Weekly Update 24 July 2016 – LS Trader

The S&P 500 made new all-time highs this week, but the other global stock indexes continue to lag the S&P. The dollar’s recent recovery continues, and we could see some long dollar breakouts this week as the long-term trends look to be in the process of favouring the dollar once more against several of the major currencies.

Stocks

From last week: “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 S&P 500 printed new all-time highs again this week but only managed to advance 15 points for the week. Momentum is decreasing slightly, and we continue to see lower than average volume go through the market. Volume continues to decline steadily, as it has since the huge volume day on the 24th June. This indicates a lack of sponsorship for the current rally.

The Nasdaq 100 reached its highest level since last year and may yet reach the next resistance level at 4716.5, the 2015 high. This rally also shows shrinking and below average volume, by the RSI is still pushing gradually higher, printing 67.49 on Friday. This week’s RSI high is the highest RSI level since the 1st April.

The Nikkei and the Dax continue to lag their US counterparts, and both remain in long-term downtrends. The Nikkei is still below its 200-day moving average, but the Dax has moved above it this week. The Dax continues to struggle against the 60 level on the RSI, which is bear market resistance, a level that the index has not crossed since May.

Commodities

The energy markets continue to show weakness, lead by RBOB Gasoline, the weakest market in the sector and currently the only market in a long-term downtrend. Crude Oil’s weakness is bringing a change of long-term trend to down within range. The RSI this week broke below bull market support at 40, which indicates lower prices ahead.

The grains markets have continued their recent decline, and both Corn and Wheat have made new lows for the current move. The long-term trend is now mostly down for the grains markets, remaining up only in Soybeans and Soybean Meal, due to their recent massive rallies.

Currencies

Things are starting to look up for the dollar. The dollar index has rallied to its highest level since March, and a change of long-term trend to up is now within range.

A change of long-term trend is also very much within range against the Canadian dollar and the Swiss Franc. The Canadian dollar, in particular, has an excellent set-up which could see a significant move in favour of the US dollar if the breakout is successful.

The British Pound has consolidated this week and remains roughly in the middle of the range between this month’s highs and the 31 year low printed back on the 6th July.

Interest rate futures

Interest rate futures have continued to move lower during the week before closing flat or slightly up by Friday. The 30 Year T-Bond almost tested the 50-day moving average before rallying higher to close the week almost flat. The shorter-term markets did drop slightly below their 50-day moving averages before moving higher. The long-term trend remains up for the entire sector, and the RSI is still in the bull range. We can’t as yet rule out new highs in these markets later in the summer.

Good trading

Phil Seaton

LS Trader

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