Stocks continue to press higher with the S&P posting new 5 year highs once again and all time highs are still within range. Whether we see all time highs remains to be seen as the daily price action suggests that the markets are rising in agony.
The week ahead will be a shortened trading week due to Presidents’ Day on Monday in the U.S.
The S&P 500 ended the week higher by 0.31%, with a new high weekly close for the current move as the market continues to stabilize above 1500. However, the daily price action is far from convincing and is very much a slow grind higher that looks susceptible to weakness at any time. The price range for the week was just 13 points, which is very narrow for this market and is a range that is unlikely to continue.
One factor that is possibly holding U.S. stocks down is the resistance that we mentioned in last week’s update for the Dow at 14000. This past week March Dow rose to 14004 but was unable to hold above 14000, closing the week back at 13948. The Dow 30 is not a market that we trade at LS Trader but it is a market that we monitor, especially around psychological levels, such as round numbers.
Last wee we wrote that we expected that the Nikkei would recover the losses seen during the prior week and that did happen, although once again resistance was found around 11500. The current range spans roughly 500 points between just above 11500 and just above 11000. Watch both levels for a breakout, with a subsequent move in the direction of the breakout likely.
The general trend with few exceptions is bearish for commodities. Regular readers will know that our expectation at LS Trader is for a bear market in the grains sector to more than erase the 2012 bull market. This past week has seen price action commensurate with that view as the grains markets have resumed the downward trend. Based on LS Trader’s proprietary trend analysis, the only market from the grains sector in a long term uptrend is rough rice.
Gold this week broke out of its trading range to the downside, giving a confirmed change of trend. This move led to some heavy selling on Friday and we may now see further weakness that will likely drag silver lower for a change of trend as well.
Sugar is also trending nicely lower and is in the classic bear market formation of lower lows and lower highs. Our next downside target is the May 2011 lows at 17.01.
Coffee continues its bear market move, this week falling for a fourth consecutive week. This week’s decline of 2.77% continues a fairly impulsive decline since the failure of the May contract to clear 160. We have downside targets at 135.
Commodity bulls are really only getting any joy at present from the energy sector, particularly brent crude and no leaded gas. Heating oil is also in an uptrend but both U.S crude and natural gas are still in long term downtrends.
The dollar index advanced for a second straight week as the dollar gained almost across the board. The long term trends in the currency sector are mixed. This past week saw the end of the euro uptrend, at least for the near term, although the longer term trend is still intact.
The British pound continues to crumble, this week dropping below $1.55 for the first time since July last year. We remain on target for a continuation lower towards $1.5350.
The Japanese yen continues to weaken and this week lost another 0.67% against the dollar, in spite of a bit of a recovery seen in the middle of the week. The long term trend continues to favour the dollar but there are signs that the current trend may be on the verge of taking a bit of a breather. Longer term this market still looks to have further to run. This has so far been a hugely profitable trend for the LS Trader system with already with 1302 spread betting points profit from this single trade alone, and the trade is still running.
Interest rate futures
Interest rate futures were lower across the board but the new long term downtrend is still yet to really get underway and still ideally needs confirmation with some weakness from the shorter term markets. The lows of the current move continue to attract buyers and selling is unlikely to take hold until those levels are taken out.