Weekly Update – 27 June 2020 – LS Trader

Stocks

The Nasdaq 100 broke out to new all-time highs on Tuesday but has been unable to hold on to those gains and has pulled back towards the prior February highs. The February highs, which previously acted as resistance, may now provide support. Weakness below that support level will indicate probable further declines.

The S&P 500 and other global stock indices continue to lag the Nasdaq 100, and they remain in long-term downtrends. Downside breakouts to resume the long-term downtrend are within range.

Commodities

Gold exceeded resistance at 1789 but so far without follow through. The long-term uptrend remains intact, and we may see further rally if the market can clear 1800.

Crude Oil tested the 50% retracement level of the decline from January to the April low and has been unable to make progress. The area above current prices includes the large gap down on the 9th March, which remains unfilled and is likely to provide further resistance if we get an additional rally. Despite the rally in the energy markets, the long-term trend remains down across the board.

Currencies

The currency markets remain mixed, with the long-term trend still up for the Dollar index, but down for the dollar against the Australian dollar, Japanese Yen, and Swiss Franc. There are some currency breakouts in range this week.

Interest rate futures

Interest rate futures have rallied up to the top of their ranges and look set to test resistance at the upper boundary of the rectangles that have been in place since March. With the current low levels of volatility and the length of the consolidation, any breakouts have potential to yield decent-sized moves.

Weekly Update – 21 June 2020 – LS Trader

Stocks

The Nasdaq 100 continued lower on Monday, breaking short-term support in the process. The market then reversed and moved higher to test the prior all-time high. So far, the market has been unable to break through resistance. The rally this past week has been on declining volume and volatility.

The S&P 500 and other global indexes remain weaker than the Nasdaq 100, leaving a bearish non-confirmation in place. Currently, of the global indexes, only the Nasdaq 100 is in a long-term uptrend.

Commodities

The commodity markets remain quiet as many markets continue to undergo volatility compression. Multiple markets, such as Gold, continue to trade in rangebound consolidations. The pressure is building for the eventual breakouts. Breakouts from consolidations usually go in the direction of the prior trend. In the case of Gold, that suggests an upside breakout.

Currently, the LS Trader system is flat all metals and energy markets. The energy markets continue to recover from their rout earlier in the year. Crude Oil traded at a high of 72.50 on the 8th January, before declining all the way down to the mid-April low at 8.17. (prices as per the back-adjusted continuous contract). This week, Crude reached the 50% retracement level of the decline from the January high on Friday.

Currencies

The long-term trend remains up for the Dollar Index. The index continues to recover from the recent sell-off, which led to a volatility extreme. We may see a test of the 200-day and 50-day moving averages this week.

Interest rate futures

Interest rate futures remain in long-term uptrends but continue to trade within the trading range that has been in place since March.

Weekly Update – 14 June 2020 – LS Trader

Stocks

The Nasdaq 100 continued to make new highs through to Wednesday. Thursday saw a sharp one-day reversal, which took the market back below the change of polarity from the February all-time high. Friday printed a long-legged doji, which is an indecision pattern. Bulls have so far defended the index at fair value. The trend remains up.

Divergence continues between the Nasdaq 100 and S&P 500, which remains well short of its all-time highs printed in February. The S&P 500 also saw weakness this week but remains in a long-term downtrend. For now, the only stock index of the four we trade at LS Trader in a long-term uptrend is the Nasdaq 100.

Commodities

Gold ended the week higher, regaining the 50-day moving average and moving back into the prior range. The long-term trend remains up.

One of the big movers recently has been Rough Rice. Rice had been in a massive bull market, reaching a high of 23.565 before trading limit down for four days, which took the market back below support, bringing the uptrend to an end.

Currencies

Selling in the Dollar Index reached a volatility extreme and buyers returned during the second half of the week, keeping the long-term trend up. The long-term trend continues to favour the dollar against most of the majors.

Interest rate futures

From last week: “The market finally broke out of the range but did so to the downside. However, for now, at least, the long-term trend is up.” Interest rate futures had a good week, retracing almost all of the prior week’s decline. This has taken the sector back above the 50-day MA and into the previous range. The trend remains up.

Weekly Update – 7 June 2020 – LS Trader

Stocks

The Nasdaq 100 broke out to new all-time highs on Friday and is the first of the global stock indices to complete their recovery. Of potential significance is the fact that the Nasdaq closed above prior resistance of the February high, which is also a weekly closing high. Volatility is at a relatively subdued level for an all-time high, so this rally could still have legs. There will be many market participants who have remained on the sidelines since the February decline, who will be looking for a way to get on board. There will be others that want to fade the breakout. This week could be explosive.

Commodities

Gold had a bad week, closing below its 50-day moving average and the low of the hammer pattern printed two weeks ago. Price ended the week at a 2-month low. The trend remains up.

Currencies

From last week on the Dollar Index: “If last week’s low is taken out, we may see a cascade of selling, potentially down to the March low, which is the next structural level of support.” The Dollar did take out the low and moved sharply lower. Price action on Friday could be stopping action, and a move above Friday’s high may lead to a short-term rally. The long-term trend remains up for now.

Interest rate futures

From last week: “Volatility continues to contract in the interest rate futures markets as price continues to coil. The eventual breakout from this range could be substantial, and it could be to the upside or the downside.” The market finally broke out of the range but did so to the downside. However, for now, at least, the long-term trend is up.

Weekly Update – 31 May 2020 – LS Trader

Stocks

The Nasdaq 100, which is the strongest of the stock indices, began the week with continued strength again, moved lower and then pushed back higher to close near the highs for the week, and, within range of a breakout to new all-time highs. Volatility continues to contract and is now at the lowest level since early February.

Commodities

Gold began the week with weakness and pushed down to an intraday low below the lower boundary of the triangle, but then reversed higher, with a strong buying tail, and printing a hammer pattern. The long-term trend remains up.

Currencies

The Dollar Index is at a very critical make or break juncture. Tuesday and Thursday saw big down days, the triangle broken and a break of horizontal support, only to see buyers return and form a hammer, and closing back at the prior support level. If we see price move above Friday’s high, we may see further rally as that would suggest the bulls had defended the lows. If last week’s low is taken out, we may see a cascade of selling, potentially down to the March low, which is the next structural level of support.

Interest rate futures

From last week: “The long-term uptrend remains intact for the shorter-term interest rate futures markets. Both the 10 Year T-Note and 30 Year T-Bond continue to coil just below resistance and could breakout to the upside.” Volatility continues to contract in the interest rate futures markets as price continues to coil. The eventual breakout from this range could be substantial, and it could be to the upside or the downside. The technical and trend structure before the consolidation into the random 2-way rotational environment still supports upside resolution.

Weekly Update – 24 May 2020 – LS Trader

Monday is a Bank Holiday in the UK and is Memorial Day in the US, so the week ahead will be a shortened trading week.

Stocks

Despite the recent rally, the long-term trend remains down for all stock indices. The Nasdaq 100 remains by far the strongest index and may well test and possibly exceed the February all-time high.

However, the other global indexes are weaker and are struggling to make any upside progress, finding resistance around the 61.8% retracement levels of the prior decline.

Commodities

Gold made a new high for the week but remains below the April high. Silver continued the rally that began last week but turned lower on Thursday. The long-term trend remains down.

The energy markets have continued their recent corrective rally, which appears as though it may be running out of steam at a critical resistance area.

Currencies

The Dollar continues to consolidate against the majors. So far, the Dollar has only completed a breakout against the British Pound, but multiple breakouts are within range for a resumption of the long-term dollar bull trend.

Interest rate futures

Interest rate futures continue to consolidate in a very tight range just below the highs of the year, in the case of the shorter-term markets. The 10-year T-Note, and the weakest in the sector, the 30-year t-bond continue to trade in rectangles. An upside breakout in these two markets would likely lead to a test of the March high. Volatility has gone from an extreme high in March, to the current low levels, which are also low by historical standards.

Weekly Update – 16 May 2020 – LS Trader

Stocks

The Nasdaq 100, which is the strongest of the stock indices, began the week with continued strength but then gave up the gains and ended the week lower. The general stock market has made no upside progress for a month and could be on the verge of rolling over. Despite the recent rally, the long-term trend remains down for all stock indices.

Commodities

From last week: “Gold has held above support and continues to trade sideways in a triangle. The triangle has a slight upward bias in terms of the expected breakout being in the direction of the primary trend, which is up.” Gold broke out through the upside of the triangle in line with the primary trend and will now likely test and exceed the recent high at 1788.

Currencies

The Dollar has had a good week, gaining against most of the majors. The Dollar Index is testing the upper boundary of a triangle and may break to the upside. EUR/USD is naturally the inverse pattern, so we could see a downside breakout for the Euro.

The British Pound already broke to the downside from a similar price congestion area, and now has little in the way from a technical standpoint to protect against a test of the recent low.

Interest rate futures

From last week: “Interest rate futures have continued to trade mostly sideways, with a slight upward bias, especially in the shorter-term markets. The 3-Month Eurodollar broke out to a new high but was unable to hold that high into the close.” The long-term uptrend remains intact for the shorter-term interest rate futures markets. Both the 10 Year T-Note and 30 Year T-Bond continue to coil just below resistance and could breakout to the upside.

Weekly Update – 10 May 2020 – LS Trader

Stocks

The S&P ended the week higher but remains below the recent high, which is a clear resistance level. In addition, volatility continues to contract, as does volume. The RSI, despite the massive rally, has been unable to clear the 60 level and remains in the bear range. The long-term trend remains down.

The Nasdaq 100 has been stronger and did exceed its prior high. However, the same technical weakness is also evident here, except for the RSI, which has moved above 60. New all-time highs are a possibility.

Commodities

Gold has held above support and continues to trade sideways in a triangle. The triangle has a slight upward bias in terms of the expected breakout being in the direction of the primary trend, which is up.

The energy markets continue their recovery but remain in a long-term downtrend.

Currencies

The Japanese Yen was the first to break out, but as yet without follow-through. The Dollar remains within range of breakouts against multiple majors.

Interest rate futures

From last week: “Interest rate futures have failed to move higher and break the neckline, as volatility continues to contract. This is a choppy consolidation that could still resolve either way, with a slight upward bias in the direction of the primary trend.” Interest rate futures have continued to trade mostly sideways, with a slight upward bias, especially in the shorter-term markets. The 3-Month Eurodollar broke out to a new high but was unable to hold that high into the close.

Weekly Update – 3 May 2020 – LS Trader

Stocks

The S&P continued to rally higher, slightly exceeding the 61.8% retracement of the prior decline until Thursday before turning lower. Friday gapped lower and closed lower again. It is possible that will be the end of the corrective rally and that prices may resume the downtrend.

The Nasdaq 100 had been stronger still, testing the 78.6% retracement of the prior decline. As we have mentioned several times over the years, when the 78.6% retracement level is exceeded, the market will often go on to at least test the prior high. However, the current global backdrop and the price action seen on Thursday and Friday continue to keep that view as a low probability in this case.

Commodities

Commodities continue to consolidate and digest the recent moves. The energy markets are trying to scrape themselves off the bottom but remain in long-term downtrends, as they will for the foreseeable future.

Metals have seen continued weakness. Gold has traded lower but for now, is holding above support.

Currencies

The Dollar has seen continued weakness this past week, and we remain flat all currencies. A few majors are within range of breakouts.

Interest rate futures

From last week: “Interest rate futures continue to trade in the vicinity of the neckline and could yet break to new highs. The trend remains up across the sector.”

Interest rate futures have failed to move higher and break the neckline, as volatility continues to contract. This is a choppy consolidation that could still resolve either way, with a slight upward bias in the direction of the primary trend.

Weekly Update – 26 April 2020 – LS Trader

Stocks

From last week on the Nasdaq 100: “Friday’s bar turned lower, and that may be the end of the rally.” Stocks opened the week lower but did regain some of the declines with a strong day on Friday, but still closed down for the week.

Commodities

The energy markets had the wildest of weeks with May Crude Oil declining to -$40.32 before recovering. However, although weakness was also seen in June, which made a low print of $6.50, it never made the extreme move that May did. It is normal to roll out of the expiring contract around a week before expiry, and those that stayed in May got caught out. Therefore, the price action in June is more important as it was the liquid contract at the time. Nonetheless, one would never think that such prices levels would be seen in Crude. Whether we have a similar situation when June expires next month remains to be seen.

The trend remains down in the Crude markets. Still, there is very little value in a short position due to the extreme volatility; the required position sizing makes it all but impossible to structure a short trade with asymmetric risk-reward from current levels.

Gold dipped on Tuesday but recovered and rallied back towards the recent highs, keeping the uptrend intact.

Currencies

The dollar remains in the middle of the recent range but is still in an uptrend against the majors. We are currently flat all currency markets, which is a situation that does not arise that often.

Interest rate futures

From last week: “There are arguable head and shoulders continuation patterns forming on the 30 Year T-Bond and 10 Year T-Notes. A break of the neckline would suggest new highs and possibly negative interest rates in the US.”

Interest rate futures continue to trade in the vicinity of the neckline and could yet break to new highs. The trend remains up across the sector.