LS Trader Weekly Update – Monday 26th March 2012

The past week has seen stocks continue to stall, following on from the loss of momentum seen the week earlier. Of the 4 stock indexes that we trade at LS Trader, only the Nasdaq ended the week ahead and this week saw the Nasdaq 100 hit a new 11 year high.

Last week we wrote “Contrary to popular opinion, doji are not reversal signals in and of themselves but more an indication that the bullishness has lost a bit of momentum and are often just the markets pausing for breath before continuing higher. That said, they do present a possible warning for the short term.” As mentioned above, these doji have so far translated into some small short term weakness and there are now similar formations on the Nasdaq 100 daily chart.

Stocks

The warnings that we wrote about for stocks and the S&P 500 last week did lead to a down week but not by much. The S&P 500 retreated 0.31% for the week but the spinning top that has formed on the weekly charts could once again be a further potential warning of more weakness ahead in the short term. However, the trends, both long and short term are still up and these factors are more important than the loss of momentum until there is confirmation of a down move, which as yet we do not have. The 1400 level was taken out but the market has been unable to make a weekly close above that leve so far. A weekly close above 1400 would be bullish.

We wrote last week that a correction was due on the Dax and we did see that with a weekly decline of 2.12%. As with the other indexes though the trend is still up and as long as short term support holds (on a closing basis the 7000 level is still holding) then the upside target at 7680 is still in play.

Commodities

Gold ended the week below the 200 day moving average once again but buyers did come back in at $1627 and the market may now continue higher to test the 200 day MA. The trend however remains down.

Continuing its major downtrend is Coffee, which this week completed a 10th consecutive down week. There was a semblance of buying on Friday but the trend is still clearly down.From the energy sector, the only gainer was No Leaded Gas, which pushed through resistance intra day to reach its highest level since July 08. However, there was a bit of profit taking on Friday, which has taken the market down to close right on a support level from prior highs. If the trend is good the prior highs should provide support and lead to a continuation higher, otherwise we may see some short term weakness.

Currencies

The dollar index ended the week lower for a second straight week and may continue further down. 7950 did get taken out in tra day but held on a closing basis. A close below 7950, or more precisely last week’s low at 7932 would be bearish short term and would likely lead to a test of the February low at 7842.

Interest rate futures

We wrote last week “There are many hedge funds that are itching to short interest rate futures so if last week’s lows do get taken out we could see further selling pressure. For now though the long term trends are still up.” The prior week’s lows did hold, albeit only just, but this did lead to a formation of quite a strong reversal on a couple of the markets, a morning doji star formed on both the 5 & 10 year T notes. The morning doji star is quite a strong reversal pattern so short term strength may continue. However, this makes the low of the pattern a very key support point and if support there fails there could be some large moves lower.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 19th March 2012

The past week has been another bullish week for stocks but the initial bullishness did wear off a bit by the end of the week, as evidenced by the smaller bodied candles/northern dojis. Contrary to popular opinion, dojis are not reversal signals in and of themselves but more an indication that the bullishness has lost a bit of momentum and are often just the markets pausing for breath before continuing higher. That said, they do present a possible warning for the short term.

Bullishness in stocks has translated as it often does to dollar weakness, and although the dollar began the week in quite a strong fashion that developed into weakness by the end of the week. Therefore is the same old story with the trends being up for stocks and mixed for the dollar and commodities.

Stocks

As covered in the introduction, stocks have continued in bullish fashion but some warnings are present in the short term that a possible loss of momentum is upon us. Not really surprising considering the extent of recent moves higher and the fact that the June S&P 500 is now banging its head against the 1400 level.

The other indexes also look good in spite of similar hesitation patterns forming as the Dax advanced 3.85% for the week. The 2011 high at 7680 will be a longer term upside target now that the Dax appears to have firmly closed above 7000. However, a correction is due and we may see some weakness before that target is reached, if indeed it is in this current uptrend.

Commodities

Soybeans have continued their bull run, this week advancing by 2.76%. The upside target remains at 1450 for beans and this past week has also seen bean oil and meal following along nicely, with meal being the most bullish of the sector.

Gold ended the week down by 3.25% and continues the long-term downtrend. This past week saw the yellow metal move once again below the often watched 200 day moving average. Copper fared better, advancing by 0.51% for the week and still remains in a long term uptrend with a test of 40000 being the critical level.

Currencies

The dollar index ended the week lower by 0.51% having earlier made an upside breakout that eventually reversed. The trend for the index is still up as it is for the dollar against a few of the major currencies.

The Aussie dollar fell to a 7 week low against the dollar but then made a recovery, forming a nice hammer pattern on the weekly chart and we also saw a similar pattern of trading for the kiwi. The Canadian dollar continues to be the weakest of the 3 commodity currencies and is still in a long term downtrend whereas the trend for the other 2 is still up.

In spite of a bit of a pause from weakness towards the tail end of the week, the Yen continues to be the whipping boy of the currency markets, having declined for a seventh straight week, this past week declining by a further 1.01%. Resistance has appeared at 8400 but if that can be cleared then our target at 8500 is still on the cards.

Both the Euro and the Pound advanced for the week against the dollar but the trend is still down for both markets.

Interest rate futures

We wrote last week “We may see some decent moves lower should those support levels eventually give way”. We were referring to the medium term support levels that have held the interest rate futures markets up very well of late. This week those support levels were tested and support failed, leading to quite a dramatic sell off, which in the case of the 30 year T Bonds, this mean a weekly decline of 2.76%. There are many h edge funds that are itching to short interest rate futures so if last week’s lows do get taken out we could see further selling pressure. For now though the long term trends are still up.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 12th March 2012

The past week has been quite a volatile one with some large moves seen in stocks, commodities and currencies. Much of the losses incurred by these declines were almost completely erased by the end of the week and some markets made a complete recovery and actually ended the week higher.

Long-term trends are still up for stocks and still mixed for the dollar and commodities.

Stocks

We wrote last week that momentum on the S&P 500 may be running out of steam and right on cue weakness came in to the market, taking the market out of the recent bull channel and bring to an end the recent rally. The correction was however short lived and the S&P 500 made almost a complete recovery by the end of the week and is now only a few points off recent highs.

The Nasdaq 100 was not immune to early weakness but it did make a complete recovery and even went on to make new highs, albeit narrowly, and completed a tenth straight week of gains. However, in spite of making new highs and a new high close it’s not all bullish for the Nasdaq as there is a formation of a dragonly doji/hanging man pattern on the weekly charts, which is a bearish sign for the short term. It would not therefore be surprising to see a new test of last week’s lows in the not too distant future.

Commodities

April Crude moved around a bit during the week but did end up with an advance of 0.66%. Upside resistance is in at the local top at $110.55 but if the market can reach and clear that we would be looking at a further rise towards last year’s highs at $114.

Soybeans continued in bullish fashion until Friday where we saw some weakness. It’s been a very strong move of late so some selling pressure is not all that unusual and an further rise towards 1450 is still a possibility but we may see some further weakness in the short term prior to that.

Metals all ended the week lower but the whole sector had been significantly lower earlier in the week and the weekly charts show long lower shadows on many of the metal charts, which is bullish. The trend remains mixed for metals with the long term trends being up for some but still down for gold. Gold is currently grappling with the 200 day moving average but a move above 1800 will be required for a confirmed change of trend to up.

Currencies

The dollar index advanced for the second consecutive week, this time gaining 0.78%. This move was once again facilitated by advances against the ended the Euro, Pound and Japanese yen. We wrote last week that we were still looking for a move higher to 8200 in the USD/JPY and that should that level be taken out that 8500 would come into focus a nd that is the case now since 8200 resistance was cleared on Friday.

Respective resistance levels at $1.35 and $1.60 for the Euro and the Pound continue to look like a short term top and the failure to take out those levels has pressured both markets lower and downside breakouts look to be on the cards for both markets, with a $1.52 target for the Pound and $1.27 for the Euro.

Interest rate futures

Interest rate futures all ended the week lower but all continue to hold on to medium term support. The 5 year note formed a hammer pattern at support, which is a bullish reversal pattern, indicating buyers are trying to hammer out a bottom and push prices higher once again. As we wrote last week, we may see some decent moves lower should those support levels eventually give way but for now a continuation towards the higher end of the recent ranges looks more likely.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 5th March 2012

The past week has seen stock indexes continue to climb higher but there are signs that momentum may be beginning to wane. The dollar has also advanced for the week overall and commodities have been mixed. With a few exceptions volatility is at much lower levels than it has been for much of the past 2-3 years and many markets are trending well.

Long-term trends are up for stocks and mixed for the dollar and for commodities.

Stocks

The S&P 500 advanced by 0.40% for the week and the trend is clearly still up. However, there are signs that the momentum may be running out of steam. The bull channel that we have been writing about for several weeks is just about holding on a closing basis but the market is right on that lower trendline as of Friday’s close. If the lower level holds then we may yet see a move back towards t he top of the channel and the 1385 target.

The Nasdaq 100 continues to lead the way as far as the indexes are concerned with this past week being the ninth straight up week, for a weekly gain of 1.61%. The weekly chart still looks bullish but the daily charts are showing some indecision with a northern doji printed on Friday.

Commodities

April Crude cleared $110 on Thursday before pulling back on Friday but the trend remains up and it was a similar story for heating oil and no leaded gas. The trend remains up for all three markets at present but it remains to be seen as to whether last week’s weakness translates to a stronger pull back. Last week’s highs in all three markets will be the resistance levels that will need to be cleared.

Last week we wrote about the indecision that was present in gold and that was clearly resolved this past week with a steep sell off on Wednesday, whi ch took the market easily through he $1765 support area. The long term trend remains down but last week’s lows may provide support, as may the 200 day moving average which currently sits at $1765. Silver ended up sharply lower also on Wednesday but the trend still remains up.

Soybeans had a very bullish week, moving ahead 3.59% for the week for a third consecutive week of gains. The soybeans chart still looks bullish with little in the way of resistance between current levels and the September highs around 1450.

Currencies

The dollar index ended the week higher by 1.35% helped mainly by gains against the Euro, Pound and Japanese yen. We wrote last week that we were looking for a move higher to 8200 in the USD/JPY pairing and that level was almost reached this last week. If that resistance level can be cleared there is little in the charts by way of resistance until around the 8500 level.

Both the Euro and the Pound made sharp reversals lower having been rejected at $1.35 and $1.61 respectively. The long-term trend remains down for both of these currencies and lower prices may be ahead.

Interest rate futures

Interest rate futures continue to hold on to medium term support and both the 5 & 10 year notes advanced but the longer term 30 year bonds ended slightly lower. The long-term trend is still up across the sector and these markets must still be considered bullish as long as medium term support holds. We may however see some decent moves lower should those support levels eventually give way but for now a continuation towards the higher end of the recent ranges looks more likely.

Kind Regards

Robert Stewart