Weekly Update 21 February 2016 – LS Trader

The past week has seen stocks and the dollar both advance, but it’s been a quieter week than we have seen recently. Volatility has also dropped in most of the markets that we trade.

There are a handful of markets that are trading within range of key breakouts, and one or two markets are on the verge of changes of long-term trend.

The long-term trends are still down for stocks and most commodities, mixed for the dollar and up for interest rate futures.

Stocks

The S&P 500 put in a four-day rally this week but ran into resistance exactly at the 50-day moving average. The long-term trend remains down, and the RSI is still in the bear range.

The Nasdaq 100 displayed very similar price action but remains weaker than the S&P 500. The RSI on the Nasdaq 100 has so far been unable to break the 50 level. The 50-60 level on the RSI is bear market resistance and as long as that resistance zone holds we can look for further price weakness.

The Nikkei remains considerably weaker than both US indexes, and the current downtrend remains intact. The RSI here has been unable to break even the 40 level, and, therefore, remains very much in the bear range.

The Dax gapped higher at the open on Monday and traded higher through to Thursday. The rally was sufficient to break the prior support level from the August to January lows, which should now have acted as resistance. The break of that level may have broken the bears’ back in the near term, but the long-term trend and RSI remain bearish.

Commodities

Gold ended the week slightly lower than it began, but also some $35 higher than the lows printed on Tuesday. That low came right at the same level that had previously been resistance in this market, so if the current uptrend is good, that former resistance level should now act as support. This makes last week’s low a key level for this market. If support there fails, then we will likely see some further weakness in this market. For now, the long-term trend is up and the RSI remains in the bull range.

The energy markets have had a mixed week, but the long-term trend remains down across the sector. Brent rallied to test its 50-day moving average but has been unable to break through. The RSI in all four energy markets that we trade at LS Trader remains in the bear range, so as yet, there is no evidence that the long-term trend is going to change anytime soon.

Natural Gas has been very weak and will likely test its December low this week. RBOB Gasoline also remains near its recent low, and it too could push to new lows this week.

Sugar has taken out a recent support level and may complete a change of long-term trend to down in the coming week or so. Price has now moved well below both the 50 and 200-day moving averages, and the RSI is in the bear range. Not much more weakness will be required for a change of trend to down.

Currencies

The dollar has made a bit of a recover this week against several of the majors. The dollar index rallied to test its 200-day moving average, but as yet has been unable to close above it. The RSI remains in the bear range, but the long-term trend is still up.

Interest rate futures

Interest rate futures have had a mixed week, and all five markets that we trade at LS Trader remain below their highs printed on the 11th February, but also above support. The long-term trend is still up across the sector, and the RSIs all remain bullish. Regarding momentum, there is no bearish divergence, and the strength of the rally that began early this year suggests that there will be new highs yet to come. Whether those new highs occur in the current move or a bit later in the year remains to be seen.

Good trading

Phil Seaton

LS Trader

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