Weekly Update 27th April 2014 – LS Trader

This week ahead sees the 2-day FOMC meeting, beginning on Tuesday. This can often lead to some short-term volatility for a couple of days as Fed watchers try to guess what the Fed is going to do and what the markets’ reaction will be. This is not a winning game to play and one is far better off trading with the trend. This week also sees the end of April and historically the end of the best 6 months of the year for stocks. This gives rise to the old stock adage of “Sell in May and go away”. However, even though that is often correct, it is not always, and it also does not necessarily mean the start of the month. There have been some strong months of May historically.

The long-term trends remain intact and are still mixed for stocks, currencies and commodities, but up for interest rate futures.

Stocks

The S&P 500 continued the rally that began the week prior but ran out of steam on Thursday and pulled back, closing less than a point up for the week. The 1882.5 high posted on Thursday was exactly 10 points below the all time high posted on the 4th April at 1892.5, currently the all time high. Even following 2 days of selling, all time highs are still very close to current market levels so a break to new highs can far from be ruled out. The S&P 500 is however the strongest of the indices we trade at LS Trader.

The Nasdaq 100, in spite of the impressive rally that began back on the 15th April remains some 200 points below its recent highs and is currently in the middle to lower end of the range that has encapsulated trading so far this year. Critical support is not that much below current market levels and a break of said support could yield a decent sell-off. As ever, price action is the only thing that can confirm an idea and market direction, so for now it’s a matter of waiting for a breakout, whichever direction that may be in.

Currently the most likely stock index to break lower is the Nikkei, due to it already being in a long-term downtrend. Critical support could be tested in the coming days.

Commodities

Coffee completed its recovery following the sell-off seen in March. The July contract pushed to new highs for the current move and the highest level for coffee since April 2012 basis the back adjusted continuous contract. Short-term weakness has been seen since the high posted on Wednesday, but the trend is still very much up.

Coffee was not the only commodity market to reach a new high for the current move as orange juice also did the same, reaching its highest level since March 2012 before it also had some latter week weakness.

Silver dropped below key support as expected but then put in a strong one-day bounce before priced eased off once more. The long-term trend is still down for silver as it is also for copper, but remains up for gold and palladium

Currencies

The focus in the currency markets remains as before on 13966 resistance for the Euro basis the June contract, and the key low for the dollar index at 7937. Both of these levels are very much within range of getting tested this week, and as we have mentioned previously the success or failure of the markets breaking out through these key levels may be a key determining factor in numerous markets over the summer months. The currency markets have bee little changed really over the past week or so, presumably waiting for direction from the Euro and dollar index.

Interest rate futures

The long-term trend remains up across the board for interest rate futures. The long bond, still the strongest market in the sector from the 5 that we trade at LS Trader came within 3 points of the recent high, which marks the highest level in the long bond since June last year. The 10-year T note is the next strongest but remains back in the middle of the recent range, as does the 5 year note.

Good trading

Phil Seaton

LS Trader

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