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Weekly Update 17 May 2015 – LS Trader

The S&P 500 printed a new all-time high this week, but so far without any follow through. The dollar has seen continued weakness that has taken the dollar index down to its lowest level since January. The British Pound has extended its recent rally that has now been sufficient for a change of trend to up. Commodities remain mixed, but strength appears to be returning to precious metals, where further rally could be ahead.

Stocks

The S&P 500 rallied to new all-time highs as expected, but as yet there has been no follow-through. The RSI came close to breaking the 60 level but ended at 58.33. Ideally the rally will continue above Friday’s high accompanied by a decisive break above 60 on the RSI to indicate that this rally has legs.

The Nasdaq 100 has lagged the S&P 500 and remains 66.75 points below its April high. The German Dax ended the week lower but is still in a long-term uptrend. Here the RSI is bouncing along the 40 bull market support level. If the RSI moves decisively below 40 accompanied by a price break below 11178, there could be some considerable further weakness. A change of trend to down is however still some way off.

The Nikkei moved higher this week, and the trend here also remains up. The RSI has also held above 40, keeping it in the bull range, and the RSI has advanced to 56.81. We may see the 60 level tested this week, which would suggest a rally to new highs.

Commodities

Gold and silver both had strong weeks. Silver broke out of the triangle that we have mentioned in recent weeks and may rally further to test major resistance. For now the trend is still down for silver, but the move above 60 on the RSI suggests that may change in the coming weeks. Gold, which has been weak for much of 2015, remains in a long-term uptrend, and we could see a resumption of the uptrend with further strength this week. The RSI has just pushed above the 60 level, for the first time since January, suggesting further strength is ahead.

The energy markets have seen mixed trading, but both crude and Brent crude are within range of a change of trend to up. Natural gas is also showing signs of strength but is still the weakest market in the sector in terms of trend position. This week has seen the RSI clear 60 for the first time since November last year, so further strength looks likely.

Currencies

The Pound rallied further and completed a change of trend to up. Sentiment for the pound reached its highest level since July 2014 this week. We also have the RSI up to 73.74, in the bull range. The pound though is the only major currency in a long-term uptrend against the dollar, although other majors could follow with a change of trend soon should dollar weakness persist.

Despite considerable weakness for the dollar index, the long-term trend is still up. However, a change of trend to down is now coming within range, but whether we see sufficient weakness for the trend change to be confirmed remains to be seen.

Sentiment for the dollar index, which had been at a bullish extreme only recently has now dropped to its lowest level in almost 2 ½ years. Sentiment measures have bulls at only 9%. The last time they were this low the dollar index was just over 80, and a swift rally to 85 followed over a few weeks. However, there are no signs that a bottom is in yet, and the RSI is down to 29.66, which suggests further weakness may yet be seen.

Interest rate futures

The 30-year T-bond has had another volatile week, which began with weakness that saw a drop to its lowest level since September. A recovery has since been seen, and we may see further strength to test once again the underside of the trendline from the September low.

The long-term trend is down for the long bond but remains up for the remaining markets in the sector.

Good trading

Phil Seaton

LS Trader

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