Weekly Update – 25 March 2018 – LS Trader

Global stocks took a heavy hit this week, ending the week sharply lower. Sentiment has become extremely negative for stocks, so with the long-term trend remaining up for US stocks, it is possible that we will see a bounce higher this week, but things look to be taking a turn for weakness in the longer-term. For the first time in a long time, we have no long entries for any of the stock markets and look likely to add to our short positions over the next week or so on sell triggers.

Stocks

From last week on the Nasdaq 100: “The decline below the prior January high has bearish implications so we may see further weakness this week”. The Nasdaq began the week with weakness and continued sharply lower, ending the week down 7.06%. However, along with the S&P 500, the long-term trend is still up. Additionally, sentiment has become extremely negative with only 10% bulls. The last time sentiment was this low was the end of the early February sell-off. A substantial rally followed.

The Nikkei completed a change of long-term trend to down on Friday and joined the Dax in a long-term downtrend. However, the Nikkei is currently the weakest of the four stock indexes that we trade at LS Trader based on the current chart structure. The Nikkei ended the week lower by 5.89%

Commodities

From last week on Brent Crude: “Support from the triangle held exactly, and we saw a breakout of the triangle on Friday, which suggests further strength ahead. The trend remains up.” Brent Crude continued to rally and will likely breakout to new highs for the current move early this week.

The rally in the grain markets appears to have fizzled out, and we have gone from being net long the grains sector to short. Soybean Meal remains the strongest in the sector and may rally to test the local top in the coming weeks.

Gold held support and has rallied sharply over the last three days and may now press higher towards resistance. Silver broke out to the downside on Tuesday but was unable to continue lower and has since rallied back to test resistance. The trend remains down for Silver.

Currencies

The currency markets remain quiet, as they have for the past few weeks. The long-term trend remains against the dollar. The Dollar Index and the Euro remain rangebound.

The Yen has rallied to its highest level against the dollar since November 2016. There is bullish divergence on USD/JPY, but for now, the trend remains against the dollar.

Interest rate futures

Interest rate futures continue to grind higher in a counter-trend move. The long-term trend remains down across the sector, but moderate strength continues to be evident in the short-term. The shorter-term markets remain the weakest for now, but they are likely to test resistance this week. It is possible that resistance will hold as there is short-term bearish divergence where we have a new high in price without a new high in momentum.

Good trading

Phil Seaton

LS Trader

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