Weekly Update 24 August 2014 – LS Trader

The S&P 500 posted new all time highs and the Nasdaq 100 also posted a new multi-year high. The dollar has also continued its advance and commodities have for the most part remained weak. The long-term trends are still therefore up for stocks and interest rate futures, still mixed in the currencies but mostly favouring the dollar, and down for the majority of currencies.

Monday is a Bank Holiday in the UK, but that should make little difference, as the majority of other global markets are open as normal.

Stocks

The S&P 500 broke out to new all time highs and in the process confirmed the Nasdaq 100’s earlier breakout. The 2000 level that we have been writing about for months on the S&P 500 still remains elusive, but we could see those levels this week, although there is bearish divergence on the RSI on both the Nasdaq 100 and S&P 500. That does not point to an imminent reversal and just indicates that momentum is waning, something that is also evident on the price chart.

The Dax remains the weakest of the four stock indices that we trade at LS Trader and is also the only index that is below its 200-day moving average. It therefore remains the only one of the four in range of a downside breakout. The RSI also turned lower having been unable to push above 50, and remains in a bear range.

The Nikkei rose on the back of Yen weakness. The Nikkei moves inversely to the Yen, so a weaker Yen is good for the Nikkei. If we see a breakout lower in the Yen this week, we may see an upside breakout in the Nikkei, where 7 month highs remain in range.

Commodities

Commodities have been mostly weak, but a couple of commodities that have been in steep downtrends of late did rise sufficiently to exit their profitable trends. Cotton was one such market, which had been very profitable in recent weeks for the LS Trader system, but this week broke above resistance, ending the trade. The long-term trend is still very much down and we may yet see a break to new lows after this counter-trend move runs its course. The same can be said of both corn and rough rice, two of the grains markets that have made nice, profitable moves to the downside in recent weeks.

Soybean oil fell to its lowest level since April 2009 and remains in a very steep downtrend, in another move that has so far been very profitable for the LS Trader system. Soybeans have also been weak and remain near recent lows. Soybean meal also remains in a long-term downtrend but we may see a test of resistance during the coming week as meal remains the strongest of the soybean complex.

The metals markets have been mixed; gold and silver have both been weak and have dropped to multi-week lows but copper and palladium have shown signs of strength. Palladium in particular broke to new highs for the current move, crossing 900 for the first time since 2001.

Currencies

The Euro broke out of the narrow short-term trading range to the downside and reached and then exceeded our long-standing target of $1.3293 basis the continuous contract. The focus is now towards still lower levels. The dollar index, which trades inversely to the Euro continued its recent advance and pushed to new highs for the current move, with the focus towards still higher levels and possibly as high as 8335.

The British Pound continued recent weakness and the long-term trend remains up but possibly not for much longer. Last week we suggested that we might see further weakness towards the 200 day moving average may follow, which it did, and the pound closed below this long-term average for the first time since August last year.

Interest rate futures

Interest rate futures were unable to continue the advance seen in recent weeks, and pulled back from the highs posted the prior week. The long-term trend however remains up across the sector in spite of short-term weakness. This week sees the September contract roll forward to December.

 

Good trading

Phil Seaton

LS Trader

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