Weekly Update 18 September 2016 – LS Trader

The past week has seen stocks mount a bit of a recovery, but they remain below their recent highs. The Dollar has had a decent week and may be poised to breakout higher against some of the major currencies.

This week sees the two-day FOMC meeting begin on Tuesday.

Stocks

The Nasdaq 100 is the strongest of the four stock indexes that we trade at LS Trader and has put in quite a strong recovery this week, helped by Apple stock rising to a nine-month high. This rally has taken the Nasdaq 100 within touching distance of resistance and a possible breakout to new all-time highs.

The S&P 500 has been considerably weaker than the Nasdaq and has had a much more muted recovery. The index appears to be finding support around the 100-day moving average.

The Nikkei, which is the weakest of the global stock indexes that we trade, has moved back below its 50 and 200-day moving averages and remains in a long-term downtrend. The RSI has closed a touch below the 40 level, which is bull market support. A decisive move below 40 on the RSI would point to further weakness.

The Dax also finds itself at a key support level and is testing multiple support levels that are closely bunched. These include the 40 level on the RSI, the 200-day moving average, and the top of the downward sloping trend line from the April 2015 high. If all of these levels fail to hold, we should see the psychological round number 10,000 tested.

Commodities

The energy markets have moved lower this week with the exception of Natural Gas and RBOB Gasoline. Both Crude Oil markets are showing persistent weakness and may fall further to test key structural support levels over the next week or so.

Gold has closed lower in seven of the last eight trading days and has closed right on its 100-day moving average. This is seasonally a pretty strong time of year for the yellow metal, but not so this year so far. Price is currently just above a key short-term support level so we may see some strength. Price is also right on a trend line from the December 2015 lows. If that support level fails to hold, further weakness back towards the 200-day moving average, currently at 1271 may follow. This coincides with the low of the Brexit day rally, which was a rally day fuelled by massive volume. This is likely to represent a very high volume footprint which should provide significant support if the market falls that far

Currencies

It’s been a decent week for the Dollar, which has seen strength returning to the market this week, particularly on Friday. The Dollar Index moved through both its 50 and 200-day moving averages on Friday on decent volume and may continue to press higher this week, certainly in the run-up to the Fed meeting, which always has the potential to move the currency markets around. Volatility is trading at around fair value on the Dollar Index, which means that a breakout is due.

The British Pound has moved back below all its moving averages and had a large down day on Friday. The market has effectively consolidated in a sideways range since the 24th June and looks poised for a breakout to new lows. If Dollar strength is seen elsewhere, the Pound is likely to come under further pressure and the 1.28 area may be tested.

Interest rate futures

Interest rate futures remain in a wider trading range that has been in place for several months. Price remains between the 50 and 200-day moving averages on the 5 & 10 Year T-Notes, and the 30 Year T-Bond. The long-term trend in all three markets is up, as it is also for the UK Long Gilt. The trend is down only for the 3-month Eurodollar.

Good trading

Phil Seaton

LS Trader

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