Weekly Update 25 June 17

The S&P 500 made a new all-time high, as did the Dow, but other stock indexes lagged. Stock indices are trading in a very narrow range. Interest rate futures are also trading in a narrow range near the recent highs. The commodities markets remain mixed, with energies, soft commodities and some grains markets remaining under pressure.

The long-term trends remain as before, up for stocks and interest rate futures, down for commodities and mixed for currencies. The latter remains mostly confined to historically narrow trading ranges, which when eventually cleared will likely result in directional trading campaigns that could last a year or two at least.

Stocks

The S&P 500 made a new all-time high on Monday, but that was reversed the next day. The market closed slightly up on the week but continues to trade in a very narrow range.

The Nasdaq 100 continued to find support from the 50-day moving average and ended the week up, but still lags the S&P 500 following its steep sell-off two weeks ago.

The Dax continues to undergo significant volatility compression, and support and the 50-day MA look likely to be tested soon. The Nikkei has regained the 20,000 level and continues to grind gradually higher in a far from convincing manner.

Commodities

The energy markets saw continued weakness as Brent Crude dropped below the $45 level for the first time since April last year. Light Crude fell to $42.05 basis the August contract and may yet have further to run to the downside. The RSI fell to 25.68, which is a bearish reading. Volatility is getting elevated, but the trend for the sector remains down.

Cotton continues to collapse and has fallen from 84.66 to 66.33 in just over a month. There may yet be further declines towards the 60 level. Weakness was also seen in the Soybeans complex as both Soybeans, and Bean Meal fell to new lows for the current move.

Sugar also fell to new lows for the current move, printing its lowest price since February 2016. Volatility is elevated at daily and weekly levels, but price has not stretched too far from fair value to suggest that a reversal is imminent in spite of a small bounce on Friday. The next target is the 12.61 level, which is last year’s low.

Currencies

The Dollar Index pushed slightly above resistance early in the week but eased lower towards Friday’s close. The trend remains down for the Index, and the rally was unable to take the RSI anywhere near the 60 level. The RSI, therefore, remains in the bear range and we may see further weakness back towards last week’s low.

The Euro held on to support by the matter of a few pips and remains in an uptrend with volatility declining to very low levels, levels not seen since October 2015. This suggests a large price move is in the offing.

Interest rate futures

The 30-Year T-Bond rallied to new highs for the current moved made its highest weekly close since November. The trend remains up for the interest rate futures sector, but the longer-term markets remain the strongest.

Good trading

Phil Seaton

LS Trader

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