Weekly Update 6th July 2014 – LS Trader

The past week was a shortened one due to the 4th July holiday in the U.S. The shortened week was still sufficient for the S&P 500 to post new all time highs once again. The major global index looks set for a test of 2000 in the next week or so.

The long-term trend analysis remains as before, up for stocks and interest rate futures, mixed for commodities and down for the dollar. There were tow changes of long-term trend this past week, as corn completed a change of trend to down, and copper to up. Further long-term trend changes in a few commodities and currency markets could be ahead; of particular significance would be a change of trend for the dollar index and the Euro.

Stocks

As mentioned above, the S&P 500 rose to new all time highs this week and the key psychological 2000 level is now very much within reach. Whether the market can reach and close above that level remains to be seen. It is quite possible that this level may prove to be a significant turning point, but for now the trend remains up.

The Dow 30, although not a market that we trade at LS Trader, but still one that we monitor due to its popularity, reached a new all time high having cleared 17,000 for the first time in its history.

In last week’s update we wrote on the Dax “The long-term trend is still up and it will be interesting to observe whether the 40 support level on the RSI holds over the coming week or so.” Turns out that support was found and the RSI never dipped below 40, keeping the long-term uptrend intact. A strong rally followed and took the Dax back to just a dozen or so points below the all time high. A breakout may well follow on Monday.

The volatility index continues to drop to new multi-year lows as market complacency reaches new extremes. There is bullish divergence on the RSI and it’s possible that should the S&P 500 fail to clear the 2000 level that may be the catalyst for a sharp rise in the VIX from the current historical low levels.

Commodities

Gold moved higher following the RSI range shift to bullish that occurred the previous week and a breakout above key resistance followed. The market was unable to hold above that resistance level and moved lower, but then recovered about half of the decline. The trend is up and another test of resistance looks likely in the coming days.

Silver moved slightly higher for the week, but the big moves in metals came from copper and palladium. Palladium recovered back to the previous high as we suggested would happen in last week’s update. Copper completed a change of long-term trend to up for the first time this year and now only silver from the metals sector remains in a long-term downtrend.

The soybeans complex collapsed and continues its sharp decline from all time highs in the case of soybean meal and soybeans. Changes of trend to down are very much in range for the beans complex.

Currencies

The dollar index edged higher for the week and a change of long-term trend to up based on LS Trader‘s proprietary algorithm is coming into range. A change of trend is also coming into range for both the Euro and the Swiss franc. These changes of course require price action to confirm them, which as yet has not happened. As mentioned above, should the dollar index change trend to up and begin trending higher, that could have significant impact on other markets, particularly commodities, and also stocks.

Interest rate futures

Interest rate futures were sharply lower this week but the long-term trend still remains up across the sector. Short-term support levels have narrowly held this week but it remains to be seen as to whether that remains the case once trading resumes next week following the holiday weekend.

Good trading

Phil Seaton

LS Trader

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