Weekly Update 25 June 17

The S&P 500 made a new all-time high, as did the Dow, but other stock indexes lagged. Stock indices are trading in a very narrow range. Interest rate futures are also trading in a narrow range near the recent highs. The commodities markets remain mixed, with energies, soft commodities and some grains markets remaining under pressure.

The long-term trends remain as before, up for stocks and interest rate futures, down for commodities and mixed for currencies. The latter remains mostly confined to historically narrow trading ranges, which when eventually cleared will likely result in directional trading campaigns that could last a year or two at least.

Stocks

The S&P 500 made a new all-time high on Monday, but that was reversed the next day. The market closed slightly up on the week but continues to trade in a very narrow range.

The Nasdaq 100 continued to find support from the 50-day moving average and ended the week up, but still lags the S&P 500 following its steep sell-off two weeks ago.

The Dax continues to undergo significant volatility compression, and support and the 50-day MA look likely to be tested soon. The Nikkei has regained the 20,000 level and continues to grind gradually higher in a far from convincing manner.

Commodities

The energy markets saw continued weakness as Brent Crude dropped below the $45 level for the first time since April last year. Light Crude fell to $42.05 basis the August contract and may yet have further to run to the downside. The RSI fell to 25.68, which is a bearish reading. Volatility is getting elevated, but the trend for the sector remains down.

Cotton continues to collapse and has fallen from 84.66 to 66.33 in just over a month. There may yet be further declines towards the 60 level. Weakness was also seen in the Soybeans complex as both Soybeans, and Bean Meal fell to new lows for the current move.

Sugar also fell to new lows for the current move, printing its lowest price since February 2016. Volatility is elevated at daily and weekly levels, but price has not stretched too far from fair value to suggest that a reversal is imminent in spite of a small bounce on Friday. The next target is the 12.61 level, which is last year’s low.

Currencies

The Dollar Index pushed slightly above resistance early in the week but eased lower towards Friday’s close. The trend remains down for the Index, and the rally was unable to take the RSI anywhere near the 60 level. The RSI, therefore, remains in the bear range and we may see further weakness back towards last week’s low.

The Euro held on to support by the matter of a few pips and remains in an uptrend with volatility declining to very low levels, levels not seen since October 2015. This suggests a large price move is in the offing.

Interest rate futures

The 30-Year T-Bond rallied to new highs for the current moved made its highest weekly close since November. The trend remains up for the interest rate futures sector, but the longer-term markets remain the strongest.

Good trading

Phil Seaton

LS Trader

Weekly Update 18 June 2017 – LS Trader

The past week has seen mixed trading in many markets, especially in stocks and currencies. Interest rate futures have had a fairly bullish week and pushed to new highs for the current move. Commodities markets have seen some decent moves in a handful of markets.

Stocks

The S&P 500 fell just short of a new all-time high but continues to trade in a very narrow range between all-time highs and short-term support. The long-term trend remains up.

The Nasdaq 100 ended the week lower and was unable to make any progress into the large bearish bar that we discussed last week. As we wrote previously, it will take a significant move to reverse that sell-off which occurred on very high volume, thereby leaving a significant bearish footprint on the chart

The Dax has made no progress over the past six weeks and continues to undergo volatility compression. The RSI is also moving sideways just above the 50 level indicating a lack of directional trend. The Nikkei is also trading sideways, hovering around the 20,000 level.

Commodities

From last week following Gold’s failure to break key resistance: “That price action was not a valid breakout, and the failure could even be argued as being bearish, not bullish. Price needs to cross and ideally close above $1300 to confirm the breakout.” Gold continued with weakness this week and has closed below the 50-day moving average but has also found support right on the 200-day MA. Volatility is also undergoing significant compression.

Silver remains weaker than Gold and remains in a long-term downtrend having been unable to complete a change of long-term trend to up. There’s a possibility of a breakout through support over the coming weeks.

The energy markets saw further weakness this week as prices fell to new lows for the year in a couple of markets in the sector. Crude Oil bounced from just ticks above support, but that level may be tested this week. The trend remains down for energies.

Currencies

The dollar has had a mixed week as the dollar fell to new lows basis the Dollar Index but then reversed higher to test resistance. The long-term trend is down for the dollar.

The Euro traded inversely to the Dollar Index and just narrowly held above support. Friday’s bullish piercing line keeps the uptrend intact for now, but there’s a good possibility that support will be tested again on the Euro as will resistance on the dollar index.

The British Pound gained a little ground this week following the battering it took after the General Election. Price has so far been unable to close back above the 50-day MA, but the long-term trend is still technically up.

Although we had rolled our open currency trades forward to the September contract during the previous week, the June contract expired this week, leading to the usual spike in volume. This spike can be ignored as it is just the normal rollover volume.

Interest rate futures

Interest rate futures tested support and pushed higher to post new highs for the current move. The longer-term markets continue to outperform the shorter-term interest rate futures, but the entire sector remains in an uptrend.

UK Long Gilts have seen some price swings this week having posted new highs for the move, but falling just short of the all-time highs printed back in August last year. Subsequent price action saw Gilts pull back and test support once again. We may see support and the 50-day MA tested again this week, but the trend remains up.

Good trading

Phil Seaton

LS Trader

Weekly Update 11 June 2017 – LS Trader

The General Election result delivered a shock to the UK and the British Pound, but the result was quickly brushed off by the FTSE 100. The FTSE had gapped lower at the open but printed a strong bullish reversal and ended the day higher by 0.97%. Much of this recovery is likely due to the prospect of a weaker pound benefiting equities.

The UK was not the only country that saw a large move as the Nasdaq 100 reversed sharply lower having hit slight new highs earlier in the day. The trend for global stocks remains up.

Stocks

Tech stocks took a battering on Friday, and a large one-day key reversal bar was printed on the chart, accompanied by a near 370% increase in volume. Such a move may mark the top in tech stocks as it will take a significant move to reverse Friday’s sell-off which occurred on very high volume, thereby leaving a significant bearish footprint on the chart. From the bullish perspective, Friday’s close remained above the prior high printed on the 16th May, so technically we still have higher highs and higher lows. The long-term trend is up.

The S&P 500 also had a fairly volatile day but not to the same scale as the Nasdaq 100. The S&P 500 printed a doji, having been both higher and lower during the day but closing the day almost flat, down by 0.08%. The Nikkei also moved lower and closed the week back slightly below the 20,000 level at 19,960 basis the September contract. Quarterly stock index futures rolled to the September contract on Friday.

Commodities

Gold tested the $1300 resistance level and the trend line from the 2011 all-time high but did not close above it. The intraday breakout seen on Friday occurred on significantly lower volume, and prices quickly broke back below the trendline. That price action was not a valid breakout, and the failure could even be argued as being bearish, not bullish. Price needs to cross and ideally close above $1300 to confirm the breakout.

Palladium, on the other hand, did continue higher after the successful breakout the week prior and experienced a volatile day on Friday where prices shot up to 891.35 before falling back to lose at 856.20, but still higher for the day and the week.

Currencies

The British Pound was the big mover in the currency markets as the General Election shocked the markets. The British Pound gapped lower by over 200 pips on Friday morning as the election outcome put the UK into turmoil. This price gap took the pound back below its 50, and 200-day moving averages and price dropped below the 40 level on the RSI. However, the long-term trend, for now, is still up. Friday’s candle is known as a long-legged doji, a pattern which represents total indecision, which is very apt for the UK political scene!

The weakness in the pound did not filter through into other currencies. Even the Euro held up much better and remains above support and in a long-term uptrend.

The dollar index fell to new lows the current move in the middle of the week but recovered slightly to end the week higher. The trend remains down.

Interest rate futures

Interest rate futures pushed to slight new highs for the week before closing marginally lower. The uptrend remains intact for now, but prices are only just above support levels.

Good trading

Phil Seaton

LS Trader

Weekly Update 4th June 2017 – LS Trader

US stocks rallied to new all-time highs again this week as global stocks remain bullish. The dollar has continued to weaken, and interest rate futures have seen renewed strength.

The week ahead sees some key events. On Thursday we have the UK General election, and the European central bank meets. In the US, former FBI Director James Comey will offer testimony to the Senate. These events could all contribute to further increases in volatility as many asset classes continue to move out of the long-standing low volatility environment.

Stocks

The Nasdaq 100 and the S&P 500 both continued their recent bullish price action to print new all-time highs this week and for a change did so on increasing volume. This week’s breakouts to new highs on both indexes have been accompanied by above average volume and have also seen volatility expand nicely into the trend zone.

The Nikkei has also closed above the 20,000 level for the first time since August 2015, as global stocks remain bullish.

Commodities

Gold continues to grind higher and may yet reach the April high at just over $1300. Volatility is quite elevated in this market, which is a negative factor at present for a continued advance much beyond this year’s highs.

Several commodities fell to new lows for their current moves. Coffee declined to its lowest level in a year on increasing volume and volatility. The RSI has also fallen below the 40 level so further declines, possibly to the 120 area may lie ahead. Soybeans, Soybean Meal and Bean Oil also all declined to new lows for the current move.

Natural Gas broke out of a near 3-month consolidation to the downside and looks set to test this year’s low. The other energy markets also declined and are heading back down towards recent support levels.

Currencies

The Euro tested support on Tuesday but then rallied to new highs for the current move, falling just shy of the 1.1300 level. The current target is the spike high printed back on the 9th November at 1.1411.

The dollar index declined to its lowest level since that same date in November, and the volatility profile suggests there is room for further declines, at least to 95.65, where the next level of chart support is likely to be found.

Interest rate futures

Interest rate futures got back on track this week as the 30 Year T-Bond, and the 5&10 Year T-notes rallied to new highs for the current move. The trend remains up for interest rate futures.

Good trading

Phil Seaton

LS Trader

Weekly Update 28 May 17 – LS Trader

The week ahead will be a shortened trading week due to the Memorial Day holiday in the US and the Bank Holiday in the UK.

The past week has seen US stocks print new all-time highs but has seen mixed trading in other asset classes. Commodities markets have been particularly weak with multiple markets extending their recent declines to new lows for the current move.

Stocks

US Stocks resumed the uptrend and rallied to new all-time highs. Price has rallied for seven consecutive days following the sharp decline seen back on the 17th May. That large black candle on the 17th was a high volume bar and therefore a key footprint in the market. The fact that the market was able to reverse and trade above that bar is a plus on the side of the bulls, as is the fact that the decline never broke the 40 level on the RSI, which is bull markets support. The RSI also broke back above 60 on Friday/

The negative is that volume has been declining as the rally has progressed. Fridays’ doji on the daily S&P 500 e-mini chart also suggests some indecision. Nonetheless, all-time highs are bullish, and the trend remains up.

Lean Hogs has had a good week, breaking decisively above key resistance to reach its highest level since July last year. Other commodities such as Coffee, Orange Juice, Sugar, Soybeans and Soybean Meal all fell to their lowest levels of their current moves as multiple commodity markets remain in long-term downtrends.

Commodities

The energy markets had been pushing tentatively higher until Thursday where a very large reversal bar was printed on the daily charts. This decline was partially recovered on Friday, but the energy markets are now back to the middle of their trading range. The long-term trend remains down.

The weakest market in the sector is Natural Gas, which has been trading in a box range for the past two months and is now trading just above support. Both recent rallies have been unable to take out bear market resistance on the RSI and the 200-day moving average.

Currencies

The dollar index fell to a new low for the current move on Monday but has been trading sideways to slightly up for the remainder of the week. The long-term trend is down for the dollar.

The Euro, which moves inversely to the dollar index, made new highs for the move on Monday and Tuesday but fell just shy of the 1.13 mark before trading lower for the rest of the week. The trend remains up, and the market is quite well above support.

The British Pound has had a poor week, trading lower every day and breaking support and is now trading at its lowest level since 21st April.

Interest rate futures

US Interest rate futures tested support but just about managed to hold on. All markets in the sector remain in long-term, uptrends, but price action is far from convincing. The increase in volume seen over the past few days is due to the rollover to the September contract.

The UK Long Gilt was the strongest of the interest rate futures sector, rallying to exceed their April highs and reaching their highest levels since September last year.

Good trading

Phil Seaton

LS Trader

Weekly Update 21 May 2017 – LS Trader

The stock markets saw a sharp increase in volatility this week with a very large reversal bar printing on Wednesday which took out the entire month’s trading to date! Weakness continued at the open on Thursday before a reversal higher which retraced around two-thirds of the decline.

Stocks

The S&P 500 printed a new all-time high on Tuesday before the sharp reversal seen on Wednesday which took out support and all the bars dating back to the 24th April. This down bar was on well above average volume and has left a major footprint on the charts. The two-day rally that followed was also on above average volume, so volume and volatility appear to finally be returning to the stock markets.

From last week on the Dax: “When markets don’t rally on what is perceived by most as good news, there is generally something not right. With volatility at elevated levels, for the past week or so, further pullback to fair value, currently at 12534 may follow.” The Dax did indeed pull back as expected and fell briefly below fair value on Wednesday and Thursday, before a minor recovery.

Similar price action was evident in the Nikkei, but the Japanese index held up better than its US counterparts and did not violate support.

Commodities

The energy markets have continued their recent short-term recovery following the sharp reversal that was seen back on the 5th May. The long-term trend remains down across the sector, so this is classified as a bear market rally. The RSI has recovered to test the 60 level and price is also testing the 200-day moving average, so next week will be an interesting one as multiple resistance levels will be tested.

The commodities markets remain mixed, with the majority still in long-term downtrends and a handful of markets, such as Orange Juice and Soybean Meal falling to new lows for the current move.

Sugar, which has been in a very nice downtrend for the past few months looks as though it may have bottomed and is now testing resistance. The long-term trend is clearly still down with price below its 50 and 200-day MAs. The RSI also remains in the bear range.

Currencies

From last week on the Dollar Index: “A 3-4 bar evening reversal pattern formed on the index and if Friday’s low is taken out early next week, may result in a test of this week’s lows.” Friday’s low was exceeded, as were the recent lows, so the index has now fallen to its lowest level since the 9th November.

Benefitting from dollar weakness, both the Euro and the British Pound rallied to new highs for the current move, with the latter closing above $1.30 for the first time since September last year.

Dollar weakness is evident against all the major currencies as these markets continue to gain against the dollar, even the commodity-based currencies of Australia, Canada and New Zealand, which have been the weakest of late. The Swiss franc also completed a key breakout this week out of a rectangle pattern that had encapsulated price action for all of this year to date. Friday made a nice clean breakout with a tall white candle and no upper shadow, known as a bullish marubozu. This suggests a strong market and continuation higher next week for the franc.

Interest rate futures

Interest rate futures did complete their recovery as expected and except the long bond, all made new highs for the current move. Some weakness was seen following the breakout, but the long-term trend remains up across the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 14 May 2017 – LS Trader

The French Presidential election resulted in the expected outcome, and the anticipated sharp increase in volatility in European markets did not materialise. Both the Dax and the Euro moved lower following the result, which would have been the opposite of most market participant’s expectations.

Several stock markets made new all-time highs, or new multi-year highs as the bull market in stocks continues, albeit on muted volume and volatility. The currency markets have been mixed, and multiple other markets have made short-term reversals to move to align with the major trends.

Stocks

The Nasdaq 100 made new all-time highs again this week and continues to grind higher. The S&P 500 made a new all-time high on Monday before drifting lower for most of the week and continues to lag the Nasdaq 100.

The Nikkei crossed above the 20,000 level for the first time since 2015 and remains in an uptrend. However, a shooting star pattern has printed on the weekly charts. This may lead to a test of the prior resistance level, which should now act as support if this breakout is to continue.

The FTSE 100 made a new all-time high on Friday and closed above prior resistance. Volatility is expanding nicely, and the RSI has reached a bullish 67.91. There could be further to go for the UK market which has lagged global stocks for years.

The Dax pulled back this week, which was a case of buy the rumour and sell the fact after the markets got the expected Macron win by a comfortable margin in the French Presidential election. When markets don’t rally on what is perceived by most as good news, there is generally something not right. With volatility at elevated levels, for the past week or so, further pullback to fair value, currently at 12534 may follow.

Commodities

The energy markets have continued a sharp pullback this week, which started on the 5th May but remain in a long-term downtrend. The market has retraced to the area of prior support, which should now provide resistance. For this interpretation to be correct, the market needs to turn lower from not far above current levels. If it does, the head and shoulders pattern suggests that there is approximately another $10 of decline in the Crude Oil market, down to the $38 region.

Currencies

The Dollar Index fell to a new low for the current move on Monday before reversing higher to Thursday’s high. A 3-4 bar evening reversal pattern formed on the index and if Friday’s low is taken out early next week, may result in a test of this week’s lows.

The Euro has, of course, been the inverse of the Dollar Index, and printed a bullish morning star pattern from just above support to keep the uptrend intact. The British Pound was also lower but is holding just above support.

The currency markets remain mixed, as they have for a couple of years. Much of this is due to the very tight range that the Euro has been in. In fact, the 2-year range has been the tightest 2-year range in the history of the market. When a solid breakout does occur, a huge move is going to follow. It’s just a matter of when. When this does occur, that breakout move will unlock the other currency markets and many other markets that are impacted by the currency markets.

Interest rate futures

Interest rate futures may have completed their correction in the new uptrend, and all markets have printed bullish reversals this week, led by the shorter term markets. The three-month Eurodollar and 5 Year T-Notes have been the strongest and are leading the rally. Depending on which market in the sector we are looking at, the retracement was about 50% of the advance from the March low.

Good trading

Phil Seaton

LS Trader

Weekly Update 7th May 2017 – LS Trader

The coming week’s opening will be dominated by the outcome of the French Presidential Election on the 7th May, and that may lead to some volatility when the markets open Sunday night/Monday morning.

Stocks have been bullish, but the dollar has remained mixed, as have commodities. The energy markets took a battering until a partial recovery was seen on Friday.

Stocks

The Nasdaq 100 made a new all-time high again this week. The S&P 500 also made a new all-time closing high on Friday. Whether we see a continuation of strength this week may be determined by matters elsewhere. Either way, US stocks are bullish at this time.

The Dax also made new all-time highs this week, but huge volatility can be expected on Monday following the result of the election. If Macron does not win by a large margin, or if Le Pen wins against the odds, the Dax will very likely take a tumble. The Nikkei also completed a recover from the sell-off seen during April to reach its highest level since 2015.

Global stocks remain bullish, and all four indexes that we trade are in long-term uptrends.

Commodities

The energy markets showed further weakness this week with both Crude Oil markets breaking down to complete the anticipated trend change.

Silver continues to decline sharply, falling below the swing low at 1690 that we highlighted last week. Silver has now fallen from 1873.6 on the 17th April to 1621.5 on Thursday 4th May, 15 consecutive down days. Volatility has reached elevated levels, and the next level of support at 1582.8 will likely be strongly defended and attract some bottom fishers.

Sugar did continue with short-term strength and then reversed lower again, as we expected, printing new lows for the move on Thursday and Friday. Prices do not look overdone, nor is volatility even close to extreme levels, so with structural support not appearing until 14.00, low prices may yet be seen.

Currencies

It’s been an interesting week in the currency markets and the expected volatility on Sunday night/Monday due to the French Presidential elections will likely lead to some large moves this week.

The Dollar Index fell to new lows for the current move, and, perhaps critically, closed below major support. The trend is down for the dollar index, which is the inverse of EUR/USD. The Euro rallied to above 1.10 for the first time since November and appears to be finding support at the 200-day moving average.

The British Pound has reached its highest level since late September, but there is bearish divergence evident on the RSI. That does not mean that lower prices are imminent, merely that momentum has decreased. Here too, the 200-day MA appears to be providing support.

The Canadian dollar dropped to its lowest level since February 2016. There is a lot of room for further weakness in this pair (strength in USD/CAD), but Friday’s key reversal day puts that view under pressure in the short-term. The trend will need to reassert itself early this week as a move back into the prior trading range would suggest that trend had faltered.

Interest rate futures

Interest rate futures continued short-term weakness, and remain below their 200-day MAs. The 50-day MAs appear to be providing support at this time. The long-term trend remains up for the sector, but short-term weakness is evident.

Good trading

Phil Seaton

LS Trader

Weekly Update 30 April 2017 – LS Trader

The past week has seen the Nasdaq 100 make new all-time highs and has seen the Dollar Index drop to its lowest level this year. The Dollar remains mixed with strength in some markets and weakness in others. Strength is being seen in the stock markets and we could see the S&P 500 make a new all-time high this week.

Stocks

In last week’s update, we wrote on the Nasdaq 100: “Friday’s close was the highest weekly closing price of all time. All time weekly closing highs are not a bearish characteristic!”. The Nasdaq 100 continues to make new all-time highs but the technical picture is not fully supportive of further strength. On the plus side, volatility and momentum are expanding, which is what we like to see in a trending market, but volume is not materialising.

The S&P 500 came within a few points of a new all-time high but failed at resistance. The technical picture for the S&P 500 is similar to the Nasdaq, but the S&P is weaker.

Commodities

The energy markets continued with anticipated weakness, but so far only RBOB Gasoline has made the downside breakout, which confirmed a change of trend to down. Both Crude markets have declined to levels not far above trend-defining support. A change of trend to down could be completed in the next week or so if weakness persists.

Silver declined sharply this week having fallen below its 200-day MA on Monday. This has taken the RSI into the bear range and suggests a test of the swing low at 1690.6 may follow.

Gold was also lower this week and continues to consolidate around fair value. Volume and volatility have declined in concert with price, which suggests that weakness seen over the past two weeks is corrective.

Palladium is currently the strongest from the metals complex and this week reached its highest level since March 2015. If resistance can be cleared, the focus will shift higher towards 913, the 104 high.

Sugar fell to its lowest level in over a year, but printed a three-day bullish reversal pattern at the end of the week, and also a bullish hammer on the weekly chart. This suggests that we may see some additional short-term strength, but the trend remains down and the market is below resistance.

Currencies

The currency markets have shown some signs of life this week with a few breakouts being seen. As yet, there has been little in the way of follow through. The currency markets do remain mixed, with dollar strength being seen in some markets and weakness in others. The long-term trend picture is also mixed.

The British Pound has reached its highest level since late September and is pressing gradually higher on slightly above average volume. The RSI has reached 72.6, a level not seen in almost two years.

The Canadian dollar fell through clearly defined support and dropped to its lowest level since February 2016. There is a lot of room for further weakness in this pair (strength in USD/CAD).

The Kiwi also fell to its lowest level this year and looks set to test the December low, which, if broken, could open the way to significant further declines.

The dollar index dropped to its lowest level this year but has since regained the prior support level. The index is at a critical juncture, the resolution of which may determine the overall direction for the dollar for months to come.

Interest rate futures

Interest rate futures have had a mixed week, with weakness seen during the first half of the week. Long lower shadows are evident on the daily candles, which shows that buyers are entering the markets at these levels, which is just about keeping some of these trends intact. The long-term trend is up across the sector and strength may yet resume.

Good trading

Phil Seaton

LS Trader

Weekly Update 23 April 17 – LS Trader

The first round of the French Presidential elections occurs on Sunday, with exit polls being available around 7 pm on Sunday night. This has the potential to move a few markets about, particularly the Euro, Dax, and to a lesser extent the British Pound, depending on the outcome. The current polling data shows that the race is very close but has Fillon and Le Pen being the two candidates to go forward, with Macron very close behind, but Brexit and Trump have both shown previously how unreliable polls can be!

Stocks

The stock indexes have seen mixed trading. The S&P 500 has regained its 50-day moving average but continues to lag the Nasdaq 100 and remains 50 points below its all-time high, which was last posted back on the 1st March.

The Nasdaq remains close to its all-time high, which was posted earlier this month. However, Friday’s close was the highest weekly closing price of all time. All time weekly closing highs are not a bearish characteristic! This shows that the trend for stocks is still up, even though there has been some short-term weakness. However, volatility continues to decline, and volume is below average.

The Dax broke support to bring the current uptrend to an end for now, but the market is finding support at its 50-day MA, and the long-term trend is up.

The Nikkei remains the weakest of the four global stock indexes that we trade at LS Trader. Here, the Nikkei dipped briefly below its 200-day MA last week but has yet to close below it. This week saw a minor recovery rally, which keeps the long-term trend up. However, the RSI is already in the bear range, and that suggests that the recent low and 200-day MA will be tested again soon. The possibility of a change of long-term trend to down remains.

Commodities

The energy markets have had a bearish week and look set to decline further to test major trend-defining support. Friday’s price action saw Crude Oil close back below $50 per barrel for the first time this month.

Gold made a new high for the current move on Monday but has so far been unable to cross the $1300 level. Price has since pulled back, but the uptrend remains intact for now. Silver did not fare so well following its new high for the move, and pulled back to below its 50-day MA on Thursday, closing below it on Friday. The 200-day MA sits just below prices at 1777, and support can be expected around that area. The long-term trend remains up.

Currencies

The big move in the currency markets came from the British Pound, which caught a lot of traders on the wrong side of the market. The COT data shows a near record number of traders positioned short on this market. The break above resistance resulted in forced short covering for many traders and a huge spike higher. Since the large move higher on the 18th, the market has consolidated slightly, but the long-term trend for the Pound is now up.

However, the currency markets remain mixed and continue to favour the dollar overall. The Canadian dollar has been pushed lower towards a major shelf of support (resistance for USD/CAD). The dollar has been threatening to move higher against the Canadian dollar for a long time. Will this breakout, if it occurs, be the start of the next leg up for the dollar? Time will tell.

Interest rate futures

The 5-Year T-Note and 3 Month Eurodollar both completed changes of long-term trend to up this week as expected. The long-term trend for all the interest rate futures markets is now up. Since interest rate prices and rates more inversely, this means that the trend for interest rates in both the UK and the US is now lower, which is the complete opposite of what most people expect.

Good trading

Phil Seaton

LS Trader