Stock indices continue to rise to new all time highs and may yet continue to rise even though the current move is clearly extended. The LS Trader system is currently long all of the stock indices that we trade and each of these trades have been highly profitable, in particular the long trade on the Nikkei 225
As we have been expecting and writing in recent updates, the dollar continues to gain ground and we could be in the early stages of a dollar bull market. There will be corrections along the way but the overall trend for the dollar looks to be higher for the foreseeable future. This is a particularly interesting trade with great possibilities, especially since the dollar is rising at the same time that stocks are rising. This is not something that normally happens as usually the dollar rises as stocks fall. This suggests that once stocks do eventually roll over that the dollar’s advance will accelerate.
As written above, stocks have continued to press higher and may yet continue higher. With stocks at all time highs there is no doubt that we are currently in a bull market. That said, we are likely much closer to the end of that bull market than the beginning, which effectively began back in March 2009.
Sentiment in the Nasdaq has reached 93% bulls, a level not seen in over 6 years and before the 2008 crash. This does not mean that prices cannot rise further, as based on the current momentum the odds favour higher prices, but it does suggest that once the current run ends, the sell off will be nasty. This goes for U.S. and European stocks.
The Nikkei continues its amazing bull run, clearing the psychological 15,000 level as we expected may happen last week and also going on to reach and exceed our next target at 15,180. The Nikkei now stands at its highest level since December 2007. There is little in the way of technical resistance to prevent a continuation higher towards 16,000.
The trends for both gold and silver remain very much down with key resistance still holding firm. The inability for these markets to clear those resistance levels has continued to exert a downward pressure on these markets. As we wrote last week, we continue to look for another test of the recent crash lows.
Commodity prices have continued the longer term downtrend for the most part with only a few exceptions. The energy sector has pushed higher in the short term but the longer term trends still remain down. Strength has also been seen in the soybean complex but the trend overall for grains is still down. From the metals sector, the only remotely bullish market at this time is Palladium.
From last week on the dollar index: “If 8366 is exceeded, the 2012 highs will be the next target around 8481”. Basis the cash market, the dollar index did already take out the 2012 high but June futures still have a way to go and the target for June remains at 8481.
It’s been another strong week for USD/JPY and the June contract has pressed higher to 10318, on the way to our target at 105. A correction is looking due here based on waning momentum but price action has yet to confirm or suggest any weakness so we can continue to look higher until there is price action to the contrary.
As we wrote in last week’s update, we are looking for the dollar to continue to rise over the coming weeks and still expect that rise to exert a downward pressure on commodities and cap much further advances for stocks.
Interest rate futures
The longer term trend still remains up for the sector but the extent of recent selling still suggests lower prices near term. A test of key support looks likely in the coming weeks, leading to a change of trend to down if the test is successful.