Weekly Update 17 July 2016 – LS Trader

The past week has seen the S&P 500 rally to new all-time highs and has seen the Nasdaq 100 complete a change of long-term trend to up. The week has also seen mixed moves in the currency and commodities markets and also saw a pullback in interest rate futures.

Stocks

From last week: “The S&P 500 rallied to a new high for the current move and made a new all-time high weekly close. From the standpoint of technical analysis, this cannot be bearish.”

We got the expected breakout to new all-time highs in the S&P 500, and the index rallied to print a record high of 2168 basis the September contract on Thursday. Both volatility and momentum are increasing, which suggests that the uptrend will continue. However, the one negative, and it is possibly a significant one, is that volume has been in continual decline as the rally has progressed.

The Nasdaq 100 broke through the April high that we wrote about last week, completing a change of long-term trend to up in the process. The RSI also broke above 60, entering the bull range in the process. The Nasdaq 100 continues to lag the S&P 500 and declining volume is present in this index, too. The long-term trend is now up for both US indexes but remains down for the other two indexes that we trade at LS Trader, the Dax and the Nikkei.

Commodities

Our target for Silver at 21.63 has yet to be reached. All metrics since the spike high on the 5th July have been in decline; volume, volatility and momentum have all pulled back with price. This suggests that there may be some more weakness for this market before the uptrend resumes and the high from the 5th July is exceeded.

Gold, which has remained significantly weaker than Silver, has declined further. Here the RSI has dropped back below 60, printing 54.31 on Friday as opposed to Silver’s print of 72.63. Volume has also contracted and volatility, along with price are almost back to an area of fair value, so we may see Gold and Silver resume their rallies over the next week or so. The long-term trend for both is still very much up.

Currencies

From last week on the British Pound: “Volume has been in decline almost every day since the 24th, which suggests that the selling pressure may be running out of steam and that a corrective rally higher may be due.” The Pound found support from just above the 31-year low and rallied higher as expected, moving back to fair value around 1.35. Friday saw a reversal back lower again, and the long-term trend remains down. Volatility is also declining back to a more reasonable level.

The currency markets, on the whole, are going through a quiet period, and the long-term trends are currently mixed. The dollar index continues to find support at the 200-day moving average but has yet to make a significant move to the upside to lead to a change of long-term trend to up. The RSI continues to test the 60 level, and if that level can be decisively broken then, we may see some movement to the upside and increased volatility, which would likely result in a few more breakouts in the currency markets.

Interest rate futures

From last week: “The spike high printed on the 24th represents considerable resistance, and we may see some weakness in interest rate futures in the near term”. Interest rate futures moved sharply lower this week as expected. The 5 Year T-Note has pulled back to the 50-day moving average but has done so on lower than average volume.

The 10 Year T-Note has followed a similar pattern but had almost a 200% volume day on Friday, which suggests there may be further to go in the pullback before the long-term uptrend resumes. The long-term trend remains up across the sector at present, and quite a large sell-off will be required for that to change.

Good trading

Phil Seaton

LS Trader

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