LS Trader System weekly update 27th January 2013

The S&P 500 hit new 5 year highs again during the past week with the cash S&P 500 crossing 1500 for the first time since 2007. The March S&P 500 hit a high of 1499.1 and will very likely clear 1500 during the coming week. All time highs for the S&P 500 are now within range and may be seen in 2013.

The long term trends are therefore still up for stocks, up for bonds (although possibly not for much longer), mixed for the dollar and for commodities.

Stocks

The stock index sector remains bullish with 3 of the 4 indices that we trade at LS Trader reaching new multi year highs during the past week. The S&P 500, having hit new 5 year highs again this week will likely cross 1500 on the March contract on Monday and should the market be able to close above that psychological level, may well continue higher from there. With all time highs being within range over the coming weeks, that will be the focus of traders, who will try to keep pushing the market higher.

The March Nikkei 225 had another volatile week, continuing with the pattern seen during the 2 prior weeks of sharply lower prices early in the week followed by a strong recovery. The weekly charts show long lower shadows on the last 3 weeks’ candles, which indicates a strong rejection of the lows around 10400. Having been sharply lower earlier in the week, the market recovered to hit new highs for the current move on Friday.

The Dax narrowly held on to support and subsequently pushed to new highs for the current move, keeping the long term uptrend intact.

Commodities

The metals markets have been mixed over the past week but continue to be led by Palladium, which advanced 2.53% this week for a third consecutive week of advances. Palladium now stands at its highest level since 2011.

Strength continues to return to the energy sector with both Brent Crude and no leaded gas having good weeks. The trend remains up for most of this sector but is still down for U.S. Crude and Natural gas.

Last week we wrote about Feeder Cattle and suggested that the downtrending market may have a pullback to test the underside of the trendline, and that did happen this week. The market has closed pretty much bang on that level and is therefore at a critical point and could go in either direction. If the resistance level holds, a move lower to 135 may follow in due course.

Grains markets have shown short term counter trend strength during the past couple of weeks but the long term trend still remains down across the sector and the downtrend may resume during the coming weeks once support levels are broken. There is plenty of downside potential in these markets and sharply lower prices are expected in 2013.

Currencies

The dollar has been very mixed, both rising and declining against different major currencies. The Euro climbed to its highest level in 11 months and may now target 13750.

The British Pound completed a long term trend change to down for the first time in quite a while and having broken key support may now continue lower towards $1.53, in what may be a substantial downtrend over the coming months.

The dollar has continued its amazing run higher against the Yen and the LS Trader system has currently caught just over 1000 spread betting points profit from this trade since the system entered long back on the 15th November.

Interest rate futures

Interest rate futures have all seen bearish price action this week and now look set to test critical support during the coming week. Will the much-anticipated collapse for this sector finally be arriving? The position will be clearer depending on how the market reacts when major support is tested, possibly early in the coming week.

Good trading

Phil Seaton

LS Trader

LS Trader Weekly Update 20th January 2013

The S&P 500 hit new 5 year highs during the past week as the bullish stock phase continues. All time highs for the S&P 500 are now within range. Whether the markets can keep the bullish run going remains to be seen, but there is further upside potential. The long term trends are therefore still up for stocks, up for bonds, mostly down for the dollar and remain mixed for commodities.

Monday sees the U.S. markets closed for Martin Luther King Day.

Stocks

The March S&P 500 continued its recent advance and as mentioned about, reached new 5 year highs in the process. The focus now will shift towards all time highs as based on the chart structure, that is where the next real resistance level will appear. On the basis of the cash S&P 500, that represents around another 90 points, to 1575, from Friday’s close.

The March Nikkei 225 also added to gains but had a second consecutive week of volatility, which at times earlier in the week had seen much lower prices, only for the markets to recover. The weekly charts show long lower shadows on the last 2 weeks’ candles, which indicate rejection of the lows around 10400.

The Dax has continued to drift sideways but did have a go at a test of the recent highs but was unable to push through and fell back slightly. The range of the past few weeks has been very tight and volatility is on the decline in this index. That will likely change soon as a break from the range will lead to some larger price moves, in whichever direction the breakout occurs.

Commodities

Palladium did break out of the range as we suggested may happen in last week’s update but has so far been unable to push higher. The trend remains up. Other metals also had good weeks, with decent recoveries from recent selling seen in the remaining 3 metals markets that we trade at LS Trader, gold, silver and Copper. The trend for the sector is still up and there are potential upside breakouts in the coming days.

Some big moves have been seen in certain commodity markets, such as Feeder Cattle, which this past week declined by 3.37%, following a similar decline during the previous week. This move has been sufficient to change the long term trend to down. Friday’s candle was a hammer, which suggests some buying at the lows of last week and may push the market slightly higher to test the underside of the trendline, currently around 148 before resuming the downtrend. Further out we may see a continuation lower to around 135.

Currencies

The dollar has had a positive week, with the dollar index moving higher by 0.63%. The biggest move of the week came against the Swiss Franc, where the dollar advanced by 2.43%. The dollar also had a good gain against the Pound, which now looks under pressure and may complete a change of long term trend to down in the near future should weakness continue. This week has seen the Pound move below the 200 day moving average for the first time since August and should the next level of support fail, we could see further declines to around $1.53.

The dollar has gained yet again against the Japanese Yen, and as with the Nikkei, any time that selling has appeared in the last 2 weeks, buying has been seen as evidenced by the long lower shadows on the weekly charts.

Interest rate futures

Interest rate futures moved slightly higher for second week, keeping the long term uptrend intact. As before, a change of long term trend to down is within range but so far any attempts to push down through support have been met with buying. Will an extended downtrend develop should support eventually be broken? Possibly. However, it would not surprise me should the much-anticipated collapse of this sector not occur to the extent that many expect. As ever, let’s let the markets tell us where and how far they want to go simply by following the trends as they develop.

Good trading

Phil Seaton

LS Trader System Update 13th January 2013

Stocks have continued in bullish fashion over the past week and have gone on to make new highs for the current run while the dollar has continued with long term weakness. The trends are therefore still up for stocks and bonds, mixed for commodities and mostly against the dollar. Dollar strength has continued against the yen but that is more to do with yen weakness than dollar strength.

Stocks

The March S&P 500 advanced by 0.65% for the week, taking out the highs of last year. The support zone provided by the window from the gap up 2 weeks ago that we wrote about last week has not been tested and that window may yet provide support on any weakness.

The March Nikkei 225 declined early in the week, closing the gap formed the previous week but then made a strong recovery, which recovered the earlier losses and took the index to new highs for the current move.

The Dax is drifting slightly lower in a tight range and the current uptrend may be coming to an end in the near future if weakness persists over the coming days.

This week in January is historically weak for some reason and often leads to large losses for stock indexes.

Commodities

Commodities have mostly benefited from a weaker dollar over the past week and even the grains sector, which of late has been highly bearish, managed to advance. The trend for grains is still very much down and with the biggest move of the week coming on Friday, it would be very premature to say that overall grains weakness is over on the basis of a single day’s trading. Friday’s jump in Corn came as the US stockpile came in lower than expected. The long term downtrend across the sector is still very much intact.

Palladium had a very volatile week highlighted by volatile trading on Monday that took the market below support. Palladium then reversed from below support to recover the week’s losses and the long-term uptrend remains intact. We may see the current trend resume if the market can clear the local top at 718.85 on the March contract.

Currencies

The dollar declined for the week, with the dollar index ending lower by 1.24%, erasing the gains of the three prior weeks. The long term trend is still down and remains against the dollar against the majority of the majors. This move in the dollar index was inverted by the Euro, which rose to its highest level against the dollar since April last year.

The Japanese Yen has continued with weakness, declining against the dollar for yet another week as the Yen fell to new 2 ½ year lows. The Bank of Japan this week added further stimulus and is now targeting higher inflation in order to bring an end to decades of deflation. It is expected that the BOJ will raise their inflation target from 1% to 2% and such expectations may spell further weakness for the Yen.

Interest rate futures

Interest rate futures managed to find support as once again the long term uptrend remains intact. A change of trend is well within range but any weakness is being met with buying. As we wrote last week, one of the biggest problems that sellers in this sector will likely face is that since so many people have been expecting a large downtrend for so long, that such a move may fail to fully materialize.

Good trading

Phil Seaton

LS Trader Weekly Update 6th January 2013

Last week we wrote: “Unless something dramatic happens over the next 3 trading days, the Santa Rally will have failed to materialize.” Well, something dramatic did happen with events surrounding the fiscal cliff resolution and bullish moves were seen in stocks, which erased the recent losses and saw the March S&P 500 slightly exceed the prior highs seen in December. The trends are therefore still up for stocks, mixed for the dollar and commodities and still up for bonds.

Stocks

The March S&P 500 made a large bullish move for the 4 day trading week, commencing with a rally on New Year’s Eve, gapping higher on Wednesday and closing the week ahead by 5.33%, keeping the longer term uptrend intact. Gaps, known as windows in Japanese trading literature, often provide good levels of support, with the lower end of the gap often providing the strongest measure of support. On that basis, March S&P 500 should find support around 1425 or higher should it be unable to hold new highs.

The Nasdaq 100, which has been the weakest of the stock indices we trade at LS Trader, and still the only index of the 4 still in a long term downtrend, managed a 4.91% gain on the March contract for the week. Longer term support at 2515 still remains intact and that may not now be tested until later in 2013.

The Nikkei 225, which is making a parabolic move on the basis of the weekly charts, advanced 3.86% for the week and completed an eight consecutive week of gains. The target of 10800 that we wrote about last week was exceeded during the week, but the market came off that a bit by Friday’s close. As with the S&P 500, the Nikkei may also find support from the gap around 10580 on the March contract.

Commodities

Last week we wrote that we expected considerable weakness in the grains sector, sufficient for the bull market seen in 2012 to be completely retraced as part of a new grains bear market. This week saw continued grains weakness and the trend is now down across the sector. We continue to look for lower prices longer term on the basis of our proprietary indicators. We expect this sector, which was very profitable from a spread betting perspective in 2012 to bring large profits again this year.

The long term trend is still up for the metals sector but once again weakness has been seen, possibly influenced by the prospect of a stronger dollar during the coming months. Copper and Palladium continue to be the strongest markets in the sector, with gold and silver both falling to 5 month lows. A change of trend to down for these two metals is within range.

Currencies

The dollar has been a mixed bag again this week, continuing on with the indecision seen the previous week. However, the dollar index did manage to advance by 1.03% for the week, largely due to its rise against the Euro, Pound and Yen.

The big moves have once again come from USD/JPY, which rose for an eighth consecutive week, adding another 2.41% to the recent move.

Interest rate futures

Large declines have been seen this past week in the interest rate futures sector, which may now be beginning to show be showing sufficient weakness to continue lower for a change of long term trend to down for the first time and what seems like an age. The largest move came for the 30 year T-bond, which fell 2.61% for the week and looks likely to be the first from this sector to have a change of long-term trend. One of the problems this sector may face is that so many people have been expecting a large downtrend for so long, that such a move may fail to fully materialize. As Market Wizard Paul Tudor Jones used to say, “That which is obvious is obviously wrong”.

Good trading

Phil Seaton

P.S. You can sign up for a 30 day trial of the LS Trader System here