LS Trader Weekly Update 30th July

Stocks began the week on the back foot, but bottomed on Wednesday and a sharp rally followed, which took the S&P 500 to new highs for the current move. The dollar did the opposite, giving up initial gains from early in the week and ending lower.

The grains markets, which are still in a bull market fell back this week but the trends remain intact.

The long-term trends are still mixed for stocks and commodities but the trends in the currency markets are becoming less clear, but still on balance favouring the U.S. dollar.

Stocks

The S&P 500 pull back early in the week but found support once again just above the 1320 area, which formed a platform for an impressive rally which took the index to new highs for the current move.

The Nasdaq 100 moved in similar fashion but is not quite so bullish as it did not clear recent resistance and has subsequently not made a new high for the current move. The trend remains up for U.S. induces.

The Nikkei is still the weakest but even that managed to advance. Friday’s close was just below the 50 day MA but the momentum looks as though it will take it through the moving average and possibly to the recent highs. The long-term trend is still down.

Commodities

October Gold ended the week ahead by 2.23% but still remains range-bound and in a sideways consolidation that suggests it is building up for a breakout. The range is currently around $100 with support around $1550 and resistance around $1650. A break of either level could be good for a move of around $100 in the direction of the breakout.

We wrote that the grains markets are often very much weather driven so any sign of rain could send prices in to a sharp correction. This week did see some rain and prices corrected but still remain in the long-term uptrend and the bull market is still intact.

Currencies

The dollar index initially cleared our 8400 target but then pulled back to end the week lower by 0.97%. The long-term trends still mostly favour the dollar, with the exceptions being the Pound and the Canadian dollar.

The Australian dollar continues to rise and the trend looks set to change to up. The New Zealand dollar also advanced and that too may be on the verge of a trend change in the not too distant future as the commodity based currencies come back into favour.

The Euro fell to new 2 year lows on Tuesday but then put in a decent recovery, finishing the week ahead by 1.22%. The Euro now looks like it may continue higher towards the 50 day moving average. The long-term trend is still down.

Interest rate futures

We wrote last week that we thought there was limited upside potential in this sector and having clawed up to new all time highs early in the week, Wednesday saw the beginning of some serious selling that culminated in a large down-day on Friday that brought the trend to an end, at least for the short-term. The long-term uptrend still remains in place and further weakness will be required for a change of trend to down.

Good trading

Phil Seaton

LS Trader

LS Trader Weekly Update 23rd July 2012

The big moves have once again come from the grains sector where a bull market is still in progress and there are a few new all time highs coming from this sector as the drought in the U.S. continues. Stocks had briefly hit new highs intra-day this week before backing off on Friday and the dollar remained mixed having recovered much of its losses for the week on Friday.

The long-term trends are still mixed for stocks and commodities but continue to favour the U.S. dollar.

Stocks

The S&P 500 initially continued with strength and posted a slight new intra-day high for the current move at 1375.7 on the September contract. The market was unable though to complete a breakout higher and fell back on Friday. The current range is therefore between last week’s high and support at 1320. The S&P 500 managed a small gain of 0.48% for the week and the long-term trend remains up.

It was a similar story for the Nasdaq 100, which having made a slight new high on Thursday also pulled back on Friday, forming a bearish engulfing pattern in the process. The Nasdaq 100 still managed a weekly advance of 1.41% in spite of Friday’s selling.

The weakest index remains the Nikkei, and following last week’s decline of 2.04%, looks to be resuming the long-term downtrend with 8260 as the next downside target on the September contract.

Commodities

Gold remains range-bound and in a sideways consolidation that suggests it is building up for a breakout. Support is still at $1547 and the long-term trend remains down.

The grains bull market continues. This past week saw Soybeans, Soybean Meal, Corn and Wheat all hit new all time highs. These trades have all been extremely profitable for the LS Trader system but how long this parabolic rise can continue for remains to be seen. Moves in grains are often very much weather driven so any sign of rain could send prices in to a sharp correction. For now the bull trends remain intact.

Feeder Cattle has been heavily sold as the steep downtrend continues in spite of a couple of days of buying mid-week.

Currencies

The dollar index had been heading lower throughout the week until a strong reversal on Friday left the index ahead by 0.12% for the week. The trend still remains up and 8400 remains the target.

The Australian dollar successfully tested and exceeded the $1.0261 target that we wrote about in the previous update and ended the week ahead by 1.54%. However, the Aussie still remains in a long-term downtrend. That may change soon if the current strength continues.

The Euro once again fell to new 2 year lows and remains on track for our target at $1.18. The next support level is at $1.21 but if that fails, $1.18 remains a distinct possibility.

Overall the long-term trend still favours the dollar against all the majors with the exception of the British Pound.

Interest rate futures

Interest rate futures continue to press higher and the 10-year T-note hit a new all time high as yields fell to record lows once again. As we have written previously there still appears to be limited upside but that could have been said for much of the past few months, but the sector has continued to rise. Yields on the 5-year notes also hit record lows and short-term 3 month Eurodollars press ever closer to par. It seems unthinkable that Eurodollars could go negative so there is certainly little upside potential in this market, something that could be said about the whole sector. This is one sector where there is an upside ceiling.

Good trading

Phil Seaton

LS Trader Weekly Update 16th July 2012

It’s been a mixed week in many markets this past week with the S&P 500 ending the week flat and the currency markets also being mixed. The big moves have once again come from the grains sector where a bull market is in progress and some markets have reached new all time highs. Corn was the biggest mover, advancing by 6.51% for the week.

The long-term trends are still mixed for stocks and commodities but continue to favour the U.S. dollar.

Stocks

The S&P 500 ended the week flat but had been as low as 1320 before mounting a recovery. Friday saw a bullish engulfing pattern form on the daily charts and the weekly charts show a hammer type pattern. This suggests that the lows are being rejected and that last week’s lows at 1320 may now provide support. The trend is still up.

The Nasdaq 100 ended the week lower by 1.23% but once again found support just north of 2500, which continues to be a critical support level. In similar fashion to the S&P 500, the lows were rejected on Thursday, followed by bullish price action on Friday, which took the Nasdaq back above the 50-day moving average. The trend remains up.

Commodities

Gold ended the week ahead by 0.83% but had been considerably lower during the week before some nice bullish price action on Friday where the futures gapped higher at the open and closed above the previous 4 days’ closing prices. As before support remains at $1547 and the long-term trend remains down, but the shorter term action is effectively a sideways move with no clear trend.

Although in the U.K. we’ve had the wettest summer on record so far, in the U.S. they are suffering with heat waves and droughts. This has caused havoc with some of the U.S. crops and has led to a bull market in grains, a bull market that the LS Trader system has caught nicely. One of the great things about trend following is that you don’t need to stay up on or follow the news, as all events are eventually reflected in the price. The price moves in this sector over the past few weeks have been very aggressively bullish. This past week saw both Soybeans and Soybean Meal reach new all time highs and saw Corn limit up during the week.

Currencies

The dollar index did test the 8400 level as we suggested might happen last week but was unable to clear it, closing marginally down for the week. Similarly, the trend overall has been mixed.

The dollar had been advancing almost across the board until Friday, which saw some decent moves for most of the majors against the dollar. The Euro fell once again to new 2 year lows and remains on course for our longer-term downside target at $1.18, which is a level that has held firm since 2005. If the Euro does fall as far as $1.18 it will be a key level to watch for the markets reaction.

The Australian dollar bounced nicely off the 200-day moving average and saw some continuation higher on Friday but the long-term trend is still down. We may see a test of the recent highs at $1.0261 this week.

Overall the long-term trend still favours the dollar against all the majors with the exception of the British Pound.

Interest rate futures

Interest rate futures remain in a strong uptrend and the sector advanced across the board this past week with prices once again approaching new highs as yields fell once again towards record lows. There are signs once again of a lack of conviction in taking these markets higher, reflected by the small real bodies and doji shown on the daily charts. There still appears to be limited upside but that could have been said for much of the past few months but the sector has continued to rise.
Good Trading

Phil Seaton

LS Trader Weekly Update 9th July 2012

The past week has seen the dollar recover from recent short-term weakness and resume the longer-term uptrend, which included pushing the Euro down to 2 year lows. Commodities remain mixed although the long-term trend overall remains down for commodities. Much of the initial strength in commodities markets wore off before the end of the week, with the most bullish moves coming in the grains sector, which continue to benefit from the recent drought. The trend remains mixed for the stock indexes with the U.S. indexes still the strongest.

Stocks

The S&P 500 initially header higher but stalled at 1375 before moving lower again. The index ended the week lower by just 0.34% and the trend is still up. The market may well continue down towards the 1330 area, where the 50-day moving average currently sits. The 1330 area also represen ts a key area, which previously had provided resistance and may now provide support should the index decline that far.

We wrote last week that the Nasdaq 100 may move higher towards resistance at 2626 and that did happen, with a new high for the current move posted at 2656. A doji was formed here which represents indecision, and this was followed by a long black candle on Friday, which completes a 3 day evening star reversal pattern, which suggests that weakness may continue in the short term, although the trend is still bullish. Support may be found roughly mid way through the tall white candle formed on the 29th June, which is approximately at the same level as the 50 day moving average.

Commodities

Gold initially continued with last week’s bullishness but fell just short of the $1640 level that we highlighted last week. From there gold reversed, and may now head lower towards $1547. T he long-term trend remains down.

Crude and the other energy markets also initially continued with the prior week’s bullishness, before retracing much of those gains. The trend still remains down across the sector.The most bullish sector of all at present continues to be the grains, all of which made sharp gains throughout the first half of the week before running out of steam on Friday. The bullishness of the sector from a technical perspective is highlighted by the gaps higher seen on a few of the grains charts.

Currencies

The dollar had a strong 2-day rally to close out the week, advancing from 8189 to 8356 in just 2 days, which is a significant move for the index. This culminated in the highest weekly close for the current move and suggests a test of the 8400 level in the not too distant future. The support area that we highlighted last week may be key was not quite tested and support should still be found around 8140 should the index reverse again.

The British Pound, currently the only major still in a long-term uptrend against the dollar according to our proprietary long-term trend indicators was rejected at the 200-day moving average, which we suggested last week may be tested. From there the Pound headed lower and may now decline towards the recent lows posted on the 1st June, a break of which would give a change of trend to down.

The Euro opened the week higher but then spent pretty much the rest of the week moving lower, ultimately taking out the recent low and falling to its lowest level in 2 years against the dollar. This move opens the door once again to our longer-term downside target at $1.18.

Overall the long-term trend still favours the dollar against all the majors with the exception of the British Pound.

Interest rate futures

Interest rat e futures advanced once again as the seemingly never-ending long-term uptrend continues. The markets continue to hold above the 50 day moving averages and short-term support levels and as long as that remains the case there is a good probability that the recent all time highs in these markets will be tested once again. There is however a limit as to how high these markets can go with yields moving once again back towards all time lows. There will come a point if the uptrend continues where the risk/reward for long positions is not there and that may lead to an unravelling of longs.

Good Trading

Phil Seaton

LS Trader Weekly Update 2nd July 2012

Friday saw some big moves in the markets following events in Europe and some large reversals followed. Up to that point the dollar had been gaining and stocks for the most part had been in retreat. That all changed on Friday as stocks and commodities short higher and the dollar lower. It remains to be seen as to whether this is any more than a one-day move or the beginning of some new trends. The long-term trends are so far unaffected so the odds favour this being just a short-term move but time will tell.

Long-term trends remain mixed for stocks, mostly down for commodities and up for the dollar and bonds.

Stocks

The S&P 500 headed lower initially to support around 1300 and as could be seen by the lower shadows on the daily candles, there was demand around 1300. Friday saw a huge move higher, which took out the rece nt highs and took the market back to resistance at 1360. Friday’s close at 1356.4 on the September contract is a new high close for the current move and that is potentially bullish. 1360 resistance still needs to be cleared. If it can then we may still see a move potentially up to the highs of the year around 1408.

The Nasdaq 100 moved in similar fashion, this time finding support from just over 2500, but falling just short of the recent highs. The target will now be resistance at 2626 on the September contract.

Commodities

Commodities had a highly bullish day on Friday as the dollar collapsed. Metals and energies had big reversal moves, which for most markets were counter to the long-term trend. Gold looked to be heading for the recent lows until Friday’s reversal and may now have another go at the $1640 resistance level. The long-term trend remains down.

Crude advanced 9.36% on Friday having fallen to new 18 month lows on Thursday. Friday’s rally suggests that the downtrend is over for now and that a break of short-term resistance will follow. The long-term trend is still however very much down.

The grains sector had bullish moves, lead by Wheat, which advanced 10.15% for the week, reaching its highest level since September last year. Soybeans also broke out to new highs since 2008, advancing 3.8% for the week. The prior resistance area around 1400 should now provide support.

Currencies

The dollar had been slowing gaining throughout the week until a big reversal on Friday. The dollar index declined 1.51% on Friday and tested the 50-day moving average. The index will likely test key support at 8140 in the coming week. If support there fails the next support level does not come in until 7900.

The Pound had a bullish week, most of the bull move came on Frid ay. The Pound looks set to test the 200 day moving average again this week and the recent highs and just below $1.58. The long-term trend is still up for the Pound, the only market still in an uptrend against the dollar.

The long-term trend is still down on the Euro but Friday’s reversal suggests a test of the 50-day moving average and the recent highs just below $1.28. Overall the long-term trend still favours the dollar.

Interest rate futures

Interest rate futures ended the week pretty flat but had been considerably higher earlier in the week prior to Friday’s sell-off. The long-term trend is still up across the interest rate futures sector and the markets are still holding above short-term support. The 50-day moving average is still in range and is looking like it may be tested. There is good support in the area of the 50-day MA so if the markets do get as low as that a bounce may be expected.

Good Trading

Phil Seaton