Weekly Update 17 April 2016 – LS Trader

We continue to see signs of strength returning to the commodities markets, and it’s possible that we have seen the bottom for many markets in the sector. If the commodities markets have bottomed, there is potential for some very large moves to the upside over the coming months. However, it’s important to wait for confirming price action not to jump the gun. These moves, when they come, will present very profitable opportunities.

Stocks

The S&P 500 continues to grind higher but as yet has been unable to break resistance and confirm a change of trend to up. There is no question that there is significant resistance at just above current prices, but should the market breakout to new all time highs it’s possible that we could see considerably higher prices. There are numerous traders that have tried and failed to call a top over the past few months, and there is still sufficient short interest in the market to suggest that a breakout would likely lead to a raft of short covering and further rally.

The Dax rallied this week but once again has run into resistance at the March high and also at the 60 level on the RSI, which has kept a lid on all rallies since December. The long-term trend remains down, and there is significant price resistance overhead in terms of chart structure and the 200-day moving average.

The Nikkei also called this week but remains in a long-term downtrend, below its 200-day moving average and still below 60 on the RSI.

Commodities

Gold ended the week lower but remains above its long-term moving averages, and more importantly, above bull market support on the RSI. However, there is a possibility of a head and shoulders pattern forming, so a break of the neckline and the March low may see a further pullback here before the long-term uptrend resumes.

Silver, which has lagged Gold this year, finally completed a change of trend to up and registered a gain for the week while Gold fell back. There is some resistance in a zone around 1650, but if that can be cleared, there is room for a considerable further rally. On the weekly chart, Friday’s close completed a breakout from a 16-month wedge and broke the neckline of an inverted head and shoulders pattern on the daily chart. These patterns give a longer-term target of around 1850.

We saw both Crude Oil markets break the 60 level on the RSI this week, but so far without follow through to the upside. The RSI for both Crude markets is in the bull range, but the long-term trend is still down. Brent has a change of long-term trend to up within range, and that could be completed in the next few weeks. However, let’s wait for confirming price action and not jump the gun.

Currencies

The dollar index fell to its lowest level since August last year before putting in a three-day rally and reaching its highest level since March. However, the long-term trend is still very much down, and the RSI remains in the bear range.

The British Pound, currently the only current future that we trade at LS Trader that we don’t have a current open position in, remains in a long-term downtrend. This is the only one of these currency markets where the long-term trend still favours the dollar. The Pound continues to find resistance around the 50 -day moving average and the RSI remains in the bear range. One potential bullish development that could be unfolding is the possible head and shoulders bottom that is taking shape. However, that’s not a trade that we would take if the neckline is broken, as the long-term trend is still down.

Interest rate futures

Interest rate futures ended lower this week, but all remain above key technical levels, and above their 50 and 200-day moving averages. The RSI is also still in the bull range, so the focus remains towards higher levels. The long-term trend remains up for the entire sector.

Good trading

Phil Seaton

LS Trader

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