Weekly Update 7 August 2016 – LS Trader

The S&P 500 posted new all-time highs again this week and may be poised for a breakout higher even though there is little volume fueling the move and that we are in seasonally the weakest month of the year. The Nasdaq 100 is closing in on its all-time highs posted in March 2000.

The dollar has had a mixed week but could be heading for a long-term trend change to up, with the opposite move a possibility for the Euro. Interest rate futures have moved lower and commodities remain mixed.

Stocks

The S&P 500 broke short-term support on Tuesday but then rallied for four days to test the high of the year, closing just one point below that level. There is a good chance of a breakout to new highs this week. Volume remains low, as does volatility. The RSI has moved back above 60 and remains bullish.

The Nasdaq 100 continues to be the leader regarding recent strength. This week’s high of 4797.75 is now only 86.25 points below the all-time high for Nasdaq 100 futures, printed all the way back in March 2000. There still appears to be higher for this index to run, and we could see all-time highs soon.

The Dax reached its highest level since April this week but has been unable to clear resistance from the April high. It has also been unable to break the trend line from the 2015 high. There is therefore significant overhead resistance, but if price can break through, that would be bullish. The RSI is in the bull range, but the long-term trend is still down and requires a break of resistance for that to change.

The Nikkei regained its 50-day moving average this week, but the long-term trend remains down, and the RSI is in the bear range. The Nikkei continues to be impacted by a strong Yen and is the weakest of the four stock indexes that we trade at LS Trader.

Commodities

The energy markets put in a bit of a reversal this past week. This makes last week’s lows key swing levels in the crude oil markets. These lows should now provide some support, but if broken they may lead to significant selling and further weakness. The exception is Natural Gas, which still looks like it could be in the early stages of a new leg higher in spite of finishing lower this week. There are a couple of key resistance levels that need to be taken out, but if they are we could be off to the races.

The metals markets have seen some weakness this week. Copper has moved below both of its 50 and 200-day moving averages and remains in a long-term downtrend. Gold and Silver have also moved lower, with both markets possibly set to test support this week. Even Palladium, which has been the strongest of the metals markets in recent weeks has displayed some weakness and may also test support soon. For now, the long-term trend is up for all metals with the exception of Copper.

Currencies

From last week: “The Euro rallied to take out the 50-day moving average and should test the 200-day moving average this week.” The Euro did rally and test the 200-day moving average, but was unable to break through, printing a two-day bearish reversal pattern right at the long-term moving average. The long-term trend remains up for now but a test of some key support levels looks to be in the cards.

The dollar index, which is a near-perfect inversion of the Euro, regained its 200-day moving average on Friday. The long-term trend is still down for the index, but a change of trend to up is within range. The RSI remains in the bear range but could reach the 60 level soon.

Interest rate futures

Interest rate futures fell this week, but the sector remains in a long-term uptrend. The shorter-term markets were the weakest, and both the 5 & 10 Year T-notes fell to test their 50-day moving averages.

The 3-month Eurodollar is currently the weakest in the sector and is already below its 50-day moving average and set to test the 200-day moving average this week. The RSI has entered the bear range already, and it looks like we might have a top in on this market.

Good trading

Phil Seaton

LS Trader

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