Weekly Update 21st June 2015 – LS Trader

Stock indexes and the dollar remain near to key levels. This week’s recovery in the major stock indexes took them to within touching distance of a test of their recent highs. The dollar, on the other hand, is also testing key levels, which is support in the case of the dollar index. Dollar weakness has taken the Euro to within range of a change of trend to up. The proximity to key levels in several markets suggests that the next week or so could be very interesting indeed.

Stocks

Stocks had a strong week until Friday, where some weakness was seen. The rally from Monday’s low took the S&P 500 to within 7 points of its May all-time high. The RSI has held the 40-bull market support level, and the long-term trend remains up. Another test of all-time highs looks a possibility.

Price action in the Nasdaq 100 was almost identical to the S&P 500, but the Nasdaq remains slightly stronger in terms of momentum. The Nasdaq could also test its multi-year high in the coming week.

By far the weakest of the four stock indexes we trade at LS Trader is the Dax, which this week dropped to its lowest level since February. Here the RSI has already broken the 40 level, which suggests another test of last week’s lows may be ahead.

Commodities

Sugar continues to fall and this week dropped to new 6½-year lows. The RSI is down to a bearish 27.84, and there is nothing in the chart that suggests anything other than a trend continuation at present.

Palladium broke a key shelf of support to fall to its lowest print since February 2014. There is a zone of support just below current levels and down to the 690 area, but if prices can make their way below that then we can look for a continuation down towards the next support level at 640.

Copper is another metal that is sinking fast ever since the failed upside breakout in early May. For now the trend remains up but with the RSI falling to 25.92 this week, well into the bear range, we may see further weakness to test major support in the coming weeks.

As for the precious metals, we have still yet to see any decisive price action, but silver is close to testing key support in the coming days. Gold, on the other hand, did put in quite a decent rally on Thursday, but again there is nothing convincing here, so further sideways consolidation seems likely until we get a clear breakout.

Currencies

The British Pound resumed the uptrend this week with a break of the May high. The move was confirmed with a break of the 60 level on the RSI, and the rally may have further legs. The Euro has also rallied to within range of a change of trend to up, and a change of trend could be confirmed this week. The Euro and the Pound are highly correlated, so the best moves tend to occur when both markets are moving together, in other words, one currency confirms the other.

The dollar index came within a pip of completing a change of trend to down but support narrowly held on Thursday, and a 100-point rally quickly followed. This makes last week’s low a very key level for the index, and indeed for the dollar in general. Should that level be broken, the dollar would be in a downtrend, and the move would likely be confirmed by an upside breakout in the Euro. The RSI has dipped below bull market support at 40, dropping to 37.31 this week. However, the long-term trend is still up for the dollar index, albeit only just.

However, it’s not all been bad news for the dollar. The New Zealand dollar continues its recent collapse down to new multi-year lows and is now at its lowest level in 6 years, give or take a week.

Interest rate futures

Interest rate futures continued their corrective recovery this week, and further strength may be seen. Only the 30 Year T-Bond and 10 Year T-Notes completed a trend change to down from the U.S. interest rate futures sector, with both the 5 Year Notes and 3 month Eurodollars remaining in long-term uptrends. The latter could complete an upside breakout this week as it is only a couple of points away from its April and May highs.

Good trading

Phil Seaton

LS Trader

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