LS Trader Weekly Update – Monday 25th July 2011

Risk appetite has returned to the markets after a week of volatility but some safe haven markets such as gold and the Swiss franc are still in demand, so investors still remain undecided on future price moves. Stocks resumed the long-term uptrend having bounced nicely off short term support levels early in the week and the dollar has resumed the long term downtrend, falling virtually across the board over the past week. Commodities have been mixed but have benefited from a weaker dollar and this has seen Gold hit new all time highs once again.

Stocks

We wrote last week that if support around 1290 to 1300 holds that we may see a test of 1340 on the S&P 500 and that’s exactly what happened. The S&P 500 fell to 1291.3 before finding support and then moving higher before closing the week at 1341. The next target will be 135 4.5 resistance and then 1361.6, the highs of the year on the September contract. The current phase must be considered bullish as long as 1290 support holds.

The Nasdaq 100 also had a good week and reached its highest level in a decade, perhaps significantly closing above the highs of this year. Further out we may see a continuation higher towards 2565.

Commodities

Crude moved higher again but has still been unable to clear the $100 level on a closing basis. This week saw a rollover into the September contract, which briefly edged above $100 intra day but closed the week out at $99.87. Some resistance at $100 is to be expected but a close above $100 may open the way for $104.

Both Gold and Silver were higher again with Gold going on to make new all time highs. December gold posted a new all time high at $1612.3 on Tuesday before pulling back slightly, but still ending the week abov e $1600 and with a new all time high weekly close. Silver also pushed higher and retook the $40 level, which completes a 50% retracement of the massive decline seen back in early May.

Cotton had another down week and closed below the 100 level for a second consecutive week. As we wrote last week, the next major support point comes in around 80 and that will be the next target.

Currencies

The dollar index ended moved lower and pierced support at 7440. The index also broke below and upward sloping trendline that has been in place for several weeks and may now target the bottom of the wider range at 7330.

Recent weakness for both the Pound and the Euro came to an end against the dollar this week as dollar weakness took effect across the board. The dollar was also lower against the Yen and may push lower towards the March lows.

The best performing currencies continue to be the Swiss Franc and the New Zealand dollar, both of which are near to all time highs. This is an unusual position as both of these markets do not as a rule perform all that well together as one is considered higher risk and the other a safe haven. This is a clear indication of the current indecision in the markets.

Interest rate futures

Interest rate futures drifted lower this week having failed to push on and make further new highs. The trend still remains up but the highs of the year will need to be taken out to prevent further weakness.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 18th July 2011

Volatility has continued to be the order of the day across most market sectors as indecision remains rife amongst traders and investors. The long-term trends remain mixed and sustained trends are lacking in most markets, although there are a few exceptions.

Stocks

The indecision has remained present in stocks but overall indexes are lower over the past week. The long term trend still remains up for the S&P 500 and the Germax Dax but the trend in the other major indexes are down.

The S&P 500 ended the week considerably lower than it began, but had also been lower during the week. Long lower shadows on the daily charts show lower prices being rejected and for now the long term trend remains up. Support remains in place around the 1290 to 1300 area and we may see a move higher towards 1340 if support holds but a bre ak of that support area will likely point to lower prices.

Commodities

Crude once again was unable to clear the $100 level and resistance from the $100 level and the prior week’s bearish engulfing pattern kept a lid on gains for Crude although this will likely change should crude be able to regain and close above $100.

Last week on gold we wrote: “We may now see a test of $1560 resistance, a level that will likely determine near-time price action for the yellow metal. Much may depend on the US dollar, but a break above $1560 may lead to another go at all time highs.” Gold did indeed test and clear $1560 resistance before going on to make new all time highs. Silver also followed gold’s lead higher, breaking out of the recent consolidation to the upside.

Big mover of the week was Cotton, which shed 12.66% for the week and closed below the 100 level for the first time since early Jan uary. The decent for Cotton has been as rapid as the rise and cotton has now fallen for the past 6 weeks consecutively. This may lead to some sideways action and consolidation before the downtrend resumes. The next major support point comes in around 80, although a second consecutive close below 100 would be ideal for that scenario.

Currencies

The dollar index ended the week higher having bounced off short-term support around 7440. For the most part the index has been moving sideways and is currently in a short-term range between approximately 7450 and 7650. The wider range spans form 7330 to 7700.

The Euro broke out of the triangle formation that we wrote about last week to the downside and having fallen to it’s lowest level in several weeks and falling through good support mounted a decent recovery and took that market back to within the range. We may yet see a decline towards $1.32 an d the declines of early last week gave a clear image of just how fast these markets can fall. The Euro still looks as though it may be forming a large topping pattern with a series of lower highs and lower lows, which is bearish.

The Pound also made a breakout to the downside but mirrored the Euro’s movements and climbed higher by the end of the week.

Interest rate futures

We wrote last week about the dangers of prematurely considering that a trend has changed before getting confirmation of a change of trend and said that even though many are bearish on this sector, prices can still move higher. We saw that again this week with interest rate futures markets moving higher again and resuming the uptrend. As has been the case for some considerable time, the shorter-term markets such as the 5 year and 10 year notes remain stronger that the longer term 30 year bond. The sector as whole remain s in a long term uptrend.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 11th July 2011

The long-term trends are still mixed for stock indexes even though the past week has been quite bullish. Trends are also mixed for commodities and are still down for the dollar. Volatility has been present of late in many markets and sectors but we could be on the verge of some decent breakout moves soon.

Stocks

The indecision that has been present in the stock markets for the past couple of weeks finally broke out into a decent directional move early in the week and the markets continued higher until a disappointing jobs report from the US led to some weakness on Friday.

We wrote last week that the formation on the weekly charts over the past few weeks had been of a quasi morning star pattern and noted that that was a bullish reversal pattern. In addition, the S&P 500 ended the recent run of lower highs, which is an other bullish indication. Friday’s high was right on a resistance level and the market pushed lower but if the market can clear Friday’s high this week we may see another go at the highs of the year.

The Nasdaq 100 had a strong week but stalled just short of the year’s highs having recovered amazingly well from last month’s weakness.

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 in a long-term downtrend.

Commodities

Crude ended the week higher but was rejected at just below the $100 level, forming a bearish engulfing pattern on Friday. If resistance at $100 continues to hold we may see a move lower towards support at $90. Heating oil and no leaded gas were considerably higher and no leaded gasoline may continue higher towards the highs of the year.

Gold found support in the $1 470-1480 area and bounced sharply higher, ending a 2-week losing streak. We may now see a test of $1560 resistance, a level that will likely determine near-time price action for the yellow metal. Much may depend on the US dollar, but a break above $1560 may lead to another go at all time highs.

Currencies

The dollar index ended the week higher having bounced off short-term support around 7440. For the most part the index has been moving sideways and is currently in a short-term range between approximately 7450 and 7650. The wider range spans form 7330 to 7700.

The Euro is in a triangle formation, which could eventually lead to a sizeable breakout. For now the long term trend is up but the market is now down towards the bottom of the triangle. When we have a triangle we can take the range from the widest point of the triangle and then add or subtract that from the eventual breakout point for our target. The current range is around 1000 pips so a downside breakout could see a move down to approximately $1.32

Interest rate futures

We wrote last week about the dangers of prematurely considering that a trend has changed before getting confirmation of a change of trend, and right on cue the interest rate futures markets reversed yet again and remain in a long-term up-trend.

As we wrote last week, on a fundamental basis interest rate futures should probably be much lower than they are and that the markets are seemingly completely ignoring fundamentals at present. This is why we rely on the price and price action as our primary indicators as although many are bearish on this sector, prices can still move higher.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 4th July 2011

The coming week will be a shortened trading week due to the July 4th Independence Day holiday in the US.

The past week has seen bullish action from stocks, bucking short-term weakness and a renewal of US dollar weakness. The markets are seemingly trading in a schizophrenic style, with extreme moves in either direction following each other. Long-term direction currently remains unclear for most markets.

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

Stocks

We have been writing for the past couple of weeks about indecision in the stock markets, highlighting in particular the doji patterns that had been formed on the last 2 weeks’ weekly charts. A long green candle followed these 2 doji candles, and this is bullish. The formation on the weekly charts over the pa st few weeks is of a quasi morning star pattern, and this is a bullish reversal pattern from the recent lows. We also wrote that the recent lows may provide some support and they did, but few would have foreseen the bullish action from support which blasted straight through 1295 resistance and also took out the recent high, breaking the trend of lower highs.

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 in a long term downtrend.

Commodities

After recent weakness, the energy sector had a fairly strong week and Crude snapped a five-week losing streak to bounce higher from support at $90. The other energy markets followed Crude higher.

Gold declined for a second straight week and closed below the $1500 level for the first time in several weeks and the next likely target will be a test o f support around the $1460-1470 area. The long-term trend remains up for now. Silver continues to mirror Gold’s movements and also moved lower.

The grains sector has been mixed, with Corn and Wheat falling like stones but the other markets holding up relatively well. Agricultural markets also remain strong in the short term having recovered much of their recent weakness.

Currencies

The dollar index failed to clear the 7700 resistance level and this failure led to new weakness for the dollar and a fairly decent move to the downside in the direction of the long-term trend. As we have been writing of late, in spite of short-term dollar strength, which has been evident over the past several weeks, the long-term trend has remained down and many currencies have remained above short-term support.

The Swiss Franc pushed to new all time highs early in the week but then came off those highs whereas other major currencies and higher risk currencies have fared well and moved higher having held support.

Interest rate futures

Interest rate futures underwent a steep sell-off almost across the board, with only the short term 3 month Eurodollars holding up reasonably well. The other markets in this sector all sold off sharply bringing an end to the recent bullish run. Due to the duration of the recent uptrend considerable further weakness will be required for a change of long-term trend to down.

It is worth noting though that the dollar has made similar moves over the past few months leading many people to consider that the trend has changed, only for a reversal to occur and the long term trend resume itself once again. This same kind of price action could also occur in the interest rate futures sector. Fundamentally, as we have written before, this sector should probably be much lower than it is but we have seen many times that the markets seemingly completely ignore fundamentals on many occasions and many market participants are unsure of future direction.

Kind Regards

Robert Stewart