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Weekly Update 11 October 2015 – LS Trader

The stock markets have continued with counter-trend rallies, but all four indices that we trade at LS Trader remain in long-term downtrends. The currency markets remain mixed, but dollar weakness is evident against several of the majors in the short-term. Interest rate futures remain in an uptrend, and commodities are mixed. There are a few commodity markets that are showing some early signs of strength, Sugar being one, in particular, but overall the commodities markets are still in a bear market.

Stocks

Stocks have continued to press higher this week. Friday saw the S&P 500 reach its highest level since the 21st August and are now just below the prior support level that held the markets up for several months earlier in the year. This makes last week’s high a very key level as prior support should now be resistance and should provide a barrier to further gains. If the S&P 500 moves decisively above this 2015-2020 area, further strength may be seen over the coming weeks, possibly back towards the all-time highs posted earlier in the year.

The Nasdaq 100 has seen similar price, and it may rally further to test the underside of the long-term trendline, which currently intersects the market around the 4565 level.

The two weakest indices are still the Nikkei and Dax. Both ended the week higher but are clearly still in long-term downtrends. These two indices look likely to be the first to turn lower again should weakness return to global stock markets.

Commodities

Gold and silver have shown continued strength this week, and there are further signs that the bottom may be in for now. Silver, which broke its trendline a few weeks back, has this week seen its RSI move above the key 60 level, which suggests further strength over the coming weeks. Gold, which was stronger on Friday than Silver, reached its highest level since August. Here, the RSI has just crept above the 60 level at 60.48, also indicating further strength over the coming weeks. Whether either of these metals rallies sufficiently to complete a change of trend to up remains to be seen.

Sugar has had another strong week, and the bottom looks to be in on this market. The RSI has reached a very bullish 80.76 this week, and price has rallied to its highest level since mid-May. The long-term trend has been down for Sugar since July 2014, but a change of trend to up looks imminent and may complete this week.

Currencies

The past week has seen some dollar weakness, particularly against the commodity-based currencies of Australia, New Zealand and Canada. The long-term trends are still mixed in the currency markets but remain up for the Euro and down for the dollar index. The dollar index is heading down towards the lower end of the recent range and may fall further to test 92.77, the August low. Such a move would lead to further Euro strength.

The British Pound, already in a downtrend against the dollar, has rallied this week but does look like it may be running out of steam. The RSI has turned over below the 60 level, which keeps it in the bear range. This suggests price weakness may be seen next week.

The most important currency market at present is USD/JPY because it has such an impact on global markets. One of the reasons that many markets have been consolidating is due to the Yen moving sideways in a box range against the dollar. This consolidation has been in place now for almost two months. Once we get a breakout from this range, we should see some large moves in several markets.

Interest rate futures

The long bond was unable to exceed the prior week’s high and traded lower throughout most of the week. This weakness has kept the long-term trend down in this market, which is the only once of the five interest rate futures markets that we trade at LS Trader that is still in a downtrend.

The other markets in the sector were all weaker this week, but they remain in uptrends. Tests of key short-term support levels could be seen this week, and the markets will need to turn higher from near current levels to keep the uptrends intact.

Monday is Columbus Day in the U.S., so the bond market is closed.

Good trading

Phil Seaton

LS Trader

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