Weekly Update – 29 July 2018 – LS Trader

The stock markets remain at a critical juncture and saw some chart damage done at the end of the week. This will put the uptrend under pressure in the short-term next week and these markets need to open with strength or support will likely be tested and broken. Bullish sentiment remains high in the S&P 500 but not dangerously so.

Stocks

The S&P 500 made a new high for the current move but had a relatively sharp reversal on Friday. However, the S&P 500 held up better than the Nasdaq 100, where price action on Thursday and Friday did some technical damage. The uptrend in both markets is under pressure this week. However, the long-term trend remains up for both markets.

The Dax has continued its recovery from the June sell-off, and the Dax and the Nikkei are both within range of a long-term trend change to up. Whether we see that trend change this week remains to be seen. The Nikkei is undergoing significant volatility compression and volatility is now at its lowest level since just before the March low and a rally of almost 3000 points in under two months. A big move is in the offing, and at present that move could be up or down.

Commodities

The CRB Commodity Index ended its run of eight consecutive weekly declines, managing a meagre 0.2% gain for the week. The long-term trend remains down for most commodity markets with only a few exceptions.

The metals markets have had a mixed week, but all remain in well-established long-term downtrends. Palladium has been the strongest in the short-term, with a sharp counter-trend rally from the recent lows.

The energy markets have seen some strength this week but remain some way off their recent highs. The long-term trend remains up for now, and recent price action since the May/July highs is corrective.

The grains markets have also seen some corrective price action this week against the prevailing long-term downtrend. Only Rough Rice is currently in an uptrend, but Wheat has shown considerable strength for much of this month and could breakout this coming week.

Currencies

Price action in the currency markets remains corrective in the short-term, with the long-term trend continuing to favour the dollar. Currently, we have two open positions in the currency markets, short British Pound and short the Swiss franc. Several of the remaining majors are within range of breakouts this week.

Interest rate futures

In spite of the near-record long position that commercials hold in interest rate futures, as reported in the commitments of traders report (COT), interest rate futures have been unable to gain any traction and complete a change of trend to up. Weakness has been seen this week, and we may see further selling and a possible test of the recent lows. The long-term trend remains down for the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update – 22 July 2018 – LS Trader

The past week has seen new highs for the current move for US stocks and the dollar, but both sectors have been unable to hold their gains and press higher. The long-term trend remains up for US stocks, up for the dollar, down for interest rates and down for most commodities.

Stocks

The S&P 500 reached its highest level since the first week of February and has consolidated above the top of the triangle. The long-term trend remains up, with the RSI bullish. If prices can continue to hold above the triangle, then the focus remains on higher prices and a rally back towards all-time highs. Prices remain at a critical juncture.

The Nasdaq 100 made new all-time highs again this week and remains bullish and above support. The Dax and the Nikkei remain in long-term downtrends, but the Nikkei is within range of an upside breakout and a change of long-term trend to up. The Dax is the weakest of the four stock indexes we trade at LS Trader.

Commodities

The majority of commodity markets remain in a long-term downtrend with only a few exceptions. The CRB Commodity Index fell this week for the eighth consecutive week, which is an indication of the current bearishness. Metals and grains have both seen continued weakness in recent weeks.

The metals markets experienced something of a bloodbath this week before recovering some of the losses on Friday. The long-term trend remains down across the sector. Sentiment remains extremely negative and the end of week corrective rally that began from Thursday’s low may continue this week.

Except for Rough Rice, the grains markets have been heavily hit over the past couple of months and remain in extended downtrends. This week has seen a corrective bounce, but the markets remain below resistance and could turn down again this week. The only things that support the bull side are that sentiment remains extremely negative, and there is bullish momentum divergence on a couple of the markets.

Currencies

The Dollar Index rallied to its highest level in a year this week before reversing sharply. The long-term trend continues to favour the dollar against all the majors, and dollar weakness at present is a correction in a dollar bull market.

Sentiment is also extremely negative for some of the major currencies against the dollar, which is a leading indicator for a corrective rally, which has already begun in some of the markets. However, the long-term uptrend for the dollar remains in effect, and we’re a long way from a change of trend to down.

Interest rate futures

Interest rate futures continue to be unable to break critical levels to the upside and remain in a long-term downtrend. The commitments of traders report (COT) still shows huge net long positions for commercials, but the weight of the long-term downtrend remains in effect.

Good trading

Phil Seaton

LS Trader

Weekly Update – 15 July 2018 – LS Trader

The past week has seen the Nasdaq 100 breakout to new all-time highs and also sees the S&P 500 at a critical juncture. Price action in US indices this week will likely determine the path for the next few weeks at least.

The correction lower in the dollar may have ended, and we have seen a resumption of strength in the dollar. Metals remain weak and in long-term downtrends and continue to print new lows. Other commodities, especially grains, have also seen continued weakness.

Stocks

From last week: “Support has been found at the bottom of the triangle (S&P 500), accompanied by the RSI holding and moving higher from bull market support. The triangle points to an upside breakout and rally to new all-time highs in the coming weeks for the S&P 500. The Nasdaq 100 also looks set for a test of all-time highs.”

The S&P 500 completed the breakout in what could be a bullish development and see a further rally back to test the late-January all-time high. The Nasdaq was stronger again and already completed its breakout to print new all-time highs on Friday. The RSI has remained in the bull range on the Nasdaq 100, with the recent correction finding support on the RSI precisely at the 40 level. The long-term trend remains up for US indices.

Commodities

The energies markets have seen weakness this week, and Crude Oil’s breakout has been unconfirmed by other markets in the sector. Crude itself saw weakness this week and broke short-term support. The long-term trend remains up for the sector for now.

From last week: “Copper broke support and remains in a long-term downtrend, as do the other metals. Copper’s low print this week was the lowest print in almost a year.” Copper has continued to sell-off this week as the entire metals sector remains weak and continues to print new lows for the current moves.

The grains sector has continued to sell-off with the exception being Rough Rice. The soybean complex all printed new lows for the current move and remain very weak.

Currencies

From last week on the currencies: “The dollar has seen continued weakness this week as sentiment recovers from very low levels for the majors against the dollar. The Dollar Index itself had reached extremely high bullish sentiment readings and is pulling back. However, the long-term trend continues to favour the dollar across the board.”

Dollar weakness continued early this week but has since seen a return of strength. Multiple currencies, including the Dollar Index, are within range of breakouts this week, and we could see the resumption of a dollar uptrend.

Interest rate futures

Interest rate futures continue to consolidate just below key resistance levels. For now, the long-term trend remains down for the sector, but as covered in recent weeks, that could be on the verge of changing. The commitments of traders report (COT) remains at or near record net long positions for commercials and record net short for large speculators. Such a profile usually resolves itself in favour of the commercials, which would suggest a change of trend to up will be completed in the coming weeks for the longer-term markets. The shorter-term interest rate futures markets remain weaker than the long-term futures.

Good trading

Phil Seaton

LS Trader

Weekly Update – 8 July 2018 – LS Trader

The past week has seen mixed trading in many markets. The dollar has seen some weakness as have metals and energies. US stocks remain long-term bullish, and interest rates continue their counter-trend advance that is now approaching the point of a change of long-term trend to up.

Stocks

From last week: “The S&P 500 is still in the large triangle pattern that has been in place for four months. This pattern could resolve itself in either direction, but with the long-term trend still up for US stocks, the odds favour an upside resolution. In other words, the bull market in US stocks is still intact.” Last week’s comments still apply. Support has been found at the bottom of the triangle, accompanied by the RSI holding and moving higher from bull market support. The triangle points to an upside breakout and rally to new all-time highs in the coming weeks for the S&P 500. The Nasdaq 100 also looks set for a test of all-time highs.

Global stocks are in a different position with the long-term trend currently down for both the Dax and the Nikkei, although strength this week in the Dax points to a test of resistance this week.

Commodities

Copper broke support and remains in a long-term downtrend, as do the other metals. Copper’s low print this week was the lowest print in almost a year.

Also from last week on Gold: “However, sentiment is very negative, and volatility is reaching extreme levels, so a counter-trend rally could be seen soon.” Gold fell to a new low for the move at 1238.8 before putting in the expected rally. Sentiment remains negative, and we may see further short-term strength, but the long-term trend remains down.

Crude rallied again this week, printing new 3 1/2 year highs but did see some weakness. The $84 target remains a possibility. Brent and the other energies have so far fallen short of a breakout, so the rally in Crude remains unconfirmed by other markets in the sector.

Currencies

From last week on the currencies: “Typically, when sentiment gets this low, a short-term reversal, correcting the prior trend is not too far away. We have seen some of that this week with several majors bouncing higher from their recent lows.”

The dollar has seen continued weakness this week as sentiment recovers from very low levels for the majors against the dollar. The Dollar Index itself had reached extremely high bullish sentiment readings and is pulling back. However, the long-term trend continues to favour the dollar across the board.

Interest rate futures

In last week’s update, we wrote about the enormous commercial long positioning as reported in the COT report and made a case for a more significant counter-trend rally and possible change of long-term trend in this sector, which would catch many out and have them positioned on the wrong side of the market.

We also noted that there was a potential test of the neckline on a head and shoulders bottom on the 30 Year T-Bond, and further out the 10 Year T-Note. The 30 Year T-Bond did briefly break the neckline and came within a point of a change of trend, which will possibly be complete this week.

Good trading

Phil Seaton

LS Trader

Weekly Update – 1 July 2018 – LS Trader

The position in the markets is currently very interesting. We’ve had a correction lower in stocks, a new rally in energies, continued weakness in metals and possibly the start of a new uptrend in interest rate futures.

## Stocks
This week’s decline in the stock markets resulted in support being broken in the Nasdaq 100 and S&P 500 and resulted in a resumption of the long-term downtrend in the Dax.

From last week on the Dax: “The Dax has seen considerable weakness over the past two weeks following the failure to breakout above 13186. Price has fallen back to the middle of the range between the late January high and the March low. A head and shoulders pattern is forming on the weekly charts, but additional weakness is required to complete the pattern.” The Dax had sufficient weakness to resume the downtrend, but as yet we have seen little in the way of follow-through.

The S&P 500 is still in the large triangle pattern that has been in place for four months. This pattern could resolve itself in either direction, but with the long-term trend still up for US stocks, the odds favour an upside resolution. In other words, the bull market in US stocks is still intact.

## Commodities
The metals have seen continued weakness. Last week on Copper: “Weakness continued this week, and a downside breakout is very much within range early this week. Commercials have a record net short position which suggests weakness will continue and support will be broken this week, resuming the long-term downtrend.” Copper broke support and remains in a long-term downtrend, as do the other metals.

Also from last week: “Gold fell to new lows for the year and may continue to decline towards the next level of support around $1250. Silver and Palladium have also seen weakness and the long-term downtrend could resume this week.” Gold exceeded our $1250 target, printing $1246.9 on Friday and remains weak. However, sentiment is very negative, and volatility is reaching extreme levels, so a counter-trend rally could be seen soon.

Last week on Crude Oil: “Crude Oil was higher by 5.71% on Friday and 7.86% on the week. The long-term trend remains up across the sector, and we may see continued strength back towards a test of the May highs.” Crude rallied as expected, in fact, more than expected and not only retested but exceeded the May high, reaching its highest level in 3 1/2 years and resuming the long-term uptrend. There appears to be further to run for this market, with further rally towards the $84 level a possibility. Other markets in the sector, especially Brent Crude, could also breakout this week.

## Currencies
From last week on the currencies: “Typically, when sentiment gets this low, a short-term reversal, correcting the prior trend is not too far away. We have seen some of that this week with several majors bouncing higher from their recent lows.” The currency markets continue to chop around near their recent lows/highs, and sentiment remains near an extreme.

## Interest rate futures
The long-term trend remains down for interest rate futures, as indeed has been the case since the trend changed to down back in October last year. However, many traders and commentators have been focusing on the expectation of higher interest rates, and since rates move inversely to prices, lower prices. That has been the case since October. The problem with that is that when so many people are on the same side of the trade, there is nobody left to sell and that often resolves itself in a move in the opposite direction.

Since late October, speculators have been building up record net short positions, while commercials have been accumulating record net long positions. The result of this has been two large counter-trend swings, once in March and the next in May. We now appear to be in the early stages of a third swing higher. When commercials build up record positions, prices usually eventually move in favour of the commercials. This suggests further upside ahead and a possible trend change to up. This will, if it happens, catch speculators on the wrong side of the market and result in forced short covering.

Also, there is a head and shoulders bottom potentially forming on the 10 Year T-Note and 30 Year T-Bond. The neckline is still a decent way above current prices on the 10 Year T-Note but is within range on the long bond. If the neckline is broken, we could see a significant rally from the technical perspective, too, possibly to around 153 on the long bond.

For now, the long-term trend remains down, but that could change soon. Keep an eye on these markets for exciting developments in the coming weeks.

Good trading

Phil Seaton
**LS Trader**

Weekly Update – 24 June 2018 – LS Trader

The past week has seen the Nasdaq 100 make new all-time highs but then pull back from those highs towards the end of the week. The dollar has had a mixed week with new highs for the current move being seen in the Dollar Index and a few of the majors, but a reversal was seen during the latter part of the week.

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

Stocks

From last week on the Nasdaq 100: “The one negative is that there is a bearish divergence between price and RSI, which indicates a slight weakening of momentum.”

The S&P 500 did have an expansion of volatility this week as expected, particularly on Tuesday where there was a sharp move lower which we swiftly reversed, keeping the uptrend intact.

The Dax has seen considerable weakness over the past two weeks following the failure to breakout above 13186. Price has fallen back to the middle of the range between the late January high and the March low. A head and shoulders pattern is forming on the weekly charts, but additional weakness is required to complete the pattern.

Commodities

Last week on Copper: “The Commitment Of Traders (COT) profile has large speculators at a record net long position, so with the market being unable to breakout to the upside this week we may see a further unwind of long positions and continued weakness.” Weakness continued this week, and a downside breakout is very much within range early this week. Commercials have a record net short position which suggests weakness will continue and support will be broken this week, resuming the long-term downtrend.

Gold fell to new lows for the year and may continue to decline towards the next level of support around $1250. Silver and Palladium have also seen weakness and the long-term downtrend could resume this week.

The energy markets saw a significant bounce on Friday. Crude Oil was higher by 5.71% on Friday and 7.86% on the week. The long-term trend remains up across the sector, and we may see continued strength back towards a test of the May highs.

Currencies

The dollar saw continued strength this week until a reversal on Thursday. The long-term trends currently favour the dollar, but a correction has been overdue with sentiment being extremely negative for most of the majors. Typically, when sentiment gets this low, a short-term reversal, correcting the prior trend is not too far away. We have seen some of that this week with several majors bouncing higher from their recent lows.

Interest rate futures

The long-term trend remains down for interest rate futures, and the markets continue to consolidate in a narrow range. Volatility has compressed on both daily and weekly charts, and this suggests that a range expansion will be seen soon. For now, these markets remain rangebound.

Good trading

Phil Seaton

LS Trader

Weekly Update – 17 June 2018 – LS Trader

The past week has seen the Nasdaq 100 print new-all time highs and has seen some volatility in the currency markets, as is often the case during the week of the FOMC meeting. The volatility resolved itself in favour of the Dollar, which is in line with the current long-term trend.

Stocks

The Nasdaq 100 rallied for most of the week and printed new all-time highs once again. There was some weakness on Friday, but the lows of the day bounced right off the former resistance line, which is now acting as support. The long-term trend remains up, and there is further room for this market to run. Volatility has expanded into the sweet spot for trend continuation. The one negative is that there is a bearish divergence between price and RSI, which indicates a slight weakening of momentum.

The S&P 500 has effectively gone nowhere this week, trading in a very narrow range. Small range bars such as this on the weekly chart accompanied by low volatility suggest that a more significant move is imminent.

Commodities

Copper failed to complete the potential upside breakout that we wrote about last week and turned sharply lower, keeping the long-term downtrend intact. This has taken the market back to the middle of this year’s trading range and has both upside and downside breakouts within range. The Commitment Of Traders (COT) profile has large speculators at a record net long position, so with the market being unable to breakout to the upside this week we may see a further unwind of long positions and continued weakness.

We have written in recent weeks about the narrow range in Gold and suggested that a breakout of that range would likely result in a decent move in the direction of the breakout, particularly if the breakout came to the downside, in the direction of the long-term trend. The market tested resistance on Thursday, was unable to push through and reversed sharply, gapping lower on Friday morning and printing a wide-bodied bar to the downside, trading well through support. This weakness took Gold to its lowest level this year.

Except for Natural Gas, the energy markets have seen continued weakness this week as the record net long large speculation position continues to be unwound. The RSI is testing bull market support on Brent Crude, and a decisive move below that level would also point to continued weakness against the prevailing long-term trend.

Currencies

From last week on the Dollar Index: “The pullback has taken the market back to fair value, so we may see strength return over the next week or so. The long-term trend continues to favour the Dollar Index, as it also favours the Dollar against all the majors except for the Japanese Yen.” The Dollar reversed higher right on cue and is now moving higher across with board, with multiple breakouts in range this week, even against the Japanese Yen, where the long-term trend has been against the Dollar.

Interest rate futures

Interest rate futures remain rangebound near the recent lows, and the long-term trend remains in a long-term downtrend. As before, commercials remain near a record net long position with large specs near a record net short position. This COT profile continues to suggest the potential for an additional counter-trend rally, but for now, the long-term trend remains down

Good trading

Phil Seaton

LS Trader

Weekly Update – 10 June 2018 – LS Trader

The Nasdaq 100 did break out to new all-time highs, and the S&P 500 also broke out of its range, with as we suggested last week. The dollar has also had the expected pullback. The long-term trend remains up for stocks and the dollar, down for interest rates and mixed for commodities.

Stocks

From last week on the Nasdaq 100: “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.” The Nasdaq reached and exceeded the March all-time high in line with our comments last week. However, there has been a pullback since and the market has closed back below prior resistance.

Also from last week on the S&P 500: “The S&P 500 continues to probe resistance on price and RSI, and a breakout to the upside could be seen this week.” The RSI did breakout from the range of the past two months and may now continue higher towards its own test of all-time highs.

Commodities

Cotton did pullback early in the week as we suggested might happen, but the long-term trend is still clearly up and the second half of the week saw bullish price action and Friday’s close was the highest close since March 2014.

Copper has had a very bullish week, and price action has closed above what would have been the right shoulder of a potential head and shoulders top. The neckline of this pattern has been tested multiple times over the past several months and has held firm. This week’s price action means that the head and shoulders pattern is a failed pattern and that has bullish potential and if the upside breakout is successful would give upside targets in the 375 region.

Currencies

The Dollar Index saw the expected weakness continue this week after sentiment had reached extreme levels. The pullback has taken the market back to fair value so we may see strength return over the next week or so. The long-term trend continues to favour the Dollar Index, as it also favours the Dollar against all the majors except for the Japanese Yen.

Interest rate futures

Interest rate futures have pulled back to the middle of the price range of the past few months. The long-term trend remains down for now. However, there are some potential bullish points which suggest a bottom may be in for now and that we might see further strength. These include the very bullish COT profile where commercials have huge long positions in all markets in the sector. Also, the RSI is back in the bull range. There is also bullish divergence on momentum indicators. This suggests that there is potential for further counter-trend rallies. However, these will be voided if the market prints new lows for the current move.

Good trading

Phil Seaton

LS Trader

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