LS Trader Weekly Update 25th June 2012

Stocks began the week in bullish fashion but were unable to continue to push higher after initial strength. The dollar saw the inverse of that move and recovered well after initial weakness at the start of the week. The dollar formed a few morning star/evening star reversal patterns which are short-term bullish for the dollar and for the most part the long-term trend still favours the dollar.

Commodities markets remain in a long-term downtrend with energies and metals showing continued weakness.

Stocks

The S&P 500 cleared the 1340 area resistance level and pushed higher initially before running in to resistance around 1360. The index then pushed lower from there and fell back through the prior 1340 resistance level which due to change of polarity should really have acted as support if the market was solid in the short term. This led to a move down to 1317.5 before support was found. The S&P 500 then formed a bullish harami pattern on Friday that suggests that the selling may have run out of momentum. The pre-market futures will give a clearer picture of short-term direction if last week’s lows hold firm. The trend is still up for the S&P 500 and we may yet see a move potentially up to the highs of the year around 1408.

Both the Nasdaq 100 and S&P 500 are still in long-term up-trends. The trend for the Nikkei and Dax is still down, the latter being held down this week by the 50 day moving average.

Commodities

Gold failed once again to clear resistance around $1650 and moved lower. The long-term trend is still down and we may now see a test of the recent lows formed in May at $1529.3 on the August contract. Silver is also approaching a key long-term support level, a break of which may lead to a decent downside move.

US Crude oil fell through support at $81 that we wrote about last week and almost reached our $77 downside target but found some support at $77.56. The trend is still down and $81 may now provide some short-term resistance. Brent Crude has also fallen to 18-month lows as the downtrend for the energy sector continues.

Currencies

It’s been a better week for the dollar following the short-term weakness that has been evident in the couple of prior weeks. This week has seen the dollar index regain the 8200 level having formed a morning star bullish reversal pattern from support at just below 8150. These lows should now provide support and may form a base for the index to move back towards the recent highs at 8400 on the September contract.

Other major currencies have also seen similar reversal patterns, with an evening star forming on the Australian dollar, which took the Aussie back below the 200-day moving average. The long-term trend is still down and last week’s highs should now provide resistance.

The dollar came within a few pips of an upside breakout against the Yen and we may see such a move this week. It seems that the seemingly ever-present threat of the Bank of Japan stepping in to weaken the Yen is supporting the market. The British Pound is also pressing higher against the Yen.

The Euro hit a wall of resistance early in the week and has moved lower during the course of the week and may now move further lower to test the recent lows, the downtrend remaining intact.

Interest rate futures

The long-term trend is still up across the interest rate futures sector and the longer term markets are still holding above short-term support. The 10 year T-note and the 30 year T Bond remain the most bullish but we may see a test of support again this week and a test of the 50 day moving average, which is now coming in to range.
Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 18th June 2012

The past week has seen stock indexes continue to move higher following the bounce from the 200-day moving average seen a couple of weeks or so ago. As was the case during the previous week, the stock index advance has been met with dollar weakness. Some strength in the coming week for U.S stock indexes may see the up-trend resume. Overall the trend for the dollar is up, commodities are still down and stock indexes are mixed.

There are some key events in the week ahead which have the potential to make considerable moves in the markets, such as the outcome of the Greek election and the U.S. Federal (FOMC) meeting on Wednesday.

Stocks

The S&P 500 initially advanced to test the 1340 area that we have been writing about recently as key but was unable to clear it. The index then pulled back but recovered to close the week at the week’s high. This suggests that there may well be sufficient momentum to keep the market moving up through the 1340 level. If the 1340 level can be cleared we may see a move potentially up to the highs of the year around 1408.

A move above the 1340 level on the S&P 500 would be a bullish sign and from a technical perspective the uptrend would be back in progress. Such a move would likely see a move higher for the Nasdaq 100. Both the Nasdaq 100 and S&P 500 are still in long-term up-trends. The trend for the Nikkei and Dax is still down.

Commodities

Gold advanced by 2.31% for the week and may yet reach our target of $1675. The long-term trend is still down.

Crude oil has gone mostly sideways over the past week but is still very much in a long-term downtrend. There are some signs that a short term bottom may be forming around 8100 but some consolidation following the prior sharp decline is not all that unsurprising. If 8100 gives way, the next target is still $77.

The overall trend for commodities is still down with Coffee showing continued weakness. The grains markets were also lower almost across the board. Soybean Meal hit new all time highs but was unable to continue higher and moved back into the range but the trend is still bullish long-term.

Currencies

The dollar index fell through the 8220 level again as the dollar lost ground across the board. This past Friday was quarterly currency expiration so we are now trading the September contracts.

The Euro did clear the prior resistance level that we have been writing about recently but was unable to hold above it. This led to a move lower followed by a recover by the end of the week. The market has now closed with a doji right on the level in question so the Euro can certainly go in either d irection in the short-term.

The British pound, which remains in a long-term uptrend against the dollar broke above the change of polarity resistance level that we have written about previously and may now continue higher towards $1.60.

All the other majors moved higher against the dollar but the long-term trend still favors the dollar against all markets except the Pound. The New Zealand dollar in particular had a good week, advancing by 2.68% and the Aussie also got back above parity with the dollar (the September contract closed at 1.0003) and now looks like it will test the 200 day moving average in the coming week. The long-term trend for both is still down but short-term momentum is up.

Interest rate futures

Interest rate futures were sharply lower on Monday and took out support on the 5 year T-note. The 10 year T note just about held on to support and both markets formed a large hammer pattern on the daily charts, indicating that at least for now the lows are being rejected. The long-term trend is still up across the sector.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 11th June 2012

The past week has seen stock indexes recover some of their recent losses with a bounce from the 200-day moving average. As ever we have seen the inverse of the stock indexes move with declines for the dollar. The long term trends are still mostly intact however, and are still up for the dollar, down for commodities and mixed for stock indexes.This week is triple witching on Friday so stock index futures roll out of June into the September contracts. Forex futures also roll on Friday.

Stocks

The S&P 500 fell to new lows for the current move dipped below the 200 day moving average but then bounced higher and has formed a bullish engulfing pattern on the weekly charts. The long-term trend is still therefore up but only just. A break below last week’s lows would change the trend to down. As for the shorter term, the market is s till below resistance from the change of polarity where prior support becomes resistance so needs to push above the 1340-1345 area that we have been writing about the past few weeks in order to be considered bullish.

The Nasdaq 100 is still the strongest of the major indexes and remains above change of polarity support. It also held above the 200 day moving average and also formed a bullish engulfing pattern on the weekly charts. As with the S&P 500, the Nasdaq also finds itself near change of polarity resistance and that resistance area will need to be taken out if this rally is going to continue.

Commodities

The gold rally stalled before reaching $1675 and the reversal took the yellow metal back below the $1600 level that should have acted as support if the market was strong. This suggests that there may be further weakness ahead and that we may yet see another test of the year’s l ows.

The long-term trend for Silver is still up but only just. However, silver continues to find very good support between 2620 and 2700 as evidence by the series of hammers on the weekly charts where the lows are being rejected. Similar price action can be traced back all the way to October so it is clear that this is a key support zone. As long as this support holds then the up trend is still in place and the outlook remains bullish. A break of that support zone may though open the way to considerable downside. One negative for silver though is failure to clear 3000 and the fact that prior resistance did not act as support around 2900. As with gold, this is not normally indicative of a solid market. If either of these markets were solid in the short-term both of those levels should have held.

Crude oil managed a small advance this week, ending the week higher by 1.05% but the trend is still very much down. The past week was in fact the first up week in 6 but it was far from convincing. The longer-term target remains around $77 to the downside.

Currencies

The dollar index fell to just below our 8220 support level before moving higher and recovering some of the week’s losses. The trend is still up and the market has closed back above 8220, ending the week at 8256. Last week’s lows will now be the new support area and the trend remains up as long as those levels hold.

The British Pound just about held on to the long-term uptrend but the shorter-term trend is still down. The prior support level acted as resistance around $1.56 and pushed the Pound lower from there. The range is now between last week’s highs and the lows of the current move. A break of either level could be good for a decent move in the direction of the breakout.

The Euro had similar price action to the Pound and also stalled at a prior change of polarity and has moved low er since. The long-term downtrend is still intact and the targets remain at 12100 and further out as low as 11800.

Interest rate futures

Interest rate futures ended the week lower across the board for the longer-term markets. The weekly charts show dark cloud cover patterns on the 30-year T-bond and the 5 & 10 year T notes. These are bearish reversal patterns and suggest further short-term weakness ahead. However, the long-term trends are still up for the sector and the markets are holding above support. As long as this remains the case, interest rate futures should be considered bullish.t

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 4th June 2012

The stock index decline resumed this week following a pause the prior week. Stock indexes have now declined in 4 of the last 5 weeks.

Commodities have continued to be hit hard and with only a handful of exceptions are trending nicely lower. The dollar has continued it’s recent uptrend in spite of a bit of a reversal on Friday. The long-term trends are still up for stocks and the dollar and down for commodities although as we discuss in the stocks section below, the long-term trend is on the verge of changing to down.

We’re now seeing the best period of trending markets since 2008 and the LS Trader system continues to have a good year, reaching new equity highs for the year again this past week. If this trending phase continues we are on a target for another year of triple digit gains.

Due to the Diamond Jubilee Bank Holidays, U.K. markets will be closed Monday and Tuesday this week but U .S. markets are open as normal.

Stocks

We wrote last week “The S&P 500 pushed higher and may be headed for a test of 1340, which due to change of polarity may now act as resistance as it was previously a support level.” The S&P 500 did indeed move higher towards 1340 but fell just short of reaching that resistance level before putting in a large bearish engulfing pattern and resuming the downtrend. We also wrote last week that the 200-day moving average, which was at 1270 was a target, and the market reached the moving average almost to the tick of Friday.

The Dax declined by 4.41% for the week and as with the S&P 500 rose initially to test the change of polarity resistance level but fell just short of that. The decline resumed from there. The Nasdaq 100 is still the strongest of the major indexes and remains above change of polarity support.

Following the recent sharp declines for stock indexes the long term trends are on the verge of switching to down so we may see further weakness over the summer months for stocks.

Commodities

We wrote last week that a break of the recent low or high could lead to a decent move in the direction of the breakout and we saw that as Gold moved up through $1600 resistance and then shot higher, bringing the recent downtrend to an end for now. $1600 may now act as support and the rally may continue towards $1675.

Crude oil essentially collapsed this past week, and having fallen through $90 decline to $85 as we wrote may happen last week. Crude then continued lower to $82.29 before recovering slightly to close the week out at $82.23, ending the week down by some 8.4%. Crude is now oversold but as we have written many times before oversold markets can continue that way for a long time. The next downside target will be aroun d $77.

Currencies

The dollar index advanced 0.55% this week but had been higher, reaching 83.67 on Friday before selling off to close at 82.97. The trend is clearly still up and we should see support coming in around 8220.

The British Pound fell by 1.73% for the week but as with most other currencies did recovery somewhat on Friday. In the case of the Pound, the bounce came just off major support, which makes the areas just below last week’s lows very significant should they be broken.

As with the Pound, the Euro also declined for the week but recovered a bit on Friday. The trend however is still down and the targets remain at 12100 and further out as low as 11800.

The dollar reached its highest level against the Canadian dollar since mid-December last year and may continue to work its way towards the October highs.

Interest rate futures

Interest rate futures did initially decline towards support but support held as once again buyers returned to the market at support. This then took these markets to new highs as yields fell to record lows once again. The trend remains very bullish across the sector and is clearly very much up. How much lower yields can decline remains to be seen.

Good Trading

Phil Seaton