Weekly Update 28 February 2016 – LS Trader

Both stocks and the dollar have moved higher this week. The British Pound has fallen to a near seven-year low. Commodities have seen mixed trading and interest rate futures have moved lower. The long-term trends remain down for stocks and commodities, up for interest rate futures and mixed for the currency markets, but slightly favouring the dollar.

Stocks

The S&P 500 continued its recent short-term rally this week, moving well through its 50-day moving average in the process. However, the rally ran out of steam beneath the 200-day moving average, with candle printing a shooting star bearish reversal pattern. The RSI has also failed to reach the 60 level and, therefore, remains bearish. The long-term trend is still down.

The Nasdaq 100 traded in very similar fashion to the S&P 500. The principle difference being that the Nasdaq remains below both its early February highs and its January highs, whereas the S&P 500 has cleared its equivalent levels. The 50-60 level on the RSI is bear market resistance and as long as that resistance zone holds we can look for further price weakness.

The Nikkei also rallied this week but remains below short-term resistance. The RSI also remains below the 50 level so is still very much in the bear range. Due to its proximity to Friday’s close, resistance could be tested this week, but the long-term trend remains down, and it will take a very significant rally for that to change any time soon.

Commodities

Gold has chopped around this week but ended the week lower. Significantly, Gold has remained above the key support level which we highlighted last week. As before, as long as that support level holds, the outlook for Gold remains bullish. Silver, however, has seen considerable weakness this week, moving back below both its 50 and 200-day moving averages. The RSI has also dropped and may test the 40 level this week.

Copper made a spike high on Friday, which was its highest print since mid-November, but the breakout from the range was unable to hold. Interestingly, the RSI turned down from the 60 level, keeping it in the bear range. The long-term trend remains down for the metals sector.

Sugar tested major trend-defining support and rallied sharply higher to test its 200-day moving average. A break of last week’s low would confirm a change of trend to down, but for now, the long-term trend remains up.

Currencies

The dollar index rallied this week to its highest level in three weeks, helped by strong day on Friday, which took the index well through its 50-day moving average. The index also remains above its 200-day moving average, and the long-term trend is up. The RSI, which has been in the bear range since early December, has risen significantly over the past couple of weeks, and we may see a test of bear market resistance at 60 in the next few days. A decisive move through 60 would be bullish for the index, and the dollar overall, and would suggest additional rally for the index towards the January and possibly December highs.

The British Pound broke through its recent lows to fall to its lowest level in almost seven years. The long-term trend is clearly down for the Pound, and the RSI is in the bear range, suggesting that we may see lower levels yet. The only positive for the Pound is that there is bullish divergence between price and RSI as we have a new low in price without a new low in momentum, but this does not necessarily suggest a reversal is imminent.

Interest rate futures

Interest rate futures moved lower this week, but all remain above support with the exception of the 3-Month Eurodollar. Weakness seen in the remaining markets in the sector suggests that we may see support tested in some or all of these markets over the coming week or so. As yet there is still no bearish divergence in any of the markets in the sector, but the RSI has dropped considerably since its high print earlier in the month. For now, the long-term trend remains up, and the RSI is in the bull range.

Good trading

Phil Seaton

LS Trader

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