Weekly Update 24 January 2016 – LS Trader

The past week has delivered some large moves in the markets, particularly in stocks and energies. At present these moves are corrective and have not been sufficient to do any damage to the long-term trend picture, which remains intact.

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

Stocks

The S&P 500 briefly pierced its 24th August low but rallied sharply after that. The long-term trend is still very much down, and the RSI is still deeply in the bear range. It’s a long way back to the January open, so unless we see a spectacular rally this week, January will end as a down month, which based on the historical record known as the January Barometer, will point to a down year for stocks.

The Nasdaq 100 remains the strongest of the four stock indexes that we trade at <span style="text-decoration: underline;">LS Trader</span>, and has as yet not completed a change of long-term trend to down, and, therefore, remains in a long-term uptrend. However, in spite of last week&rsquo;s strength from the low of the week, a downside breakout and trend change is still in range, whereas significant rally is required for an upside breakout.

The Nikkei dropped to its lowest level since October 2014, but reversed sharply from the low of the week, which was almost exactly at the level of the 200-week moving average, and has managed to close just above its August 24th low. The long-term trend is still down, and the RSI remains in the bear range.

Commodities

The energy markets have had a rare good week, rallying sharply from their lows and reporting a weekly gain. However, in spite of the rally from Wednesday&rsquo;s lows, all the energy markets with the exception of Natural Gas remain deep in a long-term downtrend and the RSI remains in the bear range in each market.

<p>Gold and Silver continue to trade mostly sideways as they continue to build up for their next big move. For now, the long-term trend in both precious metals is down, as it is also in Copper and Palladium.</p>

<p>Lean Hogs continues to rise, and this week moved further above its 200-day moving average, and the RSI is also back in the bull range. This week see the contract roll forward to April, and we may see the April contract move higher towards the 75 area over the coming weeks.</p>

<p><strong>Currencies</strong></p>

<p>In last week&rsquo;s update, we suggested that the dollar may test August the 24th high against the Yen, and that did happen, with the dollar moving just a few pips above that high. However, the market was unable to push beyond the high and the market reversed sharply lower and tested support, which will likely be tested again early next week.</p>

<p>The British Pound made another multi-year low but has fallen short of our $1.4015 target so far and has subsequently bounced higher. However, the two-day rally has not been overly convincing, and the Pound closed the week lower. The long-term trend is firmly down, and the RSI remains in the bear range. New lows cannot be ruled out as yet in this market.</p>

<p><strong>Interest rate futures</strong></p>

<p>Interest rate futures continued initially with recent strength but saw some weakness in the second half of the week. The long-term trend is now up for the entire sector following the breakout to new highs for the current move in the long bond.</p>

<p>However, the long bond was unable to hold on to early gains, and has, perhaps critically, closed back below prior resistance, which is indicative of a reversal. Unless the long bond can regain last week&rsquo;s highs in the next few days, we will likely see a continuation of the weakness that began in the latter half of the past week.</p>

<p>Good trading</p>

<p>Phil Seaton</p>

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