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Weekly Update 29 January 2017 – LS Trader

Stocks hit new all-time highs this week, which included the Dow 30 finally hitting the 20,000 level. The trend is up for global stock markets. Most other markets, particularly currencies and interest rate futures continue to consolidate, but a few are in pre-breakout mode.

Stocks

The S&P 500 narrowly held on to short-term support and rallied to new all-time highs. Volume has, however, continued to decline and is not supporting the uptrend.

The Nasdaq 100 also rallied to new all-time highs and remains stronger than the S&P 500. Volatility is on the rise and is in trend mode, but here too, volume is not supporting the market.

The Dow 30 finally broke the 20,000 level and also posted new all-time highs. The prior resistance level, which was tested multiple times, should not act as support if the trend is good. A move back below 20,000, particularly below 19,847 would suggest that price would pull back further.

The trend for all three US indexes mentioned above is up. It is also up for the Dax, Nikkei and FTSE 100. None of these markets are being supported by volume and therefore remain subject to possible weakness.

Commodities

Commodities markets remain mixed with some markets and sectors in long-term uptrends and others in downtrends. The majority, however, are consolidating at present ahead of the next trending campaign.

The question at the moment in the metals markets, particularly in Gold, is whether the mid-December low is a medium to long-term low and whether the rally from there is the first leg up in a new bull campaign. If so, this week’s correction should ultimately prove to be corrective, and all that remains is how much further the correction goes. The low at 1127.20 basis April futures must hold other the long-term bear trend remains intact. The RSI is in the bull range, but the long-term trend is still down until we have price confirmation to the contrary.

Silver has been stronger than Gold this week and could test short-term resistance and the 200-day moving average over the next week or so. The trend, for now, is still down.

Palladium and Copper remain in long-term uptrends. Palladium this week reached its highest level since May 2015 before a sharp reversal halted the uptrend for now. Copper remains just below its 2016 high but could breakout this week. Price closed on Friday right on the 200-week moving average, a very long-term trend indicator that the market has been below for most of the past four years.

Currencies

From last week on EUR/USD: “I expect resistance will be found somewhere between the 38.2 and 50% (1.0868) retracement levels of that decline before the market turns lower once more.”

Volume and volatility continue to decline in EUR/USD. Although the Euro made a slight new high for the current move this week, it remains below resistance. Friday’s close was right on the 50-day moving average, but the trend is still down.

The technicals continue to support lower prices. Price has been unable to break the December high, remains below the 50% retracement of the decline from November, and more importantly, the RSI remains in the bear range and after several attempts has been unable to break the 60 level, bear market resistance. The recent rally has been on below-average volume and has also seen a substantial volatility decline. None of these is consistent with a continuation of the trend higher and all point to a resumption of the downtrend over the coming weeks.

With only two trading days left this month, it’s highly likely that the 1.0347 low print on the 3rd of January will hold. It is more likely that we see a slight new high due to the proximity of the market to last week’s highs. Once the month is over we will have the high and lows for the month, which as covered in recent weeks, have a tendency to be either the high or low for the year. Time will tell.

Interest rate futures

The long-term trend for interest rate futures remains down, and prices ended the week lower. These markets are consolidating between the 38.2% retracement level and the 50-day MA (resistance) and the 50-month MA, which has been the controlling support MA for almost ten years. This consolidation phase may continue for a week or so more yet before the long-term trend resumes.

Good trading

Phil Seaton

LS Trader

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