Weekly Update 30 November 2014 – LS Trader

It’s been another excellent week for the LS Trader system, which continues to perform extremely well. The system has risen to new highs for the current year, with gains at well over the 100% level year to date. Additionally, the system is also at new all time highs based on the computer model that stretches back to 1983. Gains have been largely driven from strong trending markets, which have been evident in several sectors so far this year, particularly currencies, commodities and stock indexes.

Once again U.S. stock markets printed new all time highs. The S&P 500 printed a new high at 2075.25 basis the December e-mini contract on the 26th November, the day before the markets were closed in the U.S. for thanksgiving. The dollar continued its recovery from the recent correction, and energy markets collapsed. Long-term trends remain intact, up for stocks, the dollar and interest rate futures, and down for commodities.

Stocks

As written above, the S&P 500 has reached new all time highs once again. The RSI rose to a bullish 75.08 on Wednesday, the day of the latest in a long series of new all time highs. The Nasdaq 100 was stronger still and rallied throughout the week. The RSI on the Nasdaq 100 now stands at 77.32, it’s highest level since early July. With the trend in both markets clearly up and no signs of waning momentum we can continue to look higher until there is evidence to the contrary.

From last week on the Dax “..the RSI crossed above the 60 level for the first time since September. This is a bullish move and suggests further strength will be seen and possibly a test of the all time high that was printed earlier in the year.” The Dax rallied for the week and is now within touching distance of its all time high. The RSI is up to 75.2 but whether there is enough momentum left in this market for a move to new all time highs remains to be seen.

Commodities

The energy markets, which were already in well established downtrends, effectively collapsed this week leading to further windfall gains for the LS Trader system, which remains short crude oil, Brent crude, no leaded gas and heating oil. Each of these markets dropped sharply this week and the moves, which although are overextended, may not yet be over. The RSI on crude oil is down to its lowest level at 20.72 since mid-2012 where it dropped to 16, such is the extent of the recent collapse.

The metals sector has also seem some decent moves, particularly copper. This week saw a break of key support and the lowest print since mid-2010. Copper is known as Dr Copper for its supposed predictive qualities of economic health, so weakness in copper suggests a weakening economy. It’s possibly premature to say that at this stage but with price moving below a key support shelf that has held for over 4 years, there is now potential for an extended move lower.

Gold and silver also turned over and may be set for a test of the recent low. We have covered in recent updates that the rally seen from the November low was corrective and that the longer-term trends were still very much down. The inability of the RSI to get above the 50-60 on both markets so far goes to bolster that view.

Currencies

The dollar continues to recover from the recent corrections that were seen against several of the major currencies and we may see the dollar break to new highs against each of the remaining majors over the coming week or so. The dollar index remains just pips below the recent high, and the Euro which dropped to within a few pips of its recent low may also break out this week. A Euro at new lows and a dollar index at new highs would both confirm the other’s move and would suggest further dollar strength.

Interest rate futures

From last week “This price action still appears to be a consolidation and may be a build up to further rally and a test of the local top. The RSI has so far found support in the 40-50 range, which it typically does in bull markets.” Interest rate futures finally broke out of the weeks long sideways consolidation and rallied strongly throughout the week. The RSI has risen to 70.48 on the long bond, which is bullish and suggests that last week’s comments are on target and that further rally will be seen.

Good trading

Phil Seaton

LS Trader

 

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