Weekly Update 10 July 2016 – LS Trader

The past week has seen the S&P 500 make a new all-time weekly closing high as global stocks have continued their recovery from the Brexit shock. Commodities have had a mixed week, as have currencies. Interest rate futures remain in long-term uptrends with yields falling to record lows.

Stocks

The S&P 500 rallied to a new high for the current move and made a new all-time high weekly close. From the standpoint of technical analysis, this cannot be bearish. Volume has not increased as much as we would like to confirm the breakout, but that could quickly change if the market rallies further to new all-time highs, something that would likely lead to significant short-covering by those trying to call a top in the market.

In terms of the cash S&P 500, the all-time high printed at 2134.72 back on the 22nd May 2015. Friday’s high at 2131.71 is the highest print in the S&P 500 in just under a year. There is an old rule in trading that says never sell stocks on a Monday because Mondays are usually bullish. It will only take a bit of strength on Monday to see new all-time highs. If we do get the breakout, rally to 2150 may swiftly follow, and possibly 2200.

The Nasdaq 100 has also been bullish, having moved further above its 50 and 200-day moving averages. The RSI has closed at 59.47, just a fraction below the key 60 level. If the RSI decisively breaks 60 this week, we should see further strength in price to test the April high at a minimum.

Commodities

Our target for Silver at 21.63 was almost reached this week when we saw a huge spike day on Tuesday that rallied all the way up to 2122.5 before closing near the low of the day. The market has since moved slightly higher, but there are long upper and lower shadows on the daily candles throughout the week, which represents indecision. Silver is the front runner in the precious metals.

The energy markets are starting to look under a bit of pressure. Prices have fallen across the board this week. RBOB Gasoline, which has been the weakest market in the sector having failed to complete a change of trend to up during the February to May rally, has already resumed its long-term downtrend. Natural Gas, which has been the strongest market in recent weeks, also pulled lower but found support from the 200-day moving average.

Currencies

The British Pound fell to a new 30-year low this week as expected and the trend remains down. How much further this market has to go remains to be seen. Volume has been in decline almost every day since the 24th, which suggests that the selling pressure may be running out of steam and that a corrective rally higher may be due.

The dollar overall has had a mixed week, advancing against some of the majors and falling back against the others. This is indicative of the current long-term trend position in the currency markets, which remains mixed.

Interest rate futures

Interest rate futures moved higher this week but with the exception of the 30 Year T-Bond remain below the extreme high printed on the 24th June. The spike high printed on the 24th represents considerable resistance, and we may see some weakness in interest rate futures in the near term. However, once these markets work off their recent excesses, we could see further substantial rally across the board as yields continue to decline to record lows.

It would not surprise me in the least to see yields go much lower than people can imagine over the coming months, which suggests that the long-term rally in this sector is far from done.

Good trading

Phil Seaton

LS Trader

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