Weekly Update – 3 June 2018 – LS Trader

The long-term trend remains bullish for US stocks. The Nasdaq 100 has seen bullish price action this week and may head back to test all-time highs. The S&P 500 remains weaker but may also breakout this week.

A look at the monthly and weekly charts confirms that the uptrend is still intact in spite of what the perma-bears will say, who will no doubt be complaining this week that the market is wrong. It’s a mistake to fight the trend because the market is where it is because that is where it is supposed to be, and it’s supposed to be where it is because that’s where it is!

Stocks

From last week on the Nasdaq 100: “The current market pattern is that of a massive failed head and shoulders pattern, which if correct would give targets of over 800 points above current price levels. That move could get underway with a breakout this week, which if successful may lead to a test of the March 13 all-time highs.” We did get the breakout and Friday saw very bullish price action combined with a decisive move above 60 on the RSI. The next target is for a retest of the March all-time high.

Also from last week on the S&P 500: “The upper boundary of the triangle from above has been tested, and the market remains above the triangle. The RSI is funding resistance at the 60 level, but a break above last week’s highs may see the RSI move decisively above 60 and the bull market resume.” The S&P 500 continues to probe resistance on price and RSI, and a breakout to the upside could be seen this week.

Commodities

Cotton rallied to its highest level in over four years this week. The trend remains bullish but volatility is reaching an extreme and sentiment is also highly bullish so a short-term pullback may be forthcoming in the next week or so. However, the long-term trend is well established, and we may see a further rally in the longer-term.

Gold remains in a long-term downtrend and has traded in a near $20 range for the past two weeks. A break to the upside from that range will indicate that the downtrend is over for now, whereas a break to the downside through the May lows would point towards further weakness to around $1250, approximately $50 lower than Friday’s close.

Currencies

The Dollar Index ran into resistance at the November highs at just over 95.00 and has been unable to break through so far. The Euro, which is the inverse of the Dollar Index has been weaker (stronger dollar) and made its lowest print since July last year. The long-term trend continues to favour the dollar, although sentiment had become extremely negative against the Euro and bullish for the Dollar that a correction was due.

Interest rate futures

Last week on interest rate futures: “The COT bullish commercials profile proved to be bang on, and interest rate futures rallied sharply. However, price action was a bear market rally, and the long-term trend is still down. We may see a resumption of that downtrend over the coming weeks.”

The rallied stalled at resistance from the early April high and turned lower. Commercials have a near-record net long position on the 10 Year T-Note in the COT report so there may yet be higher to go to the upside before the downtrend fully resumes.

Good trading

Phil Seaton

LS Trader

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