Weekly Update – 3 December 2017 – LS Trader

Stocks hit new all-time highs on Thursday but then had a bit of a wobble on Friday, where, by recent standards, a steep sell-off ended with an equally sharp recovery. This resulted in the S&P 500 closing lower by just 0.15% for the day.

Stocks

The S&P 500 posted a new all-time high this week, and after a round trip on Friday, ended the week higher by 1.65%

From last week on the Nasdaq 100: “There is also bearish divergence between price and RSI as well as other measures of momentum, so although the trend is up, the rally is weak and long in the tooth.” Momentum continued to decline this week as evidence by doji on Monday and Tuesday, followed by a steep sell-off on Wednesday. Thursday saw a bit of a recovery, but Friday has a similar round-trip pattern to the S&P.

The Nikkei, which rolls this week to the March contract, closed the week flat and has printed an indecision candle on the weekly chart. Friday’s close us roughly in the middle of November’s price range.

The Dax has seen further weakness this week and on Friday closed below change of polarity support from the June high. Short-term support has also been broken, so things are looking a bit more bearish for the Dax than they have in some time. Friday’s close was also decisively below its 50-day moving average, and the RSI has broken the 40-level, which is bull market support. This suggests further weakness ahead, but for now, the long-term trend remains up. If weakness persists, the Dax will almost certainly be the first of the stock indexes that we trade at LS Trader to complete a trend change to down.

Commodities

The energy markets had a dip during the first half of the week but recovered with a strong day on Friday and may now make new highs for the current move. RBOB Gasoline has been the weakest of the four energy markets in a long-term uptrend. Natural Gas remains the weakest in the sector and the only one in a long-term downtrend.

Metals have seen some weakness this week. Silver has been particularly weak, dropping 4.12% and leading the way to the downside. Silver remains the only one of the four major metals markets in a long-term downtrend. Gold has also seen some weakness but remains in a choppy range between its 50 and 200-day MAs, both of which are flat. The RSI is also near the 50 level, and together these indicate an almost complete lack of trend, which has been the case for the last couple of months.

Currencies

EUR/USD looks poised to test the November top, and if successful, may go on to test the August high, and potentially exceed it. The dollar index made a two-month low last week and may move lower again this week, resuming the long-term downtrend. The RSI remains is back in the bear range, and we may see weakness towards the September low over the coming week or so.

From last week on the British Pound: “A move above last week’s high accompanied by a decisive move above 60 on the RSI may give rise to higher prices, possibly back to the local top at 1.3695.” The Pound rallied sharply, and the RSI broke the 60 level and is now in the bull range. Further strength may follow with possibly a new high for the year.

Interest rate futures

Interest rate futures have seen a good uptick in volatility this week. As before, the shorter-term markets remain the weakest. The 3-month Eurodollar dropped to its lowest level since March 2015 basis the back-adjusted continuous contract, and the 5 Year T-note made its lowest print since March this year.

Good trading

Phil Seaton

LS Trader

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