The past week has seen stocks turn lower once more and has also seen the dollar give back some of its recent gains. The long-term trends are, however, still intact in these markets.
Commodities had a highly active week, and many markets broke out from their recent trading ranges in what could be the start of a strong trending period for many financial markets.
The S&P 500 failed to break out to new all-time highs, and this failure to confirm the Nasdaq 100’s rally to new highs contributed to further weakness for the tech index. The long-term trend is up for the Nasdaq 100 but remains down for the S&P 500, Dax and Nikkei. The tragic events in Paris may weigh on stocks once they reopen next week.
The LS Trader system is currently flat the four stock indexes that we trade, but short entries are within range in two of the four indexes should the markets break lower next week.
The commodities markets remain in a deep bear market, with only a few exceptions. From all the commodity markets that we trade at LS Trader, only London Cocoa, and Orange Juice are showing signs of strength. OJ this week reached a 16-month high, and London Cocoa has reached its highest level in 4 1/2 years.
The energy markets resumed their long-term downtrends this week as expected. Heating oil has already fallen to a new low for the year and the other markets in the sector don’t look far behind. Natural gas, which has been the weakest market in the sector in recent months, looks like it may test resistance this week having found support at the recent lows.
Metals have also seen further weakness, with copper, silver and palladium all breaking to the downside this week to add to the gold short position. Gold, basis the back adjusted continuous contract, tested it low for the year to date, but so far without follow through.
Copper fell to its lowest level in over six years and still has further room to the downside. Palladium looks set to test and possibly exceed its lows for the year printed back in the summer, and we may also see Silver do the same.
The dollar showed some weakness this week as it was unable to build on the gains from recent weeks. However, the long-term trend continues to favour the dollar almost across the board, and we will likely see dollar strength resume over the coming days.
The dollar index corrected slightly lower this week but remains near its highest level in six months. If last week’s high can be exceeded, we should see further gains towards the high of the year at 101.43 and likely beyond. The RSI remains in the bull range, and the long-term trend is up.
It’s the opposite view for the Euro, which is an inversion of the dollar index. Once last week’s lows are exceeded, further weakness down towards and ultimately below the March 2015 lows should be seen.
Interest rate futures
The 30 year T-Bond dropped through the next level of support but has so far been unable to continue lower, and last week’s low now represents key support in this market.
For now the long bond is the only market in the sector that is in a long-term downtrend. Further weakness will be required for the others to follow suit. As of Friday’s close, change of trend levels are some way below current levels.