LS Trader Weekly Update – Monday 23rd January 2012

We have been writing of late about the inverse correlation between stocks and the dollar and this past week has seen more in the way of risk-on, which has favoured stocks and led to dollar weakness. This move has started to shift the long-term trend to up for stocks, but it also still remains up for the dollar. It is unlikely that both of the long term trends will continue for long in the same direction so something is going to shift before long.

Stocks

We have been writing of late about various seasonal indicators and tendencies for the stock markets in the year ahead based on what happens to stocks at different times in January and over the month as a whole. So far, January has been highly bullish so if things continue this way until the end of the month and hold true to form, stocks could be on for an up year.

Last we ek we wrote “Short-term direction is still unclear but a break above 1300 would open the way for a rise to the 2011 highs at 1355.” We did get the breakout above 1300 and not only tht but the market went on to close above that level, which included a weekly close also for further bullish confirmation and there is little in the way chart wise to suggest that the market falls short of a test of the 2011 highs around 1355.

Strength in stocks also led to a breakout for the Nasdaq 100, which this past week hit a new 10 year high having reached its highest level since 2001. Whether we get further strength this week remains to be seen and we may also see the Dax make an upside breakout.

Commodities

Crude ended lower for the second straight week but the trend is still up. Crude has closed once again below the $100 level but the trend is still up. As before we may see a continuation lower towards the 200 day moving average, which may act as support.

Gold managed to clear resistance at $1650 but has not really moved ahead in a convincing manner. The trend remains down but the market has moved back above the 200 day moving average so further strength may be seen and may get to around $1680 where there is further resistance. Silver had a larger move to the upside than gold, but the trend also remains down for silver.

Once again the big moves of the week came in the Orange Juice market, which ended the week ahead by 14.11%. The long term trend is clearly up and the market bullish, as strength this week erased losses seen at the end of the prior week and took Orange juice back to 34 year highs.

Currencies

The risk-on move being seen so far at the start of this year is having a negative short-term impact on the dollar. Although the long-term trend remains unaffected short term the dollar is weak and may be heading for a test of various support/resistance levels in the week ahead. The most important of these will be on the dollar index, which is still holding above support at 8000. There is also further support around 7950 and the dollar will remain in an uptrend short term as long as those levels hold.

Both the Euro and the Pound had bullish weeks, particularly the Euro, which broke out of a medium term bear channel, which has been in place since October. When this happens we often see a move back to test the top of the channel, which is currently just below the $1.28 level. The trend for now is still down.

Interest rate futures

The trend continues to be up for the interest rate futures sector but the risk-on strategy seen in other markets has resulted in lower interest rate futures this week. Longer term markets are heading for short term support but consider able further weakness will be required for a long term trend change to down. The 5 year notes still remain relatively close to all time highs.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 16th January 2012

We wrote last week that the way the year has started with both stocks and the dollar rising is unusual and this has continued this week. The dollar index has risen to its highest level in a year and the S&P 500 has also reached a multi-month high. Stocks and the dollar are historically inversely correlated so how much longer both markets continue to rise together for remains to be seen. Probably not very long will be the answer.

Stocks

Over the past couple of weeks we have been writing about the so called January Early Warning system which states that if the first 5 trading days of the year end up, so does the rest of the year with good accuracy. The last 38 up first five days where followed by up years in 33 of those years for an 86.6% accuracy ratio. This year the first 5 days were up, so if you put any stock in this indi cator, then the year should end up. I personally have little faith in such an indicator and believe stocks will end the year lower but we shall see.

On a more important note than seasonal indicators, the S&P 500 finally took out the 1280 resistance level but has not as yet pushed on in a convincing manner. 1300 was tested on Thursday with an intra-day high of 1297.5 but resistance held and the market pushed lower. Short-term direction is still unclear but a break above 1300 would open the way for a rise to the 2011 highs at 1355.

Commodities

Crude continued its decline and moved back below the $100 level. We may now see a continuation lower towards the 200 day moving average, which may act as support. For now the trend remains up.

Gold reached a 4-week high on Thursday but was rejected above the $1650 level and a shooting star pattern formed, followed by a bearish engulfing pa ttern on Friday so there is clearly resistance at $1650. The long-term trend remains down and there is not much in the way of support between current prices and the recent lows.

Orange Juice was a hugely active market, which saw a limit up move on Tuesday take futures to a 34-year high but this move was reversed the next day. By the end of the week juice ended ahead by 3.85% in what was an extremely active and volatile week.

Biggest moving sector of the week was grains, which reversed much of their recent gains and markets often do when moves are made counter to the long-term trend. The long-term trend remains very much down across the sector and new lows may not be too far away.

Currencies

The dollar index continues to find support around the 8000 level which continues to hold well. Friday saw a decline towards 8000 but buyers came in well above support and took the index up to a new 12-month high. The trend remains up for the dollar index as it does for the dollar on the whole.

The Euro continues to drift lower, falling to new 15-month lows against both the Pound and the dollar. The trend is still therefore very much down. Against the dollar the euro remains in a bear channel that is quite well defined and has remained in place since the end of October. The top of this channel is currently around the $1.29 level so that should provide some resistance. If last week’s lows can be taken out then the next target will be $1.25 and below that we will be looking at $1.20.

Interest rate futures

We wrote last week that we may yet see new low yields in the interest rate futures sector and that has been seen this week. The uptrend has been stubborn to say the least in spite of most commentators expecting prices to decline and we have once again seen new high prices. Those who continue to fight the trend and try to call a top continue to do so at their own peril. With the likelihood of further easing from some of the central banks (something must surely be in the pipeline in the Euro zone and in the U.S.), I would not bet against even lower yields and yet higher prices. The trend is up.

Kind Regards

Robert Stewart

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 – Tuesday 26th December 2011

The past week has been a bullish one for stocks but has also seen the dollar weaken. Once again though the dollar’s decline has not been in proportion to the gain in stocks. Although stocks and the dollar have continued their inverse relationship, the moves in the dollar have been much less than the corresponding move in stocks. Now that we are entering the final trading week of the year the long-term trends are still down for stocks and commodities, and up for the dollar and interest rate futures.

Stocks

The past week has been bullish and has seen the S&P 500 rise up to the resistance area around 1260. Due to the proximity of the market to the resistance level and the fact that the momentum in the short term is strong as well as the fact that there is hardly any upper shadow on Friday’s candle (indicating that the market h ad no sellers into the close and that the close is almost at the high of the day) the probability is quite high that the initial resistance level will be taken out. This will likely lead to a test of the 1280 resistance area and possibly the 1300 level as well in the next couple of weeks and a possible change of long term trend to up. If these levels do get taken out then we may see a continuation in the New Year towards this year’s highs around 1355. However, for now at least the trend is still down and the market remains below a couple of decent resistance levels.

As a general rule, the most bullish set up is when the Nasdaq 100 leads the way but that is not happening at present and the Nasdaq is still some way behind the S&P 500 and is currently right on the 200 day moving average, whereas the S&P 500 has already moved and closed above it.

Commodities

For much of the past few months the weakest commodity sector has been the grains. This week has seen some of these markets find support and possibly begin a reversal. Some of the trends have already come to an end for the time being whilst others are still in the trend and remaining below resistance. Considerable further strength would be required for a long-term change of trend to up and due to the extreme bearishness over the past few months that looks unlikely, at least for the foreseeable future.

Crude Oil had a very good week advancing by 6.33% having found support. This move took the market back up to test the $100 level and also above the 200 day moving average. The long-term trend remains up but it remains to be seen if there is still sufficient momentum to continue higher towards the recent highs.

Currencies

The dollar declined over the past week and perhaps importantly for the short term the dollar ind ex dipped back below the 8000 level. Since this level had previously provided good resistance it should subsequently have provided good support due to a change of polarity where prior resistance becomes support. This may now have too much impact if the 8000 and 8050 levels can be regained in the short term otherwise we may see further dollar weakness.

The dollar ended the week lower against of all the majors over the past week but the long-term trends still favour the dollar almost across the board with the exception still being against the Yen, the only major that the dollar managed an advance against, albeit by only 0.25% for the week.

Interest rate futures

Interest rate futures briefly hit new highs again on the 5 & 10 year T notes with yields falling to new lows before weakness came back to the fore and we saw the formation of some reversal patterns at resistance levels. This may well take the markets further down to test short-term support but for now the trend is still up. On the 30 year T bond, the 14650 level has provided considerable resistance and it did again this week with the market unable to push through. If we do get a Santa Claus rally continue over the next few trading days then interest rate futures may continue to fall in the short term.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 19th December 2011

Dear Alin,

As the year moves into the last 2 trading weeks, the long-term trends continue as they have for much of the year, down for stocks and commodities, and up for the dollar and interest rate futures.

Last Friday was triple witching, which saw stock index futures and forex futures roll out of December into June.

Stocks

Seems like everyone is talking about bullish seasonality for stock indexes at the moment as they pretty much have been since the beginning of December. However seasonality is not a reliable indicator and so far December is negative. That said, the true Santa Claus rally is actually much shorter than most people think and usually runs from the 23rd of December through to the second trading day in January so there is still time, although the 1260 area does provide some fairly decent resistance so even if it does rally the move may have limited upside. Of perhaps more interest is the fact that when the Santa rally fails to materialise, the following year is usually a bear market. I very much expect next year to be a bear market so we’ll see if the failed Santa rally (if it fails to happen) concurs with that.

Commodities

We wrote last week about gold “Gold continues to trade within a large triangle formation that goes back as far as September. The price action within the triangle is compressing which generally means that the market is beginning to coil up in preparation for a decent sized move once it makes the eventual breakout.” Gold did make a breakout to the downside and a very large move followed. February gold ended lower by 6.93% but it was considerably worse than that on Thursday, having been as low as $1562.5. The long-term trend does remain up for gold, the only metal that this holds true for, but possibly not for long.

We also wrote last week on Crude “Friday saw Crude find support from the 200 day moving average and recover some of the week’s losses but this support needs to hold or we may see a move lower to at least $95 in short order.” The 200 day moving average gave way on Wednesday and we did see a swift move down to $95 and all the way to $92.52 before a minor recovery. The long-term trend is still up but there is clear weakness in the short term.

Currencies

The dollar continues to move higher with gains seen this past week across the board. The dollar index also took out the resistance level around 8000 that we have been writing about for a while and reached a new high since January in the process. The dollar is approaching 52 week highs against several major currencies and although there will undoubtedly be corrections along the way, the trend looks as though it may stay up for the dollar for the foreseeable future.

Interest rate futures

Many traders continue to make the amateur error of trying to pick tops in the interest rate futures markets. There are many hedge fund and money managers that have been trying to short this market for most of the year, which in spite of whatever their expectations may be is a stupid move. It’s extremely dangerous to short a bull market and interest rate futures have been in a bull market for most of this past year.

While I would agree that there may be limited upside and the risk/reward for long trades may not be there, I would not be shorting this sector until there is confirmation of a change of trend and that has not arrived yet. Not only that but short-term support still continues to hold so anyone who shorts is taking a pure punt. The only exception to this is the short term 3 month Eurodollar, which is in a lo ng-term downtrend.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 12th December 2011

The past week saw a small continuation of strength for stock indexes but further weakness was seen in the commodity markets and the dollar for the most part was flat. Much of the week has been focused on events in the Eurozone with the Euro summit taking centre stage.

The long-term trends are still as they have been for much of the year, down for stocks and commodities, and up for the dollar and interest rate futures.

Stocks

The past week has seen stocks continue their recent short-term advance but they still remain below resistance, in a long-term downtrend, and the short-term trend is still down. On a seasonal basis this is generally a bullish time of year but as we have said many times before this is never sufficient in and of itself to take place trades. Only a few weeks ago we were in a similar position where season al bullishness around Thanksgiving suggested strength for stocks but Thanksgiving week ended up being the worst Thanksgiving week since 1932. What is of far more importance is the resistance area around 1275 and also up to 1300. If this resistance area can be taken out then we may see some further rallies but equally should resistance hold then a move lower towards the bottom of the recent range may follow.

This Friday is quarterly stock index expiration so these markets roll out of December and into March at the end of the week.

Commodities

Gold continues to trade within an large triangle formation that goes back as far as September. The price action within the triangle is compressing which generally means that the market is beginning to coil up in preparation for a decent sized move once it makes the eventual breakout. For now the breakout could go in either direction but the long-term trend does remain up for gold, the only metal that this holds true for.

Crude failed to reach the November highs at $103.37 and ended the week lower by 1.54%. This move took Crude back below the psychological $100 level but the long term trend still remains up. Friday saw Crude find support from the 200 day moving average and recover some of the week’s losses but this support needs to hold or we may see a move lower to at least $95 in short order.

As we have written before, the weakest sector of commodities of late has been the grains and this sector has also been the nest trending of late with almost the entire sector continuing to trend lower. This past week saw Rice give a confirmed trend change to down, meaning that all the grains markets are now in a long-term downtrend.

Currencies

Currencies for the most part have been uneventful and have ended the week pretty flat. The wee kly charts for many of the major show some form of doji pattern, which represents indecision. The long- term trend still favours the dollar against all the major currencies with the exception of the Yen where the trend is still down.

This Friday is also quarterly expiry for currency futures, so the end of the week sees currency futures roll out of December and into March.

Interest rate futures

We wrote last week that the lower levels were being rejected in the interest rate futures market and there was further evidence of that this week as key support levels continued to hold. This has kept yields near record lows with the yield on the 5-Year note actually falling to a new low. The upside still looks limited from here and there is more risk to the downside but the long term trend still remains up as it has for nearly all of 2011.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 5th December 2011

The past week has been bullish for stocks and bearish for the dollar. This was not all that surprising as the prior moves in these markets had been large, so a correction was always possible. The long-term trends however remain unaffected and the week ahead should be interesting.

The long-term trends remain in place, and are down for stocks and commodities, and up for the dollar and interest rate futures.

Stocks

The past week has been highly bullish for stocks and saw a 7.81% gain for the S&P 500, as the market reversed from the lows at 1147.50. The long-term trend is still down and the market did lose momentum on Thursday and Friday as shows by the doji pattern, followed by a shooting star. A shooting star is in fact a bearish reversal pattern with the long upper shadow showing that the market had rejected higher pr ices. Things can therefore go either way this week, with Mondays of late being bullish, so we may see a test of the highs of the shooting star and possibly the bearish engulfing pattern formed back on the 9th November. If both of these can be taken out then we may well see 1300, which is another resistance area. Therefore, there is quite a lot of overhead resistance that will need to be cleared for this market to move higher and before the trend can change to up.

The other scenario is that the highs of the shooting star and other resistance areas hold and we see a move back down to 1147.50.

The Nasdaq 100 has a very similar set up and is also showing a shooting star on Friday’s candle.

Commodities

We wrote last week about the importance of the $95 level for Crude Oil, and that level held firm and the resultant move pushed the January contract back above $100. The long term trend r emains up and the next upside target will be the November highs at $103.37

The weakest sector of commodities of late has been the grains, but most of them bucked that trend last week and moved higher, however the long-term trend is still down across the board.

Currencies

For the past few years there has been a strong inverse correlation between the dollar and stocks and commodities, with a move in the dollar resulting in the opposite moves for stocks and commodities and vice versa. This week has seen that happen once again that as stocks have gained, the dollar has weakened. The dollar index in fact ended the week lower by 1.38% and this is a smaller move than the moves in the stock markets may have suggested. In the short term we may be heading towards support around 7750 on the dollar index and what happens at the level may give a clearer indication of what’s coming next. If support br eaks here then we will likely see stocks and commodities gain, whereas if the dollar moves higher and back up towards 8000 then stocks and commodities will likely weaken.

Interest rate futures

Last week we wrote “Followers of candle patterns will know that each of these markets has been printing reversal patterns for the past week or so at resistance so these markets are certainly struggling to push higher with yields still near to record lows. Each of the 3 longer-term markets that we trade at LS Trader printed bear sash patterns on Friday, which are bearish reversal patterns.” These markets all moved lower from those reversal patterns but still remain above support and in long-term up trends. In fact, there are numerous long lower shadows on the daily candles, which indicate that lower prices are being rejected and buyers are coming in at those support levels.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 28th November 2011

The past week was a shortened trading week due to the US Thanksgiving Holiday and it was a negative week for stocks and commodities but a bullish week for the dollar.

The long-term trends remain in place, and are down for stocks and commodities, and up for the dollar and interest rate futures.

Stocks

For the past couple of weeks we’ve been writing about the bearish pattern formation in stocks and the S&P 500 and have been focusing on support around 1200 and 1180. Both levels were taken out this week and that may well open the door towards the lows around 1068.

We’ve also been writing about the rounding top and head and shoulders pattern that had formed on the Nasdaq 100 and suggested that these pointed to a move lower to 2150. That’s exactly what happened this week as the Nasdaq continued lower to reach a low of 2136 before closing at 2147.5. There is still further room to the downside with little in the way of support until 2035.

Last week we wrote “One thing to be considered is that the week in the build up to Thanksgiving is normally bullish, although I don’t think seasonality is never a strong enough reason by itself to either take or not take positions. It’s far more important to follow the trend and the chart structure.” This turned out to be correct as this past week was the worst Thanksgiving week for stock indexes since 1932. Yet another reason to avoid seasonal trades.

Commodities

Gold has continued to back off from $1800 and in the short term at least the uptrend is over. For now the long term trend still remains up but this is the only metal that that statement holds true for so we may see further gold weakness and a change of long-term trend.

As we wrote last week, Crude h as also continued some short term weakness and still looks to be headed towards short term support around the $95 level, not far from Friday’s close. If last week’s lows get taken out then it may be a swift move down towards $90 but for now the trend is up.

The weakest sector of commodities has been the grains, all of which are in long-term downtrends and trending nicely lower.

Currencies

As we wrote last week, the long-term inverse relationship between stocks, commodities and the dollar still remains intact. We also wrote that a break above 7850 would likely lead to a move towards 8000 and 7850 was taken out decisively. 8000 and the October high at 8043 on the December Dollar index will be the next targets.

Overall it’s been a bullish week for the dollar with gains across the board, even against the Yen, the one market against which the dollar is still in a long-term downtrend.


Interest rate futures

Interest rate futures continue in a long-term uptrend with the exception of the 3-month Eurodollar, which is trending down nicely. The longer-term interest rate futures are still in an uptrend but all are running into resistance. Followers of candle patterns will know that each of these markets has been printing reversal patterns for the past week or so at resistance so these markets are certainly struggling to push higher with yields still near to record lows. Each of the 3 longer-term markets that we trade at LS Trader printed bear sash patterns on Friday, which are bearish reversal patterns. Whilst we would not trade these as short entries as that is counter trend, it does indicate the upside momentum is waning and that the uptrends may be coming to an end soon.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 21st November 2011

The week ahead will be a shortened trading week due to the US Thanksgiving Holiday on Thursday. US markets are closed on Thursday and Friday is a shortened trading Day.

Last week we wrote that many markets were in trading ranges are were approaching support/resistance levels and that there could be several breakouts, and we saw that this past week and the same still applies for the week ahead as more key levels look set to be tested.

The long-term trends remain in place, and are down for stocks and commodities, and up for the dollar and interest rate futures.

Stocks

We wrote last week about the triangle that the S&P 500 had formed as well as the wider trading range between approximately 1200 support and 1300 resistance and said that those levels would be the levels to watch for a breakout. Over the past week t he S&P 500 broke out of the triangle to the downside, in the direction of the long-term trend but has yet to breakout of the wider range. This range now spans to the lows of last week, which if taken out would suggest a move to 1180. Below 1180 there is a lot of room as the next key support area would be all the way back to 1068, the October lows. Therefore last week’s lows and 1180 are the areas to focus on in the week ahead.

Last week we also wrote that the Nasdaq 100 was forming a rounding top, which could even be considered to be a mini head and shoulders top. The market since went on to break the neckline of this pattern and this may lead to a move lower towards 2150.

One thing to be considered is that the week in the build up to Thanksgiving is normally bullish, although I don’t think seasonality is never a strong enough reason by itself to either take or not take positions. It’s far more important to follow the trend and the chart structure.

Commodities

Gold has shown some signs of weakness this past week and has pulled back from the $1800 level, which it was unable to clear. The yellow metal remains the only market in the sector to be in a long- term uptrend but is now showing signs of short-term weakness.

Crude shot higher earlier in the week, pushing well through the $100 level. January Crude actually hot $103.37 but then sold off late on Thursday and Friday, moving back below $100. The trend remains up but the market may continue to pull back towards the $94 support area.

Currencies

The long-term inverse relationship between stocks, commodities and the dollar still remains intact. This past week saw the dollar index, which is a basket of currencies against the dollar; continue its recent advance, adding 1.46% for the week. We wrote last week that a break above 7850 for the index would be bullish and that level was tested last week but so far the index has not pushed on to the next target around 8000. The long-term trend remains up for the dollar index as it does for the dollar against most of the majors.

Interest rate futures

Interest rate futures were higher for the week with the exception of the short term 3 month Eurodollars, which continued their decline this week. Longer-term markets pushed higher, with the most strength being seen in the 30 year T bond. The long term trend still remains up in this sector but as before with yields very near to all time lows there may be a limit as to how much higher these markets can go.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 14th November 2011

The long-term trends still remain intact across the 4 primary sectors of stocks, commodities, forex and interest rate futures but many markets are in short term ranges and possibly on the verge of breakouts. Currently these trends are down for stocks and commodities, and up for the dollar and interest rate futures.

Stocks

We wrote last week about the range on the S&P 500 between approximately 1200 support and 1300 resistance and that those levels would be the levels to watch for a breakout. Over the past week the S&P 500 has remained in that range but it has now begun to tighten somewhat and form a triangle pattern. This means that price action is tightening and that when we get an eventual breakout it may lead to a decent move in the direction of the breakout.

One of the reasons for that is that there are now lo wer highs and higher lows, and a breakout will take out that pattern. However, even if the triangle is taken out, the primary resistance still remains at 1300, with support at 1200, so the market will have to take either of those levels out as well before we can have a decent directional move. For now the long-term trend remains down, so even though the market is nearer the upper end of this range, the odds favour a breakout to the downside.

The Nasdaq 100 is forming a rounding top, which is bearish and could even be considered to be a mini head and shoulders top. This would obviously be negated should the market take out the highs and resistance at 2430. The long-term trend here remains down and with the aforementioned patterns is potentially bearish in the short term, but the market needs to break short-term support, or the neckline, for confirmation.

Commodities

Gold this week finally cleared resistance around $1750 and pushed on higher, almost to $1800. The long-term trend still remains up for gold, the only metal that still remains in a long-term uptrend.

Crude has also pushed higher following last week’s breakout and may now be heading higher towards psychological resistance at $100. The long-term trend still remains down for the energy sector on the whole, but heating oil has also been moving up nicely along with Crude and may be on the verge of a long-term change of trend.

The grains markets have remained very bearish, with even the most bullish market of the grains sector, Corn, failing to take out resistance. Corn is now moving towards the lower end of the recent range. The soybeans sector has been particularly weak, with Soybean Meal falling to its lowest level since late 2010 and the other beans markets heading for the lows of the year.

Currencies

The dollar index has remained in a short-term consolidation, but short-term support around 7650 continues to hold and this is bullish as long as it does. A break above 7850 would likely lead to a move towards 8000 and such a move would be bearish for stocks and commodities. However, if 7650 support does give way then a move towards the 7500 level may follow but for now the trend remains up.

Interest rate futures

Interest rate futures all moved lower this week and we now have all 4 markets that we track at LS Trader moving lower, from the short term 3 month Eurodollars, all the way through to the 30 year T-bond. We wrote last week that with yields very near to all time lows there may be a limit as to how much higher these markets can go, and last week’s action failed to take out the recent highs. To say that a top is in for this sector may be premature and the long-term trend still remains up for t he sector.

Kind Regards

Robert Stewart