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Weekly Update 1 November 2015 – LS Trader

The past week has seen the Nasdaq 100 rally briefly to new 15-year highs and has seen the Euro continue its recent decline. Interest rate futures were lower this week, and commodities have seen mixed trading.

Stocks

The Nasdaq 100 completed the recovery and rallied to a new 15-year high this week. However, the index was unable to hold the breakout level on Friday and closed back below prior resistance. The breakout was confined by the RSI, which reached its highest level since November 2014, but has so far been unconfirmed by the S&P 500. Should we see new highs for the Nasdaq 100 over the coming days, confirmed by a breakout on the S&P 500 to new all-time highs, we could see further strength through to year-end. Strength will need to be seen this week, or we will likely see the Nasdaq 100 move lower.

As has been the case for the past couple of months, the Dax and Nikkei lag considerably behind their US counterparts and both indexes remain a considerable distance below their respective highs of the year.

Commodities

Heating Oil dropped to its lowest level since January as the energy markets continued with weakness early in the week. Following the break to new lows, Heating Oil has made a recovery rally, along with the other markets in the energy sector, with the exception of Natural Gas. Natural Gas, which is down 14.64% in a month, dropped to its lowest level since June 2012 on Friday before finishing the week with a strong close. The trend remains down for the entire energy sector in spite of strength seen this week.

Strength has been seen in some commodities, particularly Wheat, which looks set to test a major resistance level in the coming days. The RSI has risen to 60.85, and a decisive move above 60 would suggest further strength and a probable break of resistance.

Sugar has also continued its rally but has run into resistance at 14.80. If this level can be broken, then it could be clear skies above and continued rally towards the next resistance level around 16.50.

Currencies

The Euro fell hard in the middle of the week but recovered some of its losses by Friday’s close. The recovery bounce occurred just above key trend-defining support, which if broken would have changed the trend for the Euro to down.

The dollar index had a similar week, but being the near-perfect inversion of the Euro, moved in the opposite direction up towards trend-defining resistance. For now the long-term trends remain up for the Euro and down for the dollar index, but this could change soon. When it does, we will likely see some large moves in the currency markets, which for the most part, have spent much of this year consolidating. Such breakouts should also give rise to large moves in other markets that are impacted by the dollar, namely commodities.

Another important currency market is USD/JPY, which has been in a box range for over two months now. This week saw resistance tested but not broken, and so far price continues to trade sideways within the box range. An eventual breakout from this box range should also yield a decent move in this and other related markets.

Interest rate futures

Interest rate futures were lower this week, and it’s possible that the top may be in for the sector. The long-term trend is still up for four of the five markets that we trade in this sector, remaining down only for the 30 Year T-Bond. The long bond may test support this week, and if successful, may lead the entire sector lower over the coming weeks.

Good trading

Phil Seaton

LS Trader

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