Weekly Update 23 April 17 – LS Trader

The first round of the French Presidential elections occurs on Sunday, with exit polls being available around 7 pm on Sunday night. This has the potential to move a few markets about, particularly the Euro, Dax, and to a lesser extent the British Pound, depending on the outcome. The current polling data shows that the race is very close but has Fillon and Le Pen being the two candidates to go forward, with Macron very close behind, but Brexit and Trump have both shown previously how unreliable polls can be!

Stocks

The stock indexes have seen mixed trading. The S&P 500 has regained its 50-day moving average but continues to lag the Nasdaq 100 and remains 50 points below its all-time high, which was last posted back on the 1st March.

The Nasdaq remains close to its all-time high, which was posted earlier this month. However, Friday’s close was the highest weekly closing price of all time. All time weekly closing highs are not a bearish characteristic! This shows that the trend for stocks is still up, even though there has been some short-term weakness. However, volatility continues to decline, and volume is below average.

The Dax broke support to bring the current uptrend to an end for now, but the market is finding support at its 50-day MA, and the long-term trend is up.

The Nikkei remains the weakest of the four global stock indexes that we trade at LS Trader. Here, the Nikkei dipped briefly below its 200-day MA last week but has yet to close below it. This week saw a minor recovery rally, which keeps the long-term trend up. However, the RSI is already in the bear range, and that suggests that the recent low and 200-day MA will be tested again soon. The possibility of a change of long-term trend to down remains.

Commodities

The energy markets have had a bearish week and look set to decline further to test major trend-defining support. Friday’s price action saw Crude Oil close back below $50 per barrel for the first time this month.

Gold made a new high for the current move on Monday but has so far been unable to cross the $1300 level. Price has since pulled back, but the uptrend remains intact for now. Silver did not fare so well following its new high for the move, and pulled back to below its 50-day MA on Thursday, closing below it on Friday. The 200-day MA sits just below prices at 1777, and support can be expected around that area. The long-term trend remains up.

Currencies

The big move in the currency markets came from the British Pound, which caught a lot of traders on the wrong side of the market. The COT data shows a near record number of traders positioned short on this market. The break above resistance resulted in forced short covering for many traders and a huge spike higher. Since the large move higher on the 18th, the market has consolidated slightly, but the long-term trend for the Pound is now up.

However, the currency markets remain mixed and continue to favour the dollar overall. The Canadian dollar has been pushed lower towards a major shelf of support (resistance for USD/CAD). The dollar has been threatening to move higher against the Canadian dollar for a long time. Will this breakout, if it occurs, be the start of the next leg up for the dollar? Time will tell.

Interest rate futures

The 5-Year T-Note and 3 Month Eurodollar both completed changes of long-term trend to up this week as expected. The long-term trend for all the interest rate futures markets is now up. Since interest rate prices and rates more inversely, this means that the trend for interest rates in both the UK and the US is now lower, which is the complete opposite of what most people expect.

Good trading

Phil Seaton

LS Trader

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