Weekly Update 23 October 2016 – LS Trader

The dollar has had a positive week with the dollar index reaching its highest level since February. At the same time, the Euro has fallen to its lowest level since March. The stock markets have continued to consolidate near their recent highs, with the exception of the Nikkei, which completed a change of long-term trend to up this week.

Stocks

The S&P 500 closed the week higher but has effectively just consolidated below its 50-day moving average for the past eight trading days. Price remains between the 50 and 200-day moving averages, and the long-term trend is still up. The RSI, however, remains in the bear range.

The Nasdaq 100 remains stronger than the S&P 500 and is very much within range of a breakout to new highs. Volatility is low, so we can expect an increase in price movement over the next week or so.

The Nikkei, which has been the weakest of the four stock indexes that we trade at LS Trader for quite some time, completed a change of long-term trend to up this week. Volatility was in the pre-breakout phase, and volume supported the breakout. That setup suggests further rally.

The Dax has also moved higher this week and is also within range of a breakout and a resumption of the long-term uptrend.

Commodities

Gold rallied back to test its 200-day moving average after its recent steep decline, and the long-term trend remains up. Silver also moved higher for the week but remains just above a key support level. Copper is at present the most attractive of the metals as it continues to test the lower boundary of the triangle. A downside breakout has bearish potential.

The grains markets continue their recent recovery and are mostly pushing higher, although only Soybean Oil is currently in a long-term uptrend having completed a change of trend to up this week. The rest of the sector remains in a long-term downtrend for now.

Currencies

The dollar index found support at the prior resistance level, which is what we were looking for in last week’s update. As expected, that area provided a platform for a further rally as the index reached its highest level since early February. A test of par over the coming weeks looks likely.

From last week: “Dollar strength has pushed the Euro lower down towards a major trend-defining support level which could be tested this week.” The Euro did fall and tested support as expected, and price easily pushed lower. The one negative is that volatility has reached quite a high level, but the price should continue lower overall.

Interest rate futures

Interest rate futures mean reverted to fair value this week and narrowly remain in a long-term uptrend. The 30-Year T-Bond continues to trade around the 200-day moving average, but has yet to complete a change of trend to down and remains in a long-term uptrend.

Good trading

Phil Seaton

LS Trader

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