Weekly Update 23rd February 2014 – LS Trader

Stocks indices remain either at multi-year highs (Nasdaq 100) or very close to all time highs (S&P 500 & Dax). This week ahead may prove critical, as another test of key resistance on the major stock index, the S&P 500, looks likely. Success or failure here may have large repercussions across several different markets and sectors.

Stocks

The S&P 500 continued to within a couple of points of its all time high but so far resistance has held firm. Multiple failed tests of resistance over the past few weeks show the extent of resistance and short sellers present at the highs. The Nasdaq 100 poked to new multi-year highs and closed slightly up for the week, but the move is far from convincing and future direction will very likely be determined by the S&P 500’s next move.

The Nikkei, by far the weakest of the 4 stock indices we trade at LS Trader still remains close to trend defining support. The recent recovery has been unable to push much beyond the 38.2% retracement of the prior decline, but for now the trend remains up. To a large extent whether further gains for the Nikkei or weakness to test key support will be dependent on whether the S&P 500 breaks out to new highs or fails once more.

Commodities

Considering the lack of movement in the dollar, which is often a key influence in commodity markets since the majority of commodities are priced in dollars, several commodities are shaping up quite nicely, and a few of which have made decent moves. A couple of which, such as coffee and natural gas have been explosive.

Natural gas continues to work its way higher towards the next technical resistance level at 6.990 having this week reached its highest level since July 2011 basis the continuous contract. At week level the RSI has risen to 77, which is a clear indication of how strong the trend is. Large daily moves continue to be seen in this market, which show now sign of abating near-term.  Coffee made its largest weekly move since 1999, such is the extent of strength seen this past week, which adds to decent rallies seen in the prior 3 weeks. Oats also had a good week, slightly exceeding the prior highs to reach its highest level since 2008.

Currencies

The dollar index ended the week slightly higher this week, but moves in the currency markets have been muted overall. Basis the weekly continuation chart there is quite a tight range that the index has traversed over the past 23 weeks, the entire range of which is just 252 points. That’s now a lot in terms of an index that has an average daily range of around 50-60 points. This does suggest that the eventual break from this range should have legs. For now it’s a matter of waiting to see which direction the market breaks. To an extent this may be dependent on the S&P 500. A decent move either up or down for the S&P 500 may be the catalyst for an extended move not just in the dollar index, but in other currency markets as well.

Interest rate futures

Interest rate futures roll out of March into June this week. Currently the long-term trend remains up for 4 or the 5 interest rate futures markets that we trade at LS Trader, based on our proprietary trend analysis.  In the shorter term prices are consolidating near the recent highs, possibly waiting for direction from stocks and the dollar.

Good trading

Phil Seaton

Leave a Reply

Your email address will not be published. Required fields are marked *