Weekly Update 7th May 2017 – LS Trader

The coming week’s opening will be dominated by the outcome of the French Presidential Election on the 7th May, and that may lead to some volatility when the markets open Sunday night/Monday morning.

Stocks have been bullish, but the dollar has remained mixed, as have commodities. The energy markets took a battering until a partial recovery was seen on Friday.

Stocks

The Nasdaq 100 made a new all-time high again this week. The S&P 500 also made a new all-time closing high on Friday. Whether we see a continuation of strength this week may be determined by matters elsewhere. Either way, US stocks are bullish at this time.

The Dax also made new all-time highs this week, but huge volatility can be expected on Monday following the result of the election. If Macron does not win by a large margin, or if Le Pen wins against the odds, the Dax will very likely take a tumble. The Nikkei also completed a recover from the sell-off seen during April to reach its highest level since 2015.

Global stocks remain bullish, and all four indexes that we trade are in long-term uptrends.

Commodities

The energy markets showed further weakness this week with both Crude Oil markets breaking down to complete the anticipated trend change.

Silver continues to decline sharply, falling below the swing low at 1690 that we highlighted last week. Silver has now fallen from 1873.6 on the 17th April to 1621.5 on Thursday 4th May, 15 consecutive down days. Volatility has reached elevated levels, and the next level of support at 1582.8 will likely be strongly defended and attract some bottom fishers.

Sugar did continue with short-term strength and then reversed lower again, as we expected, printing new lows for the move on Thursday and Friday. Prices do not look overdone, nor is volatility even close to extreme levels, so with structural support not appearing until 14.00, low prices may yet be seen.

Currencies

It’s been an interesting week in the currency markets and the expected volatility on Sunday night/Monday due to the French Presidential elections will likely lead to some large moves this week.

The Dollar Index fell to new lows for the current move, and, perhaps critically, closed below major support. The trend is down for the dollar index, which is the inverse of EUR/USD. The Euro rallied to above 1.10 for the first time since November and appears to be finding support at the 200-day moving average.

The British Pound has reached its highest level since late September, but there is bearish divergence evident on the RSI. That does not mean that lower prices are imminent, merely that momentum has decreased. Here too, the 200-day MA appears to be providing support.

The Canadian dollar dropped to its lowest level since February 2016. There is a lot of room for further weakness in this pair (strength in USD/CAD), but Friday’s key reversal day puts that view under pressure in the short-term. The trend will need to reassert itself early this week as a move back into the prior trading range would suggest that trend had faltered.

Interest rate futures

Interest rate futures continued short-term weakness, and remain below their 200-day MAs. The 50-day MAs appear to be providing support at this time. The long-term trend remains up for the sector, but short-term weakness is evident.

Good trading

Phil Seaton

LS Trader

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