Weekly Update 30 July 2017 – LS Trader

U.S. stock indexes made new all-time highs yet again and the U.S. dollar continues to weaken almost across the board. Interest rate futures are in a random rotational two-way trading environment and may remain so for a few weeks yet. Commodities remain mixed, with metals and energies both having good weeks and continuing their recent recoveries.

Stocks

The S&P 500 rose to new all-time highs again this week but continues to trade in a narrow range in what is still a low volatility environment in spite of the large bar by recent standards printed on Thursday.

The Nasdaq 100 also printed a new all-time high on Thursday but fell just shy of the 6000 level. A sharp drop followed the high, but the lows were rejected on Thursday and Friday, which keeps the uptrend intact.

The Dax, which remains the weakest of the four indexes that we trade at LS Trader, decline further this week and is now well below its 50-day moving average and heading towards a test of its 200-day MA and quite possibly a change of trend to down over the coming week or so.

Commodities

From last week: “Gold had a decent week, keeping the long-term uptrend intact. Volatility is expanding, and price may continue higher towards 1300 level over the coming week or so.” Gold advanced again this week, reaching a high of 1277. The RSI has broken cleanly above the 60 level and looks set to continue higher to test the double top around the $1300 level.

Also from last week: “Copper reached its highest level since early March and could be poised to complete a trend change to up if it can successfully breakout from a five-month consolidation.” Copper completed a nice breakout and change of trend to up, reaching its highest level since May 2015 in the process.

Currencies

From last week on the dollar index: ”The dollar index fell to its lowest level since June 2016 and could be heading lower for a test of major support at 91.88. Volatility is expanding to fairly elevated levels so we may be nearing the point of a correction, but the long-term trend remains firmly down.” The index fell to new lows for the current move again, but volatility is reaching very elevated levels, currently at its highest levels since September 2014

The Euro, which is the inverse of the dollar index, continues to move towards our target at the 200-week MA (currently at 1.1844). Volatility is naturally elevated at these levels, but as with the dollar index, that does not mean that a reversal is imminent. Some cooling off and a correction towards fair value could be seen in both markets, but the trends are well established and intact.

Interest rate futures

Interest rate futures continue to consolidate around their 50 and 200-day MAs, both of which are nearly flat, and the RSI is also moving sideways in the region of the 50 level. Add to these declining volume and volatility, and it’s evident that this sector is in a sideways chop that is best avoided until resolved.

Good trading

Phil Seaton

LS Trader

Leave a Reply

Your email address will not be published. Required fields are marked *