Weekly Update 30th March 2013 – LS Trader

Stocks have continued to edge higher during a week that has seen relatively little volatility in the currency markets, which have mostly traded sideways. The big price moves this week have come from the commodity sector, in particular the grains markets, which have continued their long term bear market trend with sharp selling on Thursday. This is very much in line with LS Trader’s proprietary trend analysis, which continues to look for lower grains prices in 2013.

Monday is a Bank Holiday in the UK, but US markets are open as normal so we should see a return to more normal trading following a quite week this week.

Stocks

The S&P 500 hit a new all time closing high this week but still remains below the all time intra-day high basis the cash S&P 500 at 1576.09 reached on 11 October 2007. We may well see that level tested this week as the markets are typically bullish following a long holiday weekend.

The Nasdaq 100 remains just below the 2815 resistance level on the June contract, and that level will likely be tested this week. Our highly profitable Nikkei trade continues to run, but as per the US indices that we trade at LS Trader, the range remains tight.

One thing that is of importance is the near record short position that has built up by commercial funds as reported in last weeks COT (Commitment of Traders) report. Commercial funds moved to within 1% of their record net short position. At the same time, hedge funds have reached a record net long position. With both major players at such extremes, a big move is in the offing and it could go either way. This battle between commercials and hedgers probably explains the tight range seen in stocks and suggests that a break of the range, either up or down could trigger a large move. In 2007, commercial selling began a month ahead of the 2007 top and we all know what happened then. If selling breaks through support, watch out below.

Commodities

Resistance for June gold remains in place around $1620 and the market is short term bearish below that level. Critical support remains in place at the February low. Silver has edged lower and is approaching critical support likely ahead of gold. The February lows remain the key levels to watch for both markets.

Last week we wrote on U.S crude: “Friday saw a bullish engulfing pattern printed on the daily charts which suggests upside momentum may continue next week and that we may see a test of $95 on the May contract.” The 200 day moving average appears to have provided support once again for crude and this led to a bullish week and a gain of 3.76%. The $100 barrel level is once again in range, as is a change of trend to up.

Currencies

In last week’s update we wrote that critical resistance on the June dollar index at 83.42 needed to be cleared in short order for the uptrend to continue near term. Initially we saw the index move lower but it did regain and go on to exceed the resistance level, posting a new high for the current move at 83.52. That level now is the new resistance level that needs to be cleared to keep the dollar bull trend intact. For now the long-term trend is up.

The Euro fell to its lowest level since November and may be heading lower for a test of critical support at $1.27 basis the June contract. If that level can be taken out, an extended decline towards $1.21 may follow over the coming months. A move such as this will not unfold in a straight line and there will be some corrections along the way. The trend for the long term looks lower.

Interest rate futures

Interest rate futures shot higher this week for a third straight week. As was the case last week, the long term trend is still up for Eurodollars and 5 year T-notes, but remains down for the 10 year and 30 year markets. The 30 year T Bonds reached a critical resistance level on Thursday and then edged lower, forming a spinning top on the daily charts. This makes Monday’s trading key for this market as a move lower would confirm the resistance level, but a break may lead to a continuation higher over the coming weeks.

Good trading

Phil Seaton

Weekly Update 24th March 2013 – LS Trader

The past week has seen stocks unable to reach new all time highs and has also seen some further dollar weakness. Commodities have remained mixed, but are mostly trending lower as before. The long term trends still remain intact, which are currently up for stocks and the dollar and mostly down for commodities.

Stocks

The S&P 500 fell short of hitting all time highs once again and as we wrote in last week’s update, this continues to be bearish divergence from the Dow, which has hit all time highs recently and basis the June futures contract, came within 5 ticks of doing so again this week. Basis the cash S&P 500, the market is some 20 points away from all time highs of 1576.09 on 11 October 2007. It still remains unclear as to whether we will see those all time highs reached in this market.

The all time highs on the Dow have also been unconfirmed by the Nasdaq 100, which is obviously a long way from all time highs, but the Nasdaq also remains below its 2012 high. 2815 on the June contract remains the key resistance level on this market.

The Nikkei hit new 4 ½ year highs this week but ended the week up by just 0.08% following a decline late in the week. The long term trend is still very much up and this will continue to be the case for the foreseeable future, due to the extent and duration of the recent rise, which as we wrote about last week has so far generated in excess of 3150 spread betting points profit for the LS Trader system, and the trade is still in progress.

Commodities

Gold and silver are historically highly correlated so when we see moves such as we have in the past week where gold has risen and silver has declined, this usually precedes a trend reversal. The divergence between these 2 highly correlated metals will not likely continue for much longer and it could be that the bear sash pattern printed on silver’s daily chart on Friday, may take both metals back down towards the critical support shelf that we wrote about last week. If these markets do head down further towards support, a break of key support could open the door for a larger decline, but if support holds, we may get a further bounce for gold, followed by silver. The longer term trend remains down for both markets.

As we suggested may happen last week, Crude Oil did test and break short term resistance in what was quite a volatile week for the black stuff. The 200 day moving average appears to have provided support and Friday saw a bullish engulfing pattern printed on the daily charts which suggests upside momentum may continue next week and that we may see a test of $95 on the May contract.

The recent highs at 140.30 on orange juice appear to be critical as the market has been unable to clear that level following several attempts. This may pressure the market lower if further attempts fail. Major resistance stands at 144.15, the December 2012 high, which remains for now the upside target.

Last week we wrote about our target of 136.16 on April Feeder cattle and suggested that if that level was reached and subsequently broken, we may see an extended decline. This week saw feeders continue to decline and fall as far as 136.78 so that scenario remains intact.

Coffee also continued lower having resumed the long term downtrend and we still have initial targets at 130, and may see a move as low as 123 further out.

Currencies

The dollar has seen a continuation of short term, counter trend weakness against most of the majors during the past week. Critical resistance at 83.48 on the June dollar index is still holding and that level needs to be cleared in fairly short order for the uptrend to continue in the near term. The longer term uptrend still remains intact for now.

The British pound trend ended this week following a continuation of short term strength in GBP/USD but this was still a nice profitable downtrend, netting the LS Trader system just shy of 600 pips profit.

Interest rate futures

Interest rate futures have edged higher for a second week with only the 3 month Eurodollars ending lower. Eurodollars have been in a long term uptrend for what seems like forever but there are signs that this could be changing soon. This week saw quite a decent uptick in volatility in this market and a fairly decent drop in prices that took the market lower than it has been in 7 weeks.

The long term trend is still up for Eurodollars and 5 year T-notes, but remains down for the 10 year and 30 year markets.

Good trading

Phil Seaton

Weekly Update 17th March 2013 – LS Trader

The LS Trader System has continued with its strong start to the year as for the most part the markets are trending fairly well and this has led to the system reaching new equity highs for the year.

The week has also seen continuing new all time highs for stocks and the dollar has shown a bit of temporary weakness. Commodities have for the most part continued south in line with LS Trader’s expectations and proprietary trend analysis.

Stocks

The stock markets continue to press higher, reaching either new all time highs as in the case of the Dow, new multi-year highs in the Dax and the Nikkei, and closing in on all time highs on the S&P 500. Since the S&P 500 is the real stock index, the failure to so far reach new all time highs is bearish divergence, but since the lag is small and we may see that index catch up and hit all time highs this week, it may not be significant. Basis the cash S&P 500, the all time high was set at 1576.09 on 11 October 2007. Friday’s close was 1560.7.

The Nikkei this week hit its highest level since September 2008 basis the daily continuation chart and remains the most profitable trade of the year to date for the LS Trader system. Since the trade was entered on 21st November 2012, we have banked 485 points profit from December contract, 2360 from the March rollover and currently have 320 points profit from the June contract for a total of 3165 spread betting points profit, making it a very profitable trade indeed.

Commodities

Gold and silver continue to drift sideways in a tight range as they have for the past couple of weeks. As we wrote last week, a critical support shelf is within range for both markets and that will be the critical level for both of these markets during the coming weeks. If support does hold then we may see a decent bounce higher, but a break of key support could open the door for a larger decline. The longer term trend remains down.

US Crude has continued with recent counter trend strength and has managed to push back above the 200 day moving average. The longer term trend remains down but resistance may be tested this week.

Orange juice had another bullish week, crossing 140 briefly before pulling back slightly into the close. A continuation towards 144.15, the December 2012 high may still follow. That level is critical resistance so if the market can get beyond that, we may see a decent move higher.

Coffee looks set to resume the long term downtrend and we have initial targets at 130 and may further out see a decline to around 123. Feeder cattle, which is another commodity that the LS Trader System is bearish on, may now continue the profitable downtrend towards major support at 136.16, the 2009 low. If support there can be taken out then we may see a very significant downtrend over the coming months.

Currencies

This past week saw quarterly currency expiration as the March contracts rolled forward to June. The week also saw dollar strength continue during the first half of the week, but then sold off on Thursday and Friday across the board.

The dollar index climbed to 8342, just 8 pips shy of our 8350 target but then sold off quite sharply during the past 2 trading days of the week. This for now is just counter trend weakness for the dollar and the longer term uptrend is still intact.

The Euro, which is almost an exact mirror image of the dollar index had fallen to its lowest level since December, but then recovered Thursday and Friday. The trend remains up for the Euro.

The British pound fell to its lowest level since June 2010 but then put in a fairly decent recovery in line with late dollar weakness seen elsewhere. The trend is still very much down for the Pound.

Interest rate futures

Interest rate futures have edged higher once more with the shorter term markets still leading the way. The 5 year T notes and 3 month Eurodollars remain in a long term uptrend but the trend is down for both the 10 year and the 30 year bond.

Good trading

Phil Seaton

Weekly Update 10th March 2013 – LS Trader

The past week has seen the Dow 30 reach a new all time high, completing the recovery from the March 2009 lows. Of import though is the fact that both the S&P 500 and Nasdaq 100 lag behind. Perhaps most interesting is the fact that the dollar has continued to rise along with stocks. Historically, stocks and the dollar are inversely correlated, so the fact that the dollar continues to rise as do stocks, bodes well for further dollar strength, a move that will likely accelerate once stocks start to correct.

Last week we wrote about the break of the downward sloping trendline on the dollar index that has held in place since 2002. This week marks the fifth anniversary of the major dollar index bottom at 70.70. Since then, in spite of huge amounts of stimulus and most commentators expecting inflation and the death of the dollar, the dollar has in fact risen 17%. Based on our analysis, the dollar still has much further to run to the upside.

This coming week sees quarterly stock and forex expiration as the March contracts roll forward to June.

Stocks

As mentioned above, the Dow 30 reached new all time highs this week but the S&P 500 failed to do so in spite of making new highs for the current move. The chart set-ups are obviously still bullish, but further strength will need to be confirmed by the S&P 500 also reaching all time highs. Until that happens, there is a good possibility of a reversal, but for now the trends are clearly up across the sector. Basis the cash S&P 500, the market still has 25 points to advance to the 2007 high.

The Nikkei remains the strongest of the indices that we trade at LS Trader based on the strength of the current move, and this week saw the index rise to its highest level since September 08. Having this week cleared resistance at 12200, the path is now clear for a continuation towards 14000. The Nikkei trade is currently the most profitable trade for the LS Trader system this year, with 2360 spread betting points profit just from the March contract alone. Add to that the 485 points that we banked from the December contract, and we have a total profit of 2845 spread betting points from a single trade since we entered back on the 21st November last year.

Commodities

Gold has drifted sideways in a tight range over the past week, suggesting that a bigger move is just ahead. The critical support shelf is within range and that will be the critical level for this market. If support holds that may lead to a rally higher, but if it fails, a sharp drop may follow. Silver has a similar set up.

US Crude did drop below $90 as we suggested may happen in last week’s update. The market has since rallied and is now testing the 200 day moving average, which may act as resistance. The trend is still down and our targets at $87 remain in place for now.

Orange juice held on to the 120 support area and climbed steadily until Friday’s sharp advance of 6.9% took juice to its highest level this year. The weekly advance of 10.09% is the largest weekly advance in months and keeps the uptrend intact. We may now see a continuation towards 144.15, the December 2012 high. That level is critical resistance.

Currencies

The dollar index completed a fifth straight week of advances and may now continue to the next resistance level around 8350.

The British pound continues to get whipped, this week perhaps critically, closing below $1.50. AS we have written in recent weeks, there is now little in the way of chart support to prevent a decline of several hundred more spread betting points. The pound has now closed lower in 10 of the past 12 weeks.

The USD/JPY took out the recent highs to resume the longer term uptrend. If last week’s highs can be taken out, the next target will be just north of 97 on the way back towards parity further out.

Interest rate futures

It’s been a bearish week for interest rate futures, all of which have ended the week lower by some considerable margin. The 30 year T-Bond printed a huge bearish reversal pattern which took the market to new lows for the current move. The other markets in the sector printed similar price moves but remain slightly stronger than the longer term bond.

Good trading

Phil Seaton

Weekly Update 3rd March 2013 – LS Trader

The LS Trader system has continued its strong start to the year in spite of an increasing level of volatility seen in several markets. There are however a handful of markets that continue to trend well, and these markets are generating more than enough profit to offset the volatile markets.

Two things occurred this week that are of particular interest. Their long term importance will only be known after several more weeks. The first factor came in a market that we don’t trade at LS Trader, but it is nevertheless a major market and one we keep an eye on, the Dow 30. On Monday, the Dow formed a key reversal day that completely engulfed the entire price range of the prior 20 days! I can’t recall a key reversal day engulfing that many prior days’ range, although much of those prior 20 days have seen relatively low volatility. Considering the extent of this reversal, it is perhaps surprising that the Dow recovered so quickly and went on to post new multi-year highs. In the space of just a few days, there is a strong argument for the bull and bear case for stock indices!

The second key event, which is also potentially significant, is the bullish break of a downward sloping trendline on the dollar index that has held in place since 2002. We have written in previous weeks that we expected the dollar to rally in the near term and this adds some fuel to the bullish dollar argument.

Stocks

The S&P 500 has followed a similar price course to the Dow mentioned above, apart from the fact that the key reversal was not so evident. The S&P 500 however has failed to recover to new highs, so that will be the focus point in the coming week.

The Nikkei remains the strongest of the indices that we trade at LS Trader, and this week closed at a new multi-year high. Last week we wrote that a move and close above 11570 would be bullish and that has so far been the case, with the March contract reaching 11715. This has been another extremely profitable trade for the LS Trader system, and it continues to run.

Commodities

Copper completed its change of trend to down as the metals sector continues to be under pressure. However, of perhaps major importance to this sector is the critical support shelf that is within range for both gold and silver.

Brent crude has continued sharply lower following the completion of an evening star pattern on the weekly charts that we wrote about last week. In fact, with the exception of natural gas, the entire sector has taken a bettering over the past 2 weeks. Heating oil in particular has continued its near vertical decline, crossing below the 200 day moving average. A change of trend to down is within range this week. US Light crude (we trade both Brent and US Crude at LS Trader) has also continued its recent weakness, also moving below the 200 day moving average. US Crude has for some time been in a long term downtrend according to LS Trader’s proprietary trend identification and may now head further south towards $87 basis the April contract should $90 support give way.

In last week’s update we wrote that May wheat looked set to trade below $7 a bushel for the first time since June last year, and that did happen. Wheat dipped as low as $6.975 before mounting a small recovery, but the trend is still bearish.

Currencies

The dollar index completed the breakout and change of trend that we suggest may happen last week.

The British pound continues its bear trend, taking out the prior week’s lows as expected. On a closing basis $1.50 is just about holding, but should the market close this week below $1.50, look out below. There is little in the way of chart support to prevent a decline of a further several hundred spread betting points in this market.

The LS Trader system finally exited USD/JPY following a large reversal day on Monday that brought the trend for now to an end. This has been an extremely profitable trade since we entered last year back on the 15th November at 8070 basis the December contract. This single trade banked as impressive 1131 spread betting points profit.

Interest rate futures

Short-term strength has continued in the interest rate futures sector, which appears to have bottomed out around 4 weeks ago, at least for the time being. The shorter term markets have once more been the most bullish in the sector which is as expected, since the shorter term markets never completed a change of trend to down according to LS Trader’s trend analysis. Both the 5-year T notes and 3 month Eurodollars, are within range of their recent highs.

Good trading

Phil Seaton