – LS Trader

The past week has been relatively quiet in comparison to recent weeks, but the long-term trends remain in effect. In spite of recent weakness in stocks, the long-term trends are still bullish for US stocks and the Nikkei. Only the Dax is in a downtrend. Interest rate futures remain in a downtrend. The trend remains mixed for commodities and down for interest rate futures.

Stocks

The Dax remains the weakest of the four stock index markets that we trade at LS Trader and is the only one currently in a long-term downtrend. The remaining three markets all currently remain long-term bullish but a change of trend to down is within range. Whether that change of trend completes remains to be seen. Once we get beyond this month, the historical seasonal record is bullish. At weekly chart level the RSI for the Nasdaq 100, S&P 500 and Nikkei 225 are all still in the bull range and above 40. Until this changes, the focus remains to the upside.

Commodities

Metals continue to show signs of turning bullish, although currently, the only metal in a long-term uptrend is Palladium, which looks set to print new all-time highs in the coming weeks. All the metals markets have recently seen commercial buying activity, which in the case of Silver is the first time in history. This is likely a bullish development longer-term, but as yet price action does not confirm it. Copper is forming a head and shoulders bottom but requires further rally to test the neckline.

Currencies

The dollar remains in a long-term uptrend and has moved higher this week. Breakouts could be seen in favour of the dollar against a few of the major currencies this week, and the dollar index may also test its mid-august high.

Interest rate futures

Interest rate futures remain in a long-term downtrend. Short-term markets remain the weakest, with the 3-month Eurodollar printing its lowest level for the current move, and also its lowest print in almost four years. The long-term trend remains down for all US markets but is still up for UK Long Gilts.

Good trading

Phil Seaton

LS Trader

Weekly Update – 14 October 2018 – LS Trader

The past week has seen the most volatility in the markets since the prior stock market top in late January. This volatility has filtered through into many other market sectors, bringing an end to a few current trends. However, none of last week’s moves has resulted in a long-term trend change, so the trends remain as before, up for stocks (Dax being the exception), up for the dollar, down for interest rates and mixed for commodities.

Stocks

From last week on the S&P 500: “Weakness at the end of the week has violated a 14-week trend line that has been in place since July.” This week’s selling unquestionably represents a change of character in the stock markets. Wednesday’s bar was the biggest bar in a long time and was accompanied by heavy volume, which indicates institutional selling. However, the weekly and monthly charts still show a clear uptrend and the long-term trend is still up.

Also from last week: “The Nasdaq 100 completed a double top pattern on an intraday, but not a closing basis. That pattern would project to another 300 points of decline.” Selling resumed this week in the Nasdaq 100 and the 300 point decline projected from the double top pattern was easily exceeded. The long-term trend remains up, but a change of trend to down is within range.

The Dax, which has been the weakest of the indices we trade at LS Trader and the only one currently in a downtrend, triggered a short entry on Monday as the neckline of a large head and shoulders top was broken, as was a nine-year trend line, which had been in place since the March 2009 low.

Commodities

Gold rallied to its highest level since the 1st August, breaking above resistance and bringing an end to a very profitable downtrend, one in which the LS Trader system had been short since the 1st May. As mentioned in previous weeks, the chances of a bottom in the metals markets has increased due to commercials taking a rare net long position in Gold (first time they have been net long since 2001), and Silver, where they are long for the first time since the COT data has been recorded. Palladium, of course, is the leader of the metals and the only one currently in a long-term uptrend. Interestingly, commercials are still net short Palladium, which possibly indicates how much farther this market has to run over the coming months and years.

Currencies

The Australian and New Zealand dollars broke to new lows for the current move, but overall, the dollar has seen weakness this week. The long-term trend continues to favour the dollar against all the majors with the expiration of the Swiss franc.

The British Pound has seen some strength this week and is moving within range of a potential long-term trend change to up. That may surprise many who have a negative view of Brexit. However, note that commercials have been accumulating a significant net long position for the past few months, which is currently not that far shy of an all-time net long position.

Interest rate futures

From last week on the 30 Year T-Bond: “The right shoulder low at 141.09 was broken, which invalidates the potential head and shoulder bottom and now projects further weakness towards 135.” Prices fell to a new multi-year low this week at 136.50 before reversing higher. All markets in the sector moved higher this week in contra trend rallies as stocks fell. However, the long-term trend remains down for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 7 October 2018 – LS Trader

The past week has seen stocks pull back from all-time highs, the dollar rally resume, interest rate futures continue their decline to multi-year lows, and energy markets rally to multi-year highs. Market conditions are as expected for the final quarter of the year, which is often the best time of year for market trends.

Stocks

The stock markets reversed sharply this week after the S&P 500 failed to make a new all-time high on Wednesday and declines followed through to the weekend. Weakness at the end of the week has violated a 14-week trend line that has been in place since July.

The Nasdaq 100 completed a double top pattern on an intraday, but not a closing basis. That pattern would project to another 300 points of decline. However, there was decent buying action coming in from the lows of Friday which may halt the declines and be a spring back to higher prices. The long-term trend remains up.

The Nikkei has also seen weakness having fallen just short of our target of 24690. Last week’s lows now represent key support for the short-term.

Commodities

From last week: “Palladium is the strong horse in the sector, but Friday’s candle was a doji, and with both volatility and sentiment at very high levels, we may see a correction soon. The long-term trend, however, remains up, and a test of all-time highs which were printed back in January at 1124.9 may be seen over the coming weeks.” Palladium did correct lower as expected but has helped above support, keeping the uptrend intact.

The energy markets have seen further strength this week with all markets in the sector rallying to new highs for the current move.

Currencies

From last week: “USD/JPY has continued higher to reach its highest level since December 2017. This week’s price action has consolidated above the top of a symmetrical triangle that dates back to 2015. This suggests that the current move has a long way yet to run over the medium-term timeframe.” The dollar continued its rally against the Yen this week, as it has against the other majors. Renewed dollar strength has seen it push the Australian and New Zealand dollars to new lows for the current move.

Interest rate futures

From last week on the 30 Year T-Bond: “The right shoulder low at 141.09 was broken, which invalidates the potential head and shoulder bottom and now projects further weakness towards 135. This week’s low was the lowest low for almost four years.” This week saw further declines for the 30 Year T-Bond, which this week printed its lowest price since September 2014.

The entire sector remains weak. The last market in the sector, the UK Long Gilt, could also test major support and complete a change of trend to down this week.

Good trading

Phil Seaton

LS Trader