Weekly Update 16 April 17 – LS Trader

The last week was a shortened trading week with the markets closed on Friday. Monday is a Bank Holiday in the UK, but most global markets will be open as normal.

Many markets appear to be on the verge of some large moves. Although we have yet to see any sustained trends, which have been sorely lacking so far this year, there are multiple markets that are positioned quite nicely for some extended trends.

Stocks

The S&P 500 closed below its 50-day moving average for the first time since November last year. The RSI also fell into the bear range, also for the first time since November. These both indicate further short-term weakness ahead, particularly if the swing low at 2317.5 is taken out on a closing basis.

The Nasdaq 100 broke short-term support but remains above its 50-day MA and also above its March lows. As with the S&P 500, if the March lows are broken, further weakness could be seen. For now, the Nasdaq’s RSI remains above bull market support, which Friday’s print at 43.43. A decisive move below 40 would also indicate further weakness.

The Nikkei is even weaker and broke medium-term support this week. The Nikkei could now be heading for a trend change to down. A test of the 200-day MA, currently at 18325 should be tested this week. The RSI has already moved deeply into the bear range, printing 27.79 on Friday, its lowest level since February 2016.

The Dax is the strongest of the four indexes in the short-term and is currently holding just above support. However, support could be tested this week.

For now, the long-term trend is up for all four indexes. Only the Nikkei has a change of trend to down within range. It will take considerable weakness for a change of trend for the US markets.

Commodities

Gold and Silver broke resistance and both confirmed changes of long-term trend to up in the process. Gold reached its highest level since November and appears to have stabilised above both its 50 and 200-day MAs. The RSI is bullish any 72.22, well into the bull range. Volatility is expanding along with price, as is momentum. All of these are supportive of further advance. The two slight negatives are the doji, an indecision bar, printed on Friday, and the fact that volume is not increasing. Silver, which also broke above resistance this week, has also printed a doji on Friday and closed just a touch back below prior resistance. We’d like to see a decisive close back above last week’s highs, ideally on increasing volume to indicate that this trend has legs.

Currencies

The US dollar index fell back below its 50-day MA but remains above its 200-day MA and trend-defining support. The dollar remains in a long-term uptrend across the board.

However, weakness in the dollar has been seen against the Yen, where the dollar has fallen to its lowest level since November. This week saw price close below its 200-day MA of the first time in five months and has also seen the RSI fall to 30.09, well into the bear range. This is the lowest RSI reading since June last year. A change of long-term trend to down could be completed this week.

The Euro continues to trade below its 50-day MA as it has since the end of last month, but remains in the middle of the trading range that has been in place since December.

The British Pound has edged up towards the higher end of the box range that has been in pace since October but remains in a long-term downtrend.

Interest rate futures

Interest rate futures continued their recent good run and made multi-month highs in the process. The long-term trend is now up for the 30 Year T-Bond, 10 Year T-Note and UK Long Gilt. Both the 5 Year T-Note and 3 Month Eurodollar (March 18 contract) could complete a change of trend to up this week.

As we have written recently, speculators have a near record short position in interest rate futures, which leaves these markets prone to a short squeeze, forced short covering and further rally. This continues to suggest that interest rates will fall, not rise, which is the opposite of the currently popular view. Let’s see what unfolds.

Good trading

Phil Seaton

LS Trader

Weekly Update 9 April 2017 – LS Trader

Several markets have shown an increase in volatility this week, and we could be entering a more active period in the markets. We saw multiple key levels tested in the markets and a change of trend to up complete for the 30-Year T-Bond. Gold and Silver are also close to a change of trend to up, and that could complete this week. The dollar has also seen some renewed strength and remains in a long-term uptrend. Multiple long dollar breakouts are within range this week.

Stocks

The S&P 500 ended the week lower by just 0.3% but had been lower before finding support right at the 50-day moving average. The long-term trend remains up.

The Dax made a 2-year high on Monday, just shy of our long-standing target at 12429.5, which is the all-time high for the Dax printed back in April 2015. Price pulled back into Thursday’s low before a minor recovery but ended the week lower. The long-term trend is still up, and price remains above support and considerably above its 50-day MA.

The Nasdaq 100 remains the strongest of the three indexes and printed a new all-time high on Wednesday. In spite of weakness during the latter half of the week, the Nasdaq remains well above support and clearly still in a long-term uptrend. Volatility declined to its lowest level since early October.

The Nikkei remains the weakest of the four stock indexes that we trade at LS Trader and this week made two attempts at breaking the bottom of the rectangle that has been in place since December. Both Thursday and Friday’s candle show long bullish shadows, which show that buyers are coming in at those levels. The long-term remains up, but a close below Friday’s low would suggest further weakness back to the 200-day MA, currently at 18314.

Commodities

The energy markets had another bullish week, with Crude Oil regaining the 50-day MA and price retracting more than 50% of the decline from the December high. Price also moved back above its 200-day MA and broke the 60 level on the RSI, also for the first time since December. The long-term trend remains up.

Sugar continued its recent decline, and fell to its lowest level since May last year, and possibly still ha further to run to the downside, in spite of some strength seen on Thursday and Friday.

The Soybeans markets all made new lows for the current move. Soybean Oil is the weakest commodity so far this year and is down 9.5% in 2017.

Gold rallied to its highest level since November, before printing a shooting star reversal on Friday as the breakout was rejected. However, Friday’s high takes this market to within range of a change of long-term trend to up. The trend for Gold has been down since November. Silver remains weaker but is also within range of trend-defining resistance.

Currencies

The Dollar Index moved back above its 50-day MA this week, and the RSI is testing the 60 level on the RSI. If 60 is broken, we can expect further strength towards the March highs, a break of which would be bullish and would suggest that the Index was going to rally further to test the January high.

The dollar has also gained ground against most of the major currencies and has multiple breakouts within range, the closest of which is the Aussie, which price closed below its 200-day MA and just pips away from a breakout and a resumption of the long-term downtrend. The failure of the Aussie to break the November high resulted in a double top and suggests that should the breakout be successful, we may see weakness back to the December low, which is over 350 pips below Friday’s close.

Interest rate futures

Interest rate futures continued their recent strength, and the 30 Year-T-Bond broke briefly above resistance on Friday before the highs were rejected. Price remains between the 50 and 200-day MAs, and the 50 MA may now provide support. The UK Long Gilt remains the strongest in the sector, this week reaching its highest level since October. A change of long-term trend is within range for the remaining markets in the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 2 April 2017 – LS Trader

The Nasdaq 100 printed a new all-time high this week, but the S&P 500 did not. The S&P 500 has not made a new high since the 1st of March. The dollar put in a substantial reversal to keep the long term bull trend intact, and interest rate futures remain at a pivotal juncture.

Stocks

The S&P 500 fell to its lowest level since the middle of February on Monday before finding support in the region of the 50-day moving average and printing a bullish hammer reversal. Price continued higher through to Friday. As per our comments last week, Tuesday the wide range bar on the 21st was the largest daily bar of the year to date. This bar also fell on significant volume. This will leave a high-volume resistance blueprint on the chart. If the high of that bar, 2378.75, is exceeded, all-time highs will likely be tested once again. The long-term trend is still up.

The Nasdaq 100, as has been the case recently, was stronger than the S&P 500 and did print new all-time highs on Thursday and Friday. Although new all-time highs must always be considered bullish, two indecision candles on Thursday and Friday do put a dampener on the new highs, as does the below average volume. However, we must continue to follow the trend until it is broken.

The Dax also had a bullish week, with five straight up closes. This brings the Dax to within range of our long-standing target at 12429.5, which is the all-time high for the Dax printed two years ago in April 2015.

Commodities

The energy markets have had a bullish week and remain in long-term uptrends. Crude Oil’s rally has retraced just a few ticks shy of its 38.2% retracement of the decline from the December high and looks set to test its 50-day MA this week, currently at 51.43.

Sugar broke the sloping neckline of an arguable head and shoulders top pattern this week on the weekly chart. Sloping neckline patterns are less reliable that horizontal necklines, but nonetheless, the standard measuring method suggests that Sugar has potentially much further to fall. The LS Trader system already has nice profits locked in on this trade since we entered back on the 7th March at 19.02, with potentially much further to go.

The Soybeans complex is also heading south. We wrote a few weeks back that a potentially significant move was building up in Soybean Meal and that a volatility expansion and price breakout was highly likely to occur. That move has since started to materialise, and the price trend has been confirmed by volatility and volume expansion. Regarding chart structure, the September 2016 low at 294.10 represents a possible target. The move in Soybeans is more mature than the move in meal, and volatility is reaching elevated levels already. Support can be expected around 934.

Currencies

In last week’s update, we wrote about keyword support and resistance levels on the Dollar Index and Euro respectively. Both levels were tested and exceeded on an intraday basis, but both levels effectively held and big reversals followed, keeping the long-term trend in favour of the dollar.

Interest rate futures

Interest rate futures have consolidated this week. The long bond remains in a range between its 50 and 200-day MAs and is holding just below a key resistance area. The Commitments of Traders Data (COT) has shown a near record short position for speculators and hedge funds in recent weeks. If we get a rally above resistance that would catch many on the wrong side of the market and could lead to a massive wave of short covering and a rally.

The vast majority of market participants continue to think that we are in an environment of higher rates (futures prices move inversely to rates) and are positioned accordingly. This set up presents a potentially excellent opportunity on the long side if resistance is decisively broken. The 200-day MA is within range in all markets in the sector, and that will be the first target should resistance be taken out.

Good trading

Phil Seaton

LS Trader

Weekly Update 26 March 2017 – LS Trader

The stock markets continued with short-term weakness this week and have not made a new high since the 1st of the month. Tuesday’s wide range bar was the largest daily bar of the year to date, indicating that the short-term trend is down, even though the longer-term picture is still bullish.

Stocks

The stock market rally came to an end this week, at least for the short-term. The S&P 500, Nasdaq 100 and Dax all broke short-term support. Whilst the long-term trend is still clearly up, and new highs are easily within range, additional short-term weakness could lie ahead. The short-term price action indicates indecision, as we have three consecutive doji/spinning top patterns, which shows confusion in the market in the very short term. The 50EMA, currently at 2326 on the S&P 500 e-mini will be the next level to watch.

Commodities

The crude oil markets have drifted lower this week but remain above trend-defining support for now. Crude Oil is trading along its 50-week moving average and may be setting up for a move lower. It’s worth keeping in mind that the February low in 2016 was 26.05, and Friday’s close was 47.97, so a downtrend has plenty of room to run if heavy selling gets underway.

The metals have continued recent strength, led by Palladium, which rallied to a two-year high on Friday. If price can hold above the 800 level, we can look for a no look back rally higher.

Sugar turned lower again following the hammer pattern printed on the 17th March and went lower to print its lowest price since May last year.

Currencies

In last week’s update, we suggested that the Euro may rally to test strong resistance at 1.09. It reached 1.0872 and may yet press higher. This resistance is perhaps a key level on the Euro as it also correlates to medium-term support for the dollar index. The February low at 99.07 will be the level to watch this week. If that level is broken, then we could see additional weakness, but the long-term trend is still up and continues to favour the dollar.

From last week: “The Australian dollar is approaching the upper boundary of a rectangle pattern that has been in place for 11 months.” The 11-month rectangle resistance held firm, and the Aussie fell almost 150 pips. This takes the Aussie back to around the middle of the range, and a breakout to the upside and downside is within range. A break to the downside would be a resumption of the long-term downtrend, whereas an upside breakout would be a change of long-term trend to up. With volatility now down to near its lowest level of the year, the eventual breakout should yield a decent move.

Interest rate futures

Interest rate futures rallied this week and exceeded the key levels that we wrote about last week. Also, the long bond broke the 78.6% retracement, which is generally bullish and is usually followed by a 100% retracement. This is further evidence that the low may be in and that we may be in the early stages of a trend change to up over the coming weeks.

Good trading

Phil Seaton

LS Trader

Weekly Update 19 March 2017 – LS Trader

The past week was a busy week in terms of the calendar, due to the two-day Federal Reserve meeting and triple witching on Friday. Considering that, it was a quiet week in terms of price action.

Stocks

The Nasdaq 100 hit a new all-time high on Thursday before pulling back a bit, but still closing higher for the week. That makes eleven consecutive weeks where the market has closed the week higher than the open.

The S&P 500 once again failed to confirm the Nasdaq’s new high and continues to lag, remaining below its all-time high of 2391.25 printed on the 2nd March. Price has fallen back to approximately the middle of its recent range, from resistance at 2391.25 to support at 2351. The long-term trend for US stock indexes is unquestionably up, even if the internals are weak.

The Dax also posted a new high this week, but this was not an all-time high, just a high for the current move. Thursday’s high was the highest print for the Dax in almost two years, but still a few hundred points shy of its all-time high of 12429.5, which may yet be reached.

Commodities

The metals markets have recovered some of their recent declines this week, led by Copper, which has put in a six-day rally. Palladium has also seen bullish price action. These two metals remain in long-term uptrends, while Gold and Silver remain in downtrends.

The energy markets have also retraced some of their recent declines, and both Crude Oil markets remain in uptrends, for now, but both are working their way down towards trend-defining support levels.

Sugar fell to its lowest level since June last year but printed a large hammer pattern on the daily charts, which may put the downtrend under some pressure next week if we see additional strength.

Currencies

The dollar has seen some weakness this week, with the dollar index falling to its lowest level since the 9th February. The Index remains within a range between the January high and the December low. For now, the long-term trend continues to favour the dollar, but we are seeing weakness in the short-term. The dollar also fell against the Euro, which may be set to move higher to test strong resistance at 1.09.

The British Pound rallied this week and now sits almost exactly in the middle of the trading range that has been in place since October.

The Australian dollar is approaching the upper boundary of a rectangle pattern that has been in place for 11 months. A decisive breakout above the November 2016 high could see a continued rally higher, with projected targets around 700 pips above the November high, which would be circa 8450.

Interest rate futures

Interest rate futures made a counter-trend rally this week. This rally has retraced between the 38.2% and 50% of the prior swing down. If the market is going to fall lower again to test the recent lows, it should do so from at or near to last week’s high. If these markets rally much beyond that point, which is 148.97 on the long bond and 117.32 on the 5-Year T-Note, then the low may be in for a longer period, and we could be going to see a larger retracement of the larger swing down from the November 2016 high.

Good trading

Phil Seaton

LS Trader

Weekly Update 12 March 2017

In last week’s update, we noted: “Many markets remain in a neutral trading environment, but there are signs that multiple markets are beginning to awaken and that we could see some breakouts, volatility and price expansion over the coming weeks.”

A few markets have started to awaken, and we did get some breakouts during this past week, and there are likely more ahead. This week sees the two-day FOMC meeting begin on Tuesday, which generally increases volatility for a day or two.

Stocks

From last week on the S&P 500: “Price went over 3.618 standard deviations above fair value on Wednesday, which is the first time that has happened since October 2016. Volume has since declined with price so it’s possible that Wednesday was a blow off top and that we may see some short-term weakness ahead.”

We did see the expected short-term weakness as price mean reverted to exactly fair value, 2351, before turning higher again. This resulted in the first bear body (the close of the week being lower than the open) being printed on the weekly chart in eight weeks. The higher volume seen on Thursday and Friday is due to the expiration of the March contract and rolling to June, not due to fresh buyers.

That weakness seen in the S&P 500 was less evident in the Nasdaq 100, where although we saw prices pull back during the middle of the week, the market closed up for the week, as it has for every week so far in 2017.

The long-term trend remains up for global stocks. The Nikkei is in a holding pattern just below the 2017 high, with the possibility of a breakout which would take the market to its highest level since 2015. Both the Nikkei and the Dax continue to lag their US counterparts

Commodities

From last week: “The Crude Oil markets remain in an incredibly tight range as volatility continues to compress in a classic line market environment. The average true range in Crude has almost dropped in half since December. When this market eventually breakouts out, the resultant move is likely to be large indeed.”

We’ve been writing about the volatility compression in Crude Oil for several weeks and stated that the resultant move would likely be large. We got the breakout this week and a large three-day move. However, the move has not yet been sufficient to take Crude out of its wider trading range, but that may follow over the coming weeks.

Gold and Silver moved sharply lower this week as the counter-trend rally from the mid-December low continues to unwind. The long-term trend remains down for both precious metals.

Currencies

The currency markets remain in a random, two-way rotational environment with contracting volatility, which is a long-winded way of saying that there is no trend in the short-term. These markets continue to trade mostly sideways, as they have for much of the year to date. There was a reasonably large daily move in the EUR/USD on Friday, with a similar move in the opposite direction in the Dollar Index. The long-term trend remains in favour of the dollar.

Interest rate futures

From last week: “We’ve been writing for weeks that the recent strength seen in interest rate futures is counter-trend and that the long-term downtrend should eventually resume and prices fall below their December lows, and that remains the case in all the U.S. interest rate markets. The 3 Month Eurodollar has already exceeded that low and the longer-term markets may follow suit soon.”

Interest rates continued their decline this week and remain in a long-term downtrend. Friday did see a bit of strength, but with the trend being down, the long-held target of a test of the December lows remains on target.

Good trading

Phil Seaton

LS Trader

Weekly Update 5 March 2017 – LS Trader

Global stocks have seen continued strength this week with multiple indexes making new all-time highs. Many markets remain in a neutral trading environment, but there are signs that multiple markets are beginning to awaken and that we could see some breakouts, volatility and price expansion over the coming weeks.

Stocks

The S&P 500 made a thrust higher on Wednesday to all-time highs on above average volume. Price went over 3.618 standard deviations above fair value on Wednesday, which is the first time that has happened since October 2016. Volume has since declined with price so it’s possible that Wednesday was a blow off top and that we may see some short-term weakness ahead. Volatility remains elevated. This week’s high RSI print at 82.65 is the highest RSI reading since November 2010; such has been the strength of the recent rally.

The Nasdaq 100 also posted a new all-time high bit based on some of our proprietary metrics has been weaker than the S&P 500 and has also undergone quite a substantial volatility decline. There is no doubt that the long-term trend is very much up in both U.S. markets and the longer-term focus remains up, but a corrective pullback of larger magnitude than has been seen since November is due.

It’s not only U.S. markets that are at all-time highs; the FTSE 100 also posted a new all-time high this week, having broken out of a 16+ year consolidation. The German Dax has also shown some strength this week but remains below its April 2015 high of 12429.5.

Commodities

The Crude Oil markets remain in an incredibly tight range as volatility continues to compress in a classic line market environment. The average true range in Crude has almost dropped in half since December. When this market eventually breakouts out, the resultant move is likely to be large indeed.

Gold and Silver’s counter-trend rally came to a sharp halt this week. Monday saw a doji printed on the daily chart and prices traded lower throughout the week, crossing back below the 200-day moving average. The long-term trend remains down for both precious metals.

Currencies

As has been the case for the past couple of months, the currency markets remain in a range bound, two-way rotational random market environment. However, there have been signs that the long-term dollar uptrend may be about to reemerge. The Dollar Index reached its highest level in almost two months on Thursday before a pullback on Friday.

There are similar patterns evident in other currencies, and we continue to expect an eventual resolution in favour of the dollar. As with the Crude Oil markets, the currency markets are also undergoing volatility compression, but in the currency markets, it has lasted even longer. This suggests that the long-term trends have further to run and that we should see the Dollar Index make new highs, and other currencies, such as the Pound and Euro, fall to new lows beneath their January lows.

Interest rate futures

We’ve been writing for weeks that the recent strength seen in interest rate futures is counter-trend and that the long-term downtrend should eventually resume and prices fall below their December lows, and that remains the case in all the U.S. interest rate markets. The 3 Month Eurodollar has already exceeded that low and the longer-term markets may follow suit soon.

The exception to that may be the UK Long Gilts, which have been much stronger than U.S. markets. Gilts this week reached their highest level since October last year and have retraced more than 61.8% of the decline from the August all-time high.

Good trading

Phil Seaton

LS Trader

Weekly Update 26 Feb 17 – LS Trader

US stocks printed new all-time highs again this week before a slight pullback. Some commodity markets are showing signs of life, but the currency markets continue to consolidate. Interest rate futures are making a counter trend rally, which should terminate over the next few weeks and result in a resumption of the primary trend.

Stocks

The S&P 500 printed a new all-time high again on Thursday but ended the day lower. Further weakness was seen on Friday before a recovery late in the day, which saw the market close up for the eighth consecutive week. The weekly chart has volatility expanding nicely in the trending zone, but volatility has started to decline on the daily chart. This suggests possible weakness in the short-term but keeps the longer-term focus pointed higher. This week’s high RSI print at 80.45 is the highest RSI reading since November 2010; such has been the strength of the recent rally.

The Nasdaq 100 has seen almost identical price and volatility behaviour as the S&P 500. As before, volume in both indexes remains subdued.

Commodities

The energy markets remain within a tight range, with the exception of Natural Gas. The Crude oil market has stayed within a tight $2.50 box range since the first week of the year. This is a classic line market environment. A line market is where you can draw a horizontal line across the chart right through the price action, which effectively means the market has gone nowhere. When these markets do break out of this narrow, low volatility environment, the resulting move is likely to be big.

Gold printed its lowest volatility reading on Wednesday of this week since August last year and then turned higher with price on Thursday and Friday as the market moved decisively above its 200-day moving average. However, the long-term trend is still down.

Silver is still the stronger of the two precious metals and has been trading above its 200-day MA for most of February. Here volatility is much higher than Gold’s, but the advance is being supported by increasing volume. Four days this week have seen above average volume.

Currencies

The currency markets remain in a range bound, two-way rotational market environment. The long-term trend continues to favour the dollar, but short-term dollar weakness persists at this time.

The Australian dollar is one market that could potentially breakout against the dollar. The market is currently right near the top of a rectangle that has been in place for almost a year. So far, all attempts at resistance have resulted in a turn lower.

Interest rate futures

Interest rate futures have moved higher this week, but this is still viewed as a counter trend rally. The long bond remains below various resistance levels that we have mentioned in previous weeks.

The shorter-term 5 & 10 Year T-Notes are looking more bullish as both are just slightly above recent resistance and the RSI has just poked above the 60-level. There has also been a huge increase in volume, much of which is due to the quarterly roll from the expiring March contract to the June contract. There could still be further to run, but the long-term trend is still down for all markets in the sector.

Good trading

Phil Seaton

LS Trader

Weekly Update 19 February 2017 – LS Trader

Monday is Presidents’ Day in the U.S. so many markets will be closed, and it will, therefore, be a shortened trading week.

The stock markets remain bullish, with U.S. indices printing new all-time highs again. Currencies and interest rate futures remain in consolidations, and commodities remain mixed.

Stocks

From last week: “prices at all-time highs are not a bearish characteristic!”. The S&P 500 printed new all-time highs again this week. Seven consecutive up closes ended on Thursday with a slightly down day after the new high at 2351.5 was printed on Wednesday. Volume remains below average, but there was an increase in volume on the weekly chart this week. As noted last week, with the exception of low volume, the technical picture remains bullish at this time.

The Nasdaq 100 has been stronger still, and following a small down day on Thursday printed its own new all-time high on Friday. The Nasdaq 100’s volatility has expanded to its highest reading since August last year according to our proprietary measures. This is not yet at an extreme level, but it’s getting close.

Commodities

The energy markets continue to undergo volatility compression, and volatility has been in decline in the Crude markets since mid-November. Price has stayed within a tight $2.50 box range since the first week of the year. This narrow range, low volatility environment is unlikely to persist too much longer, and we can expect a large move once we get an eventual breakout, whether that is to the upside or downside.

Gold has consolidated this week and continues to trade in the vicinity of a flat 200-day moving average. There is also below average volume in the market and declining volatility, so the recent rally from the mid-December low is not as compelling as many are making out. Further strength is required before a change of long-term trend to up comes within range.

Currencies

The currency markets remain without direction, and rather unusually, we remain flat all the currency markets as there are no trends to be found in the short-term. The long-term trend continues to favour the dollar, but not by much against many currencies. The technicals remain supportive of the dollar uptrend, but not by much.

EUR/USD, which moves inversely to the dollar index, fell to its lowest level in over a month before printing a bullish reversal candle on Wednesday, followed by a bullish candle on Thursday. This took the market back to a test of the 50-day MA, but weakness returned on Friday. I have no interest in trading this market until we get a decisive breakout in either direction. As it stands, the odds still favour that breakout being to the downside. A change of trend breakout to the upside remains out of range.

Interest rate futures

Interest rate futures continue to consolidate around the 50-day MA and above the recent lows. The RSI remains in a range between the 40 and 60 levels, and there is nothing doing in this sector at present. We continue to favour an eventual resolution of this consolidation to the downside, with new lows to follow.

Good trading

Phil Seaton

LS Trader

Weekly Update 12 February 2017 – LS Trader

US stocks hit new all-time highs yet again this week. The dollar has turned around its six-week period of declines and finished the week higher. Strength continues to return to the metals, and interest rate futures continue to consolidate above their recent lows.

Stocks

The S&P 500 hit new all-time highs on Thursday and Friday as the 2300 level was reached and exceeded for the first time. All of the metrics bar one are supportive of the trend. That exception is volume, which continues to print below average levels.

The Nasdaq 100 has now closed higher for six consecutive days, printing a new all-time high in each of the last four days. Volatility is expanding nicely, and the RSI has reached a bullish 74.78, although there is slight bearish divergence. As with the S&P 500, the real negative is the lack of volume fuelling the move, but prices at all-time highs are not a bearish characteristic!

European stock indexes continue to lag the US markets. The Dax is still some 750 points below its all-time high, and the FTSE 100 is just over 100 points below its high.

Commodities

Gold and Silver both continued to advance this week. Gold reached its 200-day moving average on Wednesday before pulling back, but the short-term trend is up. Silver was stronger still and did not see weakness at the end of the week. The long-term trend is still down for both of these metals, but as before, that could change over the coming weeks if we see continue strength.

Copper and Palladium have seen renewed strength this week. Palladium looks to complete the recovery from the sharp decline last month and looks set to test the local top this week. Copper has been stronger still and made a thrust breakout to new highs on almost 200% volume readings. The RSI also broke above 60 on Friday. Friday’s high was the highest print since May 2015 for Copper.

Currencies

The dollar index ended its run of six consecutive down closes and reversed higher with a bullish engulfing pattern on the weekly chart. The RSI remains in the bull range, and the long-term trend is still up for the dollar, so we may yet see new highs in the index.

Of course, we have seen the inverse price action in the Euro, where the long-term trend is still down. Here the RSI remains in the bear range and we may see price head lower towards the January 3rd low.

Interest rate futures

Interest rate futures briefly moved above their 50-day moving averages before finding resistance just below the recent highs and turning lower again. That level was also the 38.2% retracement level of the decline from the November high.

The RSI once again has been unable to break above the 60 level having tested it again this week. This price action keeps the RSI in the bear range. If those resistance levels hold in terms of the January high, Fibonacci levels and 60 on the RSI, we can expect new lows in the not too distant future.

Good trading

Phil Seaton

LS Trader