Weekly Update 7 February 2016 – LS Trader

The past week has seen stock indexes, and the dollar move lower. Precious metals benefitted from dollar weakness and have rallied to their highest level in several months. Interest rate futures rallied to new highs, and energy markets have seen mixed trading.

Stocks

Stocks have had a mixed week. Strength seen early in the week soon evaporated and the major indexes ended the week considerably lower than where they started, and well off their highs of the week.

The long-term trend remains down in three of the four stock indexes that we trade at LS Trader, currently remaining up only in the Nasdaq 100. However, weakness was seen last week, which included a 3.27% decline on Friday, suggests that critical trend-defining support will be tested this week, with a change of trend to down looking increasingly likely.

The Dax has been the weakest of the major indexes, dropping to a slight new low for the current move, and printing its lowest price since December 2014.

Commodities

Gold rallied sharply this week, moving well through its 200-day moving average. The RSI also accelerated, moving easily through the 60 level and entering the bull range in the process. Friday’s RSI print of 74.08 is the highest in over a year. For now, the long-term trend remains down, but that could change over the next week or so if we see continued strength.

Silver also moved higher but has been far less convincing than Gold. Silver remains below its 200-day moving average, and the RSI is grappling with bear market resistance at 60. The best moves happen in these two markets when both markets move together. As yet, Gold’s strength has not been matched by Silver.

The energy markets have seen mixed trading but remain very much in a long-term downtrend. RBOB Gasoline remains the weakest of the energy markets and fell to new lows for the current move on Friday. The other markets, in spite of high volatility and a short-term rally, may test their recent lows again soon.

Currencies

The dollar index failed to break resistance and reversed sharply lower. The RSI was also unable to break through the 60 level after multiple attempts and also moved sharply lower, falling below bull market support at 40. Price also moved through the 200-day moving average for the first time since October. For now, the long-term trend for the dollar index is up and further weakness will be required for that to change.

The Euro, which is a near perfect inversion of the dollar index, rallied through its 200-day moving average and reached its highest level since October last year.

The dollar had another wild week against the Yen, more than reversing the gains seen during the prior week. The sharp reversal keeps the trend for USD/JPY down, and a test of major support looks likely next week.

Interest rate futures

Interest rate futures rallied this week, making new highs for the current move. The 30 Year T-Bond made a new high for the current move this week, accompanied by a new high in momentum, which negated the bearish divergence that we noted last week. The long-term trend remains up for the sector.

Good trading

Phil Seaton

LS Trader

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