Weekly Update 22 February 2015 – LS Trader

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Stocks rose to new all time highs once again as both the Dax and the S&P 500 made new all time high prints on Friday. The Nasdaq is also at its highest level from a monthly chart perspective since its all time high was printed nearly 15 years ago. The dollar continues to consolidate and interest rates continue to decline. Commodities remain mixed

Stocks

From last week “Friday’s close was above the prior all time high, making it also a new all time high daily and weekly close. Should the breakout be good, the breakout level should provide support and a platform for further advances.” The prior resistance did act as support on a closing basis and should continue to do so if the trend is to remain good. A move much below the December high would possibly be the beginning of a reversal. However, for now the market has closed at a new all time high close and also closed near the top of Friday’s and the week’s bar, both of which are bullish.

We have a similar set up in the Nasdaq 100, which also continues to pull away from support. Here too we can look for that level to support the advance. The Nasdaq 100 is now really beginning to look like it may test the all time high printed in March 2000 at 4884. Whether it does it in this current move or later in the year remains to be seen, but it seems likely that having come this far that the all time high will be tested again at some point.

One thing that is of particular interest in the Nasdaq 100 is that sentiment is very neutral. Often when a market is at multi-year highs or is approaching a top, sentiment would be very bullish, suggesting that most traders who want to be on board the trend already are. In this case though there seems to be plenty still on the sidelines with the bullish sentiment only at 46% bulls, so potential further buying power remains to fuel a move to test the all time highs.

Commodities

Precious metals have continued recent weakness and this week has seen the RSI on gold and silver drop below the 40-bull market support level, which means that the RSI is now bearish. The long-term trend is still up for gold, but remains down for silver as it has since it last changed trend to down 2 years ago, in February 2013.

Crude oil’s corrective rally appears to have run out of steam. Interestingly, the RSI has so far been unable to push above 60 and therefore remains in the bear range. Unless this changes it could well be that we have not yet seen the low in this market and new lows could yet be ahead. The other energies appear to be more bullish, with heating oil being by far the most bullish of all, rising to its highest level since early December and the RSI reaching a bullish 73.36. For now the long-term trend is still down here as it is for the entire energy sector.

Currencies

The dollar index continues to consolidate but remains in a sideways range, possibly a triangle pattern between the January high and short-term support. The range is tightening so we can look for a breakout in either direction soon, which will either be a break of support or a breakout of the top of the triangle; the latter of which would be bullish and suggest that the rally was not complete and that new highs were ahead.

Interest rate futures

Interest rate futures continued recent weakness and with the exception of the 3-month markets, fell to new lows for the year. The RSI has moved lower on the 30 Year T bond, confirming its switch to the bear range, but for now the trend remains up. Both the 5 & 10 year T notes also dropped below 40, so these markets are moving together at present and it continues to look like a top may be in. Further weakness is required before we get price confirmation of a change of trend.

Good trading

Phil Seaton

LS Trader

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