Weekly Update 26 April 2015 – LS Trader

The past week has seen stocks complete their recovery, and the S&P reach new all time highs. The Nasdaq 100 also broke out to multi-year highs. The dollar has been weaker but remains in a long-term uptrend. Interest rate futures and commodities have been mixed, but the long-term trend is still up for rates, and down almost across the board for commodities. However, as we cover in the commodities section below, there are a couple of markets within the range of a change of trend to up.

Stocks

From last week on stocks “In spite of the weakness seen in global stocks this week, it should be noted that the long-term trends are all still up, and further price action to the downside through longer-term support levels will be required for that to change. It is therefore at this moment in time premature to rule out a further rally and new highs. This view is further bolstered by the fact that the price action since late February has been sideways, and choppy, typical characteristics of a correction and a pause before the prior trend resumes. Only price action can confirm a change of trend, so until we see a break of major support, the focus remains to the upside.”

This view still appears to be on track as both the S&P 500 and Nasdaq 100 broke out of their ranges, which in the case of the S&P 500 was a new all-time high, and the Nasdaq 100 was a high since the 2000 top. The Nasdaq Composite, which is not an index that we trade at LS Trader, rallied to new all-time highs, exceeding the peak printed at the end of the tech bubble back in 2000, in a move not yet confirmed by the 100. In terms of futures prices, the Nasdaq 100’s high back March 2000 was 4884, still some 350 odd points above last week’s high.

The Nasdaq 100’s rally took the RSI clearly through 60 this week, reaching 66.97, suggesting that further rally is ahead. The S&P 500 also moved above 60, but only just, reaching 60.51 on Friday. The odds favour that we will see continued strength during the next few days at least.

Commodities

The energy markets have shown continued strength this week with both heating oil and no leaded gas rallying sufficiently to get within range of a change of trend to up for the first time since June last year. The crude markets are still a way off of a change of trend to up. Natural gas, by far the weakest in the sector at present, remains near its recent lows.

Both gold and silver have been weak over the past few days and may both be set for a test of their recent lows. Silver is the weakest, still in a long-term downtrend, and this week seeing the RSI move back below 40, which suggests that the March lows will be tested, and probably broken.

Corn broke sharply lower this week, breaking through a key shelf of support that turned the long-term trend back to down. This break of support and trend change, which was confirmed by the RSI falling through bull market support at 40, suggests further decline over the coming weeks towards the 2014 low around 345.

Currencies

The dollar index ended the week lower and is now testing that zone of support that we mentioned last week. Additionally, the RSI has fallen to 42.87. Bull market support comes in at 40, so if that level is decisively broken, we may see prices fall further to test the next level of major structural support. A change of trend to down for the index is however currently out of range, and I doubt if we’ll see sufficient weakness for that level to be reached before the multi-year bull market resumes.

That said, there are a handful of currencies that are coming within range of testing trend-defining levels. Whether we see sufficient dollar weakness for any of the trends to change remains to be seen.

Interest rate futures

Interest rate futures have been mixed this week, but the long-term trend is still up across the sector. Prices fell mid-week to test support, but support was found, and some strength returned to close the week out. The recent lows are, therefore, key support, and the focus remains higher as long as those levels hold. The 30-year bond is the weakest in the sector at present, but all markets remain above 40 on the RSI at present. The shorter-term markets, the 3-month Eurodollar and the 5-year T-notes remain the leaders in the sector.

Good trading

Phil Seaton

LS Trader

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