LS Trader Weekly Update – Monday 28th June 2011

Stocks managed to rise over the past week albeit in fairly volatile fashion. Early weakness was followed by a mid-week move higher and then weakness to close out the week. Commodities for the most part were lower and the dollar moved higher.

The long term trends are mostly down now for stock indexes, mixed for commodities but still down for the dollar.

Stocks

For the second straight week we have a doji pattern on the weekly S&P 500 chart, which represents indecision. The S&P 500 had moved higher in the week but cam back to close just above the lows of the week. The long term trend remains up for the S&P 500, as it also does for the German Dax, but all the other indexes that we trade at LS Trader are now in a long term downtrend.

As we wrote in last week’s update, the prior week’s lows on the S&P 50 0 September contract may provide some support but if they are taken out then the next target will be the March lows, which currently sit at 1248.5 on the September contract. To the upside there is resistance at 1295.

The Nasdaq 100, Nikkei 225 and Hang Seng all managed gains for the week but the trend remains down and these markets may yet resume the downtrend. 9800 should provide some resistance for the Nikkei, with support around 9300. A break of either of these 2 levels could lead to some movement. Having failed to continue up through 2256, the Nasdaq 100 may target the 2175 support area.

Commodities

We wrote last week about the long term trendline that had been providing support for Gold that was at $1520 as well as further support at 1511 and wrote that a breach of those support levels may lead to a decline towards $1460. Gold did fall through those 2 levels and briefly pierced $150 0 before closing just north of $1500 at $1500.9. Further weakness may be seen this coming week.

Crude ended the week lower by 2.45% but is so far finding support at $90. A break of support here will likely bring further declines to at least $85 with the next support at around $83.50.

There has been general commodity weakness over the past couple of weeks with only a couple of exceptions. Orange Juice has been particularly strong and Sugar has also made a major recovery from the recent steep sell-off. Sugar is still currently in a long term downtrend but that may change soon if short term strength continues sufficiently. Other markets that have seen some renewed strength of late include the agricultural cattle markets. These still remain in a long term downtrend for now.

Currencies

The dollar index pushed higher again in the short term and the focus will still be on the resistance level at 7700. For now the long term trend remains down but this may change over the coming weeks if the dollar continues to rally.

The British Pound in particular is looking weak and may be heading for a test of major support possibly as soon as this week against the US dollar. The pound has also been weak against the Yen. The US dollar has also been gaining strength against the Canadian dollar, which may continue to rise towards parity. The US dollar has not been at parity against the Canadian dollar since March.

Interest rate futures

The long term trend remains bullish across the interest rate futures sector with prices hitting new highs for the year and yields falling to their lowest levels of the year. The longer term 30 year bond is still lagging behind their 2010 highs and it remains to be seen if the longer term market can continue higher to test those highs.

Kind Regards
Robert Stewar

LS Trader Weekly Update – Monday 13th June 2011

Stocks have continued their recent short-term weakness and indexes have been lower across the board this past week. The dollar has also had another bounce higher particularly in the last 3 days of last week. Long term trends are still intact although that may change soon for stocks if we get much further weakness. For now the trends are up for stocks, down for the dollar and commodities remain mixed.

Stocks

As we have been writing of late, the S&P 500 continues to form lower highs and lower lows, which is a bear market set up. The past week was also the sixth straight week of declines. Last week we wrote “We may now see a continuation lower to test 1290. If support there gives way then there is little to stop a decline all the way to the March lows around 1240.” 1290 support was tested and did give way so the March lows wil l be the next downside target.

We also wrote last week about seasonal weakness and that the Nasdaq may decline towards 2250. The declines ended up being steeper than that and the index sailed through 2250, reaching 2217.8 and may now head for the next support area at 2200.

Commodities

Gold moved to $1555 early in the week but has since pulled back to 1529. The long-term trendline that has been supporting Gold is still holding and may provide some support around $1500. We may yet see a continuation higher to test all time highs at $1577.7 on the August contract but that to an extent may depend on what happens to the dollar.

August Crude closed narrowly below the $100 level at $99.85 but is forming an interesting short term pattern with tightening price action. A breakout from this pattern may lead to a decent move in the direction of the breakout.

The daily charts still show a large number of long lower shadows on the daily candles showing support for the market is still in place. These lower levels may be tested this week though. More major support is in around $95.

Currencies

The dollar index had a good bounce during the later half of the week and did not fall as far as the March lows as yet, and last week’s gains brought and end to the prior 3 week losing streak. The long term trend is still very much against the dollar but we may see a bounce higher in the short term. Support for the dollar index is at last week’s lows at just under 7400 and further down at the March lows but bulls (not that there are many at present for the dollar) will be targeting the 7700 area. Sentiment is down to only 6% bullish and may yet fall further towards 3-4% bullish but with the vast majority being bearish another bounce higher may well be on the cards in the not too distant futu re.

As continues to be the case for the past few weeks, both the Swiss Franc and the New Zealand dollar continue to fare better than the other major currencies and both of these markets hit all time highs again this week.

Ben Bernanke this week indicated that there would not be a further round of easing, known as QE3 but if economic data continues to come out as bad as it has of late some further form of easing seems likely.

Interest rate futures

Interest rate futures continue their gradually climb, ending the week marginally higher. Yields remain near their lows of the year and prices stay near their highest level since November. The long-term trend remains up across the sector.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 6th June 2011

The dollar’s recent bounce looks to be over at least for now and long-term weakness is back on track with the dollar being lower against most of the major currencies. Stocks also continue to look weak but the long term trends are still intact and these are currently up for stocks, mixed for commodities and down for the dollar.

Stocks

The S&P 500 began the week well, including a break above the downward sloping trend line that we wrote about last week but then Wednesday saw major selling and this took the market back below the trendline and even below 1300. This was a fifth straight down week for the S&P 500. We wrote last week that the market is forming lower highs and lower lows, which is a bear market set up and that trend has continued this week with stocks beginning to look bearish. We may now see a continuation lower to test 1290. If support there gives way then there is little to stop a decline all the way to the March lows around 1240.

As we also wrote last week, we are now into a seasonally weak period for stocks and June brings an end to the best 8 months of the year for the Nasdaq. So far that seasonal weakness is playing out and we may see the Nasdaq decline further towards 2250.

The long-term trend remains up for all of the indexes that we trade at LS Trader with the exception of the Nikkei, which continues to be the weakest of the indexes and the most likely to give a sell signal.

Commodities

The long-term trendline that has been supporting Gold is still holding and currently dissects the market at around $1500. The past week has seen Gold hit $1550 again and reach its highest level in 4 weeks with the long-term trend remaining up and bullish. If the market can push up above $1550 there is little in the chart to suggest that the market won’t continue higher to test all time highs, currently at $1577.7 on the August contract.

Considering the weakness of the dollar, one would probably expect Crude to be faring better than it currently is. Friday saw the August contract close narrowly above $100. As before, a glance at the daily charts shows a large number of long lower shadows on the daily candles over the past few weeks and this continues to show that support is in for the market around the $96 level. If the market were eventually to break below that level it could lead to strong selling bit for now the trend remains up.

Currencies

A third straight week of declines has been seen for the dollar index and we may now see a move lower to test the March lows. The dollar normally enjoys safe have status and an inverse relationship with stocks so recent stock index declines should in theory have benefited the dollar. However, we have been writing here for quite some time that the dollar is enjoying less of a safe haven status than it used to, primarily because of the increasing awareness of the extreme flaws of the current reserve currency, a status that may be under serious threat over the coming years.

With US debt levels soaring out of control and the US heading for the debt limit threshold they will either have to default on their loans or continue to debase their currency as they have for the past few years. With Friday’s job number coming in well below expectation, QE3 is very much on the cards and this would spell further dollar weakness.

As we have been writing recently, both the Swiss Franc and the New Zealand dollar continue to fare better than the other major currencies with both of these markets hitting all time highs this week. It would appear to be only a matter of time before the other major currencies join the party and resume their long-term up-trends. The only likely spanner in the works for this scenario will be further weakness for stocks, which may lead to some dollar buying.This week is quarterly forex expiration so the June contract rolls forward to September.

Interest rate futures

Interest rate futures continue to climb gradually as yields continue to fall to new lows for the year, leading prices to their highest level since November. The November highs will be the next target for this sector. The long-term trend remains up across the sector.

Kind Regards

Robert Stewart