LS Trader Weekly Update – Monday 9th January 2012

As we kicked off the new trading year we saw a bullish week for the dollar with moves very much in the direction of the long-term trend and also a continuation of short-term strength in stocks. This is an unusual move as stocks and the dollar are historically inversely correlated. The long-term trend for stocks remain down but if short-term strength continues that may change soon. The trend for commodities is also down but commodities during the first week of the year have been mixed.

Stocks

We wrote last week about the focus for stocks being on what is known as the January Barometer and initially on will be on the first 5 trading days, which act as quite an accurate early warning system for what is likely to happen for stocks in the year ahead. The last 38 up first five days where followed by up years in 33 of those years for an 86.6% accuracy ratio.

The January Barometer is based on the full performance for January, which shows an 88.5% accuracy rating and has only been significantly wrong 7 times in the past 61 years. This barometer basically reads that as goes January, so goes the rest of the year, so if January ends ahead it is likely that stocks will end the year ahead according to this indicator. My view remains that stocks will end the year lower but time will tell.

We also wrote last week that what was more important were the resistance levels that the S&P 500 was testing and the market’s reaction at those levels would be key for the short term. We noted that there was an evening start pattern formed on the S&P 500 daily charts (a bearish reversal pattern) at the 1280 resistance level and both of these would need to be cleared for a move higher to occur. So fat, although the S&P 500 was higher it has been unable to break that resistance and the trend therefore re mains down. Of interest is the small-bodied candles and dojis once again at resistance which represent indecision at these levels. Although small bodied candles and dojis are not reversal patterns in and of themselves they normally indicate that the short-term trend has switched from up to neutral and often proceed a reversal. Therefore the week ahead may be critical. It will also give us the data for the first five trading days early warning system following Monday’s close.

Commodities

Commodities have been mixed for the past week and gains have been seen in metals and energies, whilst recent strength in grains has stalled and reversed somewhat. The long-term trends for commodities, which are mostly down but with a few exceptions, namely the energy sector on the whole, remains down.

Currencies

The dollar index on ce again held on to the 8000 level and that formed a platform for another advance and was sufficient to take out the recent highs. The 8000 level should continue to act as support and as long as it holds the short term trend will remain up. Last week’s high represents the highest level seen for the dollar index in almost a year.

We also wrote last week about the Euro and the fact that the Euro remains in a bear market set up as it continues to form lower highs and lower lows, and that continued this week with new lows seen once again. Last week’s low for the Euro was the lowest since September 2010 and the trend remains very much down.

Interest rate futures

The trend remains up for Interest rate futures as indeed it has for much of the past year and we may yet see yields fall to new record lows and new highs for prices in the not too distant future. Much will depend on how stocks react i f and when they test key resistance levels. A breakout for stocks to the upside will likely see a move lower for interest rate futures but if stocks move lower then new highs for interest rate futures remain on the cards.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 5th September 2011

This coming week is a shortened trading week due to the US Labor Day holiday and US markets will therefore be closed. This holiday is often followed by some strength for stock indexes early in the week but that often runs out of steam relatively quickly.

Stocks

We wrote last week that if the S&P 500 could clear 1200 that we may see some further short term strength, and we did. It was however relatively short lived and the S&P 500 came up short of the 1250 level which many may have been looking for it to reach as a minimum. On Thursday we saw a bearish engulfing pattern and continuation lower again on Friday. The weekly charts show a large shooting star patter, which is bearish.

September is the historically the weakest month of the year for stock indexes on a seasonal basis but the month can often start on strong footing after the Labor Day US holiday, which is this Monday. Weakness often gets underway towards the latter part of this coming week and into the following week.

We also wrote last week about the German Dax and it’s continued weakness and further weakness was seen during the past week, which included Friday’s 3.19% decline on the September contract. We continue to target the next support level around 5270.

Commodities

Following the huge volatility and large decline for Gold seen during the previous week, normal service resumed this week and Gold ended the week ahead by 4.43% and we may well see another go at all time highs in the coming weeks, currently at $1917.90 on the December contract, not all that far from Friday’s $1876.9 close. As we wrote last week, the hammer pattern formed on the 25th august should provide good support.

The current short-term range on Crude still spa ns some $15, from $75 to $90 as resistance at $90 just about held this week and Crude moved lower again from Thursday’s highs at $89.90. A break of either level could be good for a decent move in the direction of the breakout. For now the trend remains down.

Currencies

The dollar index gained 1.31% for the week as the index continues to find support from the recent lows around 7350. The index may yet push higher towards the next resistance levels around 7560 but the trend remains down.

The British Pound declined for a second straight week and now looks set to test support from both the recent lows and a long rising trendline on the weekly charts.

Interest rate futures

Interest rate futures rose for the week as yields declined once again. The 10 year note is now close to it’s recent all time high and strong resistance can be expected at current levels. The sector as a whole continues to remain near the highs of the year and the long-term trend remains up across the sector. How much further room there is to the upside remains to be seen.

Kind Regards

Robert Stewart

How are Profits Calculated in Spread Betting?

Spread betting can make people large profits with only a small amount of capital wagered. That is because profits in spread betting are calculated by the point movement of the spread times the stake size. The more correct a trader is the more profits. Likewise, the more incorrect one is the greater capital lost.

In spread betting a bet is made on a spread of numbers. A trader may buy or sell the spread for a stake size of one’s choice. A trader places a spread betting buy bet on the spread 23-25 for a stake size of £2. The closing market price ends up being 35, a ten point difference, and is multiplied by the wager and the total profits are £20.

These spread betting profits could have been greater if the trader had staked £5 per point which would have resulted in £50. Another way the profits could have been greater was if the point movement had been more than 10 points. A 20 point movement would have resulted £40 in profits.

Calculating profits in spread betting is will give an approximate value if the bet is in the trader’s favour; however one can never predict the accuracy of the bet.

Online Betting Combines Entertainment and Risk Taking

Avid sports fans have always enjoyed watching televised sporting events and many have made a small wager on the side either through a bookmaker or a group of friends. The thrill one gets from watching their favourite sporting event whilst having a wager on the game has had an impact on the amount of people who have turned to online betting. Continue reading “Online Betting Combines Entertainment and Risk Taking”