Weekly Update 27 September 2015 – LS Trader

<p>The stock markets continue to consolidate but could be due to break out again soon. Both the Dax and Nikkei came close to breaking their respective 24<sup>th</sup> August lows. If those lows can be taken out, we could see some decent moves in numerous other markets as well, particularly USD/JPY which has been very highly correlated with the Nikkei in recent weeks.</p>

<p>The long-term trends remain down for stocks, down for commodities, but mixed for currencies and interest rate futures.</p>

<p><strong><u>Stocks</u></strong></p>

<p>The S&amp;P 500 headed lower this week and has been unable to break resistance at 2011.75, the 17<sup>th</sup> September high. The long-term trend remains down, and the RSI is still in the bear range, so the focus remains on lower prices, particularly as long as resistance around 2012 holds. The Nasdaq 100 has seen similar price action this week and also looks to be headed lower. From last week on the Dax: &ldquo;With the long-term trend remaining down and the RSI still in the bear range, further weakness towards the key low on the 24<sup>th</sup> August may be seen. Ultimately, we should see significant new lows below that key low.&rdquo; The Dax came within 20-odd points of testing the low from the 24<sup>th</sup> August but support held. We can look for another test of that low in the coming days. The Nikkei also tested its 24<sup>th</sup> August low as expected. Support held, and a decent rally followed on Friday. We can still look for another test of that key low soon. As before, if that low is broken, we may see a swift 600-odd point decline down to the next level of structural support around the late-2014 lows.</p>

<p><strong><u>Commodities</u></strong></p>

<p>Gold broke through its trendline that has held since January but was unable to progress. Similarly, the RSI tested the 60 level and but for a brief intra-day break, was also unable to break through decisively and price has since moved back below the trendline and RSI back below 60. This suggests that these two levels are key for this market in the near term. A decisive break of both would be short-term bullish, but if both levels hold we can look for further weakness back towards the recent lows. The long-term trend remains down. Rough Rice made a new high for the year and continues to head towards our next target around 13.50. The trend is clearly up, and the RSI remains in the bull range.</p>

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

<p>The dollar index remains range bound and has been effectively consolidating since the March 2015 peak. The range is quite wide, between the 101.43 high and the 92.77 low. The breach of major support back in March, and the series of lower lows and lower highs does have the trend pointed lower. The RSI is also in the bear range. However, it won&rsquo;t take much further rally from Friday&rsquo;s close to change that. For now, sideways is the order of the day, and that is also keeping many other currency markets in a range, particular EUR/USD, which is a near perfect inversion of the dollar index.<br />
<br />
Another key currency market right now is USD/JPY due to its very high correlation to the Nikkei and other stock indexes. Once USD/JPY break from its current sideways range such a move could trigger some large moves in multiple markets across different asset classes.</p>

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

<p>Interest rate futures have had a mixed week, with strength seen through Thursday before some weakness on Friday. The 3 Month Eurodollar broke to a new high on Thursday but pulled back on Friday, and we saw similar price action in the Long Gilt. These two remain the strongest in this sector, followed by the 5 &amp; 10 Year T-notes. The trend for the sector is up with the exception of the long bond, which remains in a long-term downtrend.</p>

<p>Good trading</p>

<p>Phil Seaton<br />
<strong>LS Trader</strong></p>

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