LS Trader Weekly Update – Monday 4th June 2012

The stock index decline resumed this week following a pause the prior week. Stock indexes have now declined in 4 of the last 5 weeks.

Commodities have continued to be hit hard and with only a handful of exceptions are trending nicely lower. The dollar has continued it’s recent uptrend in spite of a bit of a reversal on Friday. The long-term trends are still up for stocks and the dollar and down for commodities although as we discuss in the stocks section below, the long-term trend is on the verge of changing to down.

We’re now seeing the best period of trending markets since 2008 and the LS Trader system continues to have a good year, reaching new equity highs for the year again this past week. If this trending phase continues we are on a target for another year of triple digit gains.

Due to the Diamond Jubilee Bank Holidays, U.K. markets will be closed Monday and Tuesday this week but U .S. markets are open as normal.

Stocks

We wrote last week “The S&P 500 pushed higher and may be headed for a test of 1340, which due to change of polarity may now act as resistance as it was previously a support level.” The S&P 500 did indeed move higher towards 1340 but fell just short of reaching that resistance level before putting in a large bearish engulfing pattern and resuming the downtrend. We also wrote last week that the 200-day moving average, which was at 1270 was a target, and the market reached the moving average almost to the tick of Friday.

The Dax declined by 4.41% for the week and as with the S&P 500 rose initially to test the change of polarity resistance level but fell just short of that. The decline resumed from there. The Nasdaq 100 is still the strongest of the major indexes and remains above change of polarity support.

Following the recent sharp declines for stock indexes the long term trends are on the verge of switching to down so we may see further weakness over the summer months for stocks.

Commodities

We wrote last week that a break of the recent low or high could lead to a decent move in the direction of the breakout and we saw that as Gold moved up through $1600 resistance and then shot higher, bringing the recent downtrend to an end for now. $1600 may now act as support and the rally may continue towards $1675.

Crude oil essentially collapsed this past week, and having fallen through $90 decline to $85 as we wrote may happen last week. Crude then continued lower to $82.29 before recovering slightly to close the week out at $82.23, ending the week down by some 8.4%. Crude is now oversold but as we have written many times before oversold markets can continue that way for a long time. The next downside target will be aroun d $77.

Currencies

The dollar index advanced 0.55% this week but had been higher, reaching 83.67 on Friday before selling off to close at 82.97. The trend is clearly still up and we should see support coming in around 8220.

The British Pound fell by 1.73% for the week but as with most other currencies did recovery somewhat on Friday. In the case of the Pound, the bounce came just off major support, which makes the areas just below last week’s lows very significant should they be broken.

As with the Pound, the Euro also declined for the week but recovered a bit on Friday. The trend however is still down and the targets remain at 12100 and further out as low as 11800.

The dollar reached its highest level against the Canadian dollar since mid-December last year and may continue to work its way towards the October highs.

Interest rate futures

Interest rate futures did initially decline towards support but support held as once again buyers returned to the market at support. This then took these markets to new highs as yields fell to record lows once again. The trend remains very bullish across the sector and is clearly very much up. How much lower yields can decline remains to be seen.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 28th May 2012

The recent stock index decline took a pause this past week with gains being in all 4 of the major indexes. Commodities have continued their recent declines and the dollar has continued to advance. The long-term trends are still up for stocks and the dollar and down for commodities.

The markets continue to trend very well and in many cases better than they have for the past 2-3 years. This has led to gains for the LS Trader system in many markets and the system is now ahead 53.22%* YTD. If the current trending conditions remain in place we may be on target for another year of triple digit gains.

This Monday is Memorial Day in the U.S. so several markets will be closed.

Stocks

The S&P 500 pushed higher and may be headed for a test of 1340, which due to change of polarity may now act as resistance as it was previ ously a support level. The long-term trend remains up but the past few weeks have been weak and the 200-day moving average is still a potential downside target. The 200-day SMA currently sits around 1270. Before that though there is support at last week’s lows at 1287.

Similar moves were seen in the other indexes but there is little to do at present as the short term trend is not aligned with the long term trend so until that changes the best place to be in stock indexes is on the sidelines.

Commodities

Gold rolled into the August contract last week so the new lows for support are now at $1529.3. The long-term trend remains down and there should be resistance around $1600 with support in at the recent lows. A break of either level may lead to a decent move in the direction of the breakout.

Crude ended the week lower by 1.02% and did briefly dip below our $90 target before closing the week at $90.86. As we wrote last week, if $90 does fail to hold then a move to $85 may follow. The trend remains down.

There have been some other very profitable downtrends in commodities, namely Coffee, down 6.34% for the week and Cotton, down 5.6% for the week and Sugar, which was down 4.15% for the week. These are all markets that the majority of spread bettors don’t trade but they do provide excellent trading opportunities and often trend very well either from the long or short side. Orange juice is another less often traded commodity that is also in a steep and profitable downtrend, having declined 11.89% over the past 4 weeks. The LS Trader system has caught all of these moves. This shows the benefit of being diversified across different markets as well as the advantage of trading from the short side.

Currencies

The dollar index advanced to its highest level since 2010 having t aken out the highs of the year this past week, so the trend is very much up. Similarly, the Euro took out the support lows that we have bee writing about of late and has fallen to new 22 month lows. There is still room for further downside for the Euro.

The dollar also reached its highest level since February 2011 against the Swiss Franc as the uptrend continues to gain steam. The trend now favours the U.S. dollar against nearly all of the majors. If the dollar continues to advance then we will see further pressure on commodities and stocks.

Interest rate futures

Interest rate futures ended the week lower for the week but the long-term trend remains intact. As has been the case for much of the past few weeks there are signs that the uptrend may be coming to an end but so far each time new buying has come in to push the markets higher.

We wrote last week about the hanging man patte rns on the 10 year T note, stating that a lower close would be required to confirm that pattern and we did get that lower close. The market has so far not been able to close above the hanging man pattern so it is still intact so we may see a decline to support once again this week.

The 30 year Bond may decline to support around 14365 which had provided strong resistance previously and should now provide support. If support there is tested and gives way we may see some strong selling return to this market. The trend still remains up across the sector.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 7th May 2012

The month of May has got off to a weak start for stock indexes, which have all sold-off this week, having failed to make new highs for the year. This has taken all of the indexes that we trade at LS Trader back below their 50-day moving averages.

The dollar reversed the prior week’s moves and ended the week higher against all of the majors with the exception of the Yen. This has led to weakness for most commodities. The long-term trends are still up for stocks, mixed for the dollar and mostly down for commodities.

Stocks

The S&P 500 topped out for the week on Tuesday and spent the rest of the week in decline. It remains to be seen as to whether we have already seen the highs for the year for the stock indexes. The answer to question may be clearer once we see the market’s reaction to a test of what should be quite go od support around 1350. If 1350 support fails and we get a confirmed break out of the current box range, then we can take the height of the range and subtract it from the low of the range to give a target of around 1290. For now the trend is still up.

We wrote last week about the relationship between Apple and the Nasdaq 100, and this week saw Apple make a large decline falling some 6.26% for the week and now looks to be heading for a test of support around $555, a break of which may open the way to further declines. Such a move would have a bearish impact on the Nasdaq 100, which has closed right on support at 2625 on the June contract. If 2625 gives way, the next support is at 2575. For now the trend is still up.

The German Dax did push above 6800 on an intra day basis but was unable to close above that level and subsequently moved lower once again and now looks to be headed for a test of the lows of the current trading around 6500. Just below this is a furth er support level created by the change of polarity from the October highs, so a key support zone is in play for the week ahead. For now the trend is still up but the market’s reaction at this support zone will provide a clue as to near term direction.

Commodities

Gold edged lower by 1.18% and continues the longer-term downtrend. The market almost reached as highs as short-term resistance at $1680 but failed to reach that far and moved back towards the lows of the range. A test of the April lows at $1613 looks likely and if that support level fails then a move to the year’s lows at $1528.6 would become the target.

Crude may a precipitous decline in the last 2 trading days of the week, taking out the support level around $101 that we wrote about a few weeks ago. The trend still remains up and a test of the 200 day moving average looks highly likely this week, with a bounce from there a pos sibility due to the extent of the 2 day move. A change of long-term trend to down is now within range.

Currencies

The dollar advanced against most of the majors and a few key support and resistance levels may be tested this week, none more important than the $1.30 level that we have been writing about for the past few weeks. Many traders will be focused on this level and a break below it, especially on a closing basis could spark a dollar rally and a breakout higher for the dollar index.

The commodity based currencies have been heavily hit this past week as a move back towards the risk-off trade has been evident, hence the move out of the riskier currencies and into the U.S dollar.

Interest rate futures

Many so called experts have been warning against interest rate futures for quite some time and have been giving sell recommendations for ages. The fact remains though that these markets are still very much in a bull market and the trend is firmly up. This was confirmed by the sharp rejection of the lows back in March and the subsequent strong rally seen since which has taken the 10 year T note back to new highs. Trying to pick tops and going against such a strong trend is a dangerous move. Trading with the trend is a far safer option even though prices are at record highs and yields at record lows. One potential fly in the ointment to higher prices is the fact that the 5 year T note is now right at resistance formed by its all time highs, and the weakest of the sector, the 30 year bonds are also approaching a test of all time highs.

Good Trading

Phil Seaton
www.LSTrader.co.uk

LS Trader Weekly Update – Monday 30th April 2012

The past week has seen stocks continue their short-term recovery and move back above their respective 50-day moving averages. The long-term trend is still very much up for stocks and a continuation towards the highs of the year is now a possibility once again.

The dollar weakened across the board and the dollar index in particular may be heading for a test of key support, a break of which would change the long-term trend for the dollar back to down. Commodities have been mostly bullish, helped by dollar weakness.

Stocks

Stock indexes pushed higher, led by the Nasdaq 100, which benefitted from superb results from Apple. Apple makes up around 20% of the Nasdaq 100, which is one of the reasons that Nasdaq has been leading the stock indexes of late, with Apple seemingly moving ever higher. Apple ended the week higher by 5.24 % having giving back some of the gains following the report on Tuesday that resulted in a large gap higher. Gaps often get filled, but the low of the gap is also a key support area, so should Apple drift back down and close that gap, support can be expected, which would in turn likely support the Nasdaq 100.

The German Dax moved higher for a second week and is currently testing the 6800 resistance level that we wrote about last week. A move above 6800 may open the door for a test of 7000.

Last week we wrote: “a glance at the longer term weekly charts still shows how bullish the markets are and what we have seen so far is a relatively small correction and nothing as yet to become to alarmed about. The S&P 500 still has good support at a couple of support zones around 1350 and 1330. As long as those hold the longer trend will still be very much intact.” The S&P 500 did fall almost to 1350 where support did come in and in a big way, taking the index back o ver 1400 briefly. For those that are familiar with advanced candlestick patterns, the last 3 days of the week have formed a pattern known as the advanced block, which indicates selling coming in at the highs of the past 2 days, and thereby providing resistance. If this resistance can be cleared then a test of the highs of the year may follow.

On a seasonal basis we are coming to the end of April and the end of the best 6 months of the year, and also heading into May, synonymous with the “Sell in May and go away”. However, as we always say, the charts and the price is more important than any seasonal indicator.

Commodities

Gold ended the week higher by 1.34% but continues to look undecided on direction. The short term is pushing gradually higher and may well test short-term resistance around $1680 this week. The long-term trend is however still down and the market still remains below the 200 day moving average.

Once again the big moves came in Soybean Meal and Soybeans, which advanced 4.51% and 3.04% for the week respectively. These have both been excellent trades and are currently the most profitable trades of the year for the LS Trader system. This week’s rollover of Soybean Meal banked a huge 8790 spread betting points profit as it continues to post new all time highs.

Currencies

The dollar index has continued to head lower since failing to clear resistance in the previous week and may now be heading for a test of what is possibly quite a significant support level, a break of which would change the long term trend to down. The British Pound continued to push higher and looks to be heading for our next target around $1.6350. The long-term trend is now up for the Pound. Several other currencies are now pushing towards a change of long-term trend to up against the dolla r and a new spell of dollar weakness could be on the horizon. Much though will depend on stocks and whether they can continue up to and through the recent highs.

Interest rate futures

The long-term trend remains up for interest rate futures, and this week saw the 10 year T note reach a new all time high as yields returned to record lows again. There are some indecision patterns present on the daily charts, which suggest that once again the momentum may be waning, but there is no question that both the long-term and short-term trends are still up.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 23rd April 2012

The past week has seen stocks move slightly higher with the exception of the Nasdaq 100, which is still the only index to remain above the 50 day moving average.

The dollar reversed upon reaching key support and resistance areas and has therefore moved back to within the recent range against most of the majors with only a couple of exceptions. The trend is still therefore mixed for the forex markets as it is also for commodities. The long term trend is still very much up for stock indexes in spite of the recent short term correction.

Stocks

Stocks pushed higher with the exception of the Nasdaq 100, which is still the strongest of the indexes. The Nasdaq was the only one of the indexes that we trade that was still above the 50 day moving average, but that was tested this week and Friday’s low was pretty much dead on the l ine. If the 50 does give way this week there will be a test of support at 2650. Failure there would open the way to potentially a decline to the next support area around 2570.

The strongest of the indexes that we trade at LS Trader was the German Dax, which advanced by 2.5% for the week, forming a nice bullish engulfing pattern on the weekly chart. We may now see the Dax test short term resistance around 6800. The long term trend remains up.

As we wrote last week, a glance at the longer term weekly charts still shows how bullish the markets are and what we have seen so far is a relatively small correction and nothing as yet to become to alarmed about. The S&P 500 still has good support at a couple of support zones around 1350 and 1330. As long as those hold the longer trend will still be very much intact. Whether we run into the usual seasonal weakness as we get into May remains to be seen.

Commodities

Gold ended the week lower by 1.05% but appears undecided on near term direction as evidenced by the series of small real bodies on the daily charts. The market now site roughly mid way between support at 1613 and resistance at 1680. The market still remains below the 200 day moving average and the trend remains down.

Crude moved higher by 0.54% for the week and everything we wrote last week still holds true. To re-cap, we wrote: “There is still evidence of strong buying from just above the $101 level. It is likely that the $100-101 area will continue to provide good support and possibly lead to a move higher to next resistance around $106.”

The biggest daily move of the week once again came from the grains sector, where Soybean meal advanced 3.6% on Friday alone, advancing to its highest all time level and over the $400 per ton level for the first time since August last year.

Currencies

The dollar index failed to break through resistance and moved back to within the recent range. If anything the index looks more likely to test the lower end of the range next. This is largely influenced by the strong support seen for the Euro at exactly $1.30. We have been writing for the past few weeks about the importance of support at $1.30 for the Euro and that was last week’s low to the pip, at which point buyers returned once again. That makes the $1.30 level very critical, not just for the Euro, but for the dollar on the whole.The British Pound did however manage to break out of its range, giving a long term change of trend to up against the dollar.

Interest rate futures

Interest rate futures ended slightly higher but are showing signs that the momentum is waning. A series of small real bodies on the daily charts indicates some indecision and as they are appearing at resistance may indicate that these markets may push a bit lower in the short term. The long term trend is still up.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 16th April 2012

The past week has seen stocks continue to head south, and all but the Nasdaq 100 are now below the 50 day moving average, so the short term trend is down. The long-term trend is still up however for all the stock indexes but further short term weakness may follow this week.

The dollar has remained mixed but may be setting up for a breakout to the upside. To an extent what happens in stocks will impact the dollar as the long term inverse relationship is still intact. The trends for commodities still remain mixed.

Stocks

Stocks declined for another week and as mentioned above, all but the Nasdaq 100 have moved below the 50 day MA. This is an area where we can normally expect some sort of support and the past 4 days action on the S&P 500 has been chopping above and below the average. The 1380 area, which had previously been providing short term support has now switched to resistance due to change of polarity and having recovered the week’s earlier losses the S&P 500 failed at that level and pushed lower. It is quite likely that we will see a test of last week’s lows again this week. However, the long-term trend is still very much up and if viewed from a longer term perspective, the correction seen is very small. A glance at the weekly chart of the Nasdaq 100 puts this very nicely into perspective, as the market had gone almost straight up from the middle of December.

As we have written many times before markets don’t go straight up or straight down and there are always corrections along the way. The question is, how long and how deep will the correction last? That remains to be seen and we’ll have to let the market tell us. On the S&P 500 a good support point is around 1330-1340 and that is an area that has a good chance of being tested. For now, this correction is counter t o the long-term trend so the best place to be is on the sidelines until we get some confirmation one way or the other. April is still seasonally a good month but that does run into seasonal weakness in May.

Commodities

Gold ended the week higher by 1.85% but had been higher until a reversal on Friday. The market still remains below the 200 day moving average and the key $1700 level.

Crude ended the week lower by 0.49% but there is still evidence of strong buying from just above the $101 level. In the past week alone there has been a hammer and a bullish engulfing pattern from the support area so there is clearly strong interest at those levels. It is likely then that the $100-101 area will continue to provide good support and possibly lead to a move higher to next resistance around $106. However, should the support give way it would likely lead to a move lower to around $97, approximatel y where the 200 day MA currently is and the next level of support.

Currencies

The dollar index moved back above the 50 day MA with a very bullish candle pattern on Friday and will likely test short-term resistance this week. A break of this resistance will likely lead to a resumption of the long-term uptrend and a move to at least 8116 and possibly the highs of the year further out. The opposite of the dollar index is the Euro, which once again looks to be declining to test key support around $1.30. A break of $1.30 would likely see a test of the February lows and failure there may open the way for a move further down towards $1.2640. The trend remains down.

Interest rate futures

Interest rate futures have continued to press higher this past week and are continuing their recovery since printing morning star revers al patterns around a month ago. This narrowly kept the long-term trend to up and since then the short term trend is also up. Whether we see a continuation higher to the highs of this year set back in February remains to be seen but that is looking like a good possibility at present.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 9th April 2012

The past week has seen stocks finally correct somewhat, something that has been on the cards for the past few weeks. However, the long term trend is still very much up across the stock indexes and each of the indexes we trade remain above their 50 day moving averages and still a long way above their 200 day MAs.

The dollar saw an end to its recent short term weakness as it ended the week higher against all the majors with the exception of the Japanese Yen. The long-term trends are still up for stocks but mixed for the dollar and commodities.

Stocks

The S&P 500 failed to make new highs this past week and has subsequently fallen back below the 1400 level. This suggests that in the short term a top has been put in at 1419.6 on the June futures contract, although Friday did see buyers return at the lows of the day at 137 3, taking the index back to close at 1390.2.

As has been the case for much of the recent rally, the Nasdaq 100 is still the strongest and is still holding up better than the other indexes and still remains above support. As long as that remains the case there has not been a huge change in sentiment and the other indexes could recover, but if the Nasdaq joins the breakdown then that may accelerate the down moves.

As we wrote last week, on a seasonal basis April is a good month but as ever price and trend is far more important than any seasonal indicator or tendency. Looking further ahead, the old adage often applied to stocks of “Sell in May and go away” is only a few weeks away and given the extent of the recent up moves for stocks, a reasonable correction is not out of the question.

Commodities

Last week we wrote “Gold ended the week higher by 0.42% but having had a brief look ab ove the 200 day moving average on Tuesday, where it ran into the $1700 level, ended back below the 200 day MA. The long-term trend is still down and conditions bearish as long as $1700 resistance holds.” $1700 did hold and the market remains in a long term downtrend and below the 200 day MA having fallen to new lows since the First week in January.

Crude ended the week higher by 0.28% and formed a doji on the weekly chart, which represents total indecision. In the longer term the trend is still up but the short term is without direction. Support from the psychological $100 level is still in place but if that level is taken out there is little in the way of support until the 200 day moving average, which currently sits around the $97 level.

Coffee did break though the $1.90 level that we wrote about last week but was unable to push higher and the trend is still down.

Currencies

The dollar index held on to the previous week’s lows on a closing basis (although the lows were briefly taken out intra-day on Tuesday) and this formed a platform for a decent push higher as the market remains above the February low and also above the 200 day MA. The long term trend is still up but the market is currently in the middle of the range that spans from the lows at 7842 and the local top at 8116 (June contract).

The British Pound fell just short of giving a confirmed change of trend to up and reversed this week to remain in the box range that has been in place for quite some time. The long term trend therefore remains down and the market is currently sitting almost exactly on the 200 day MA, which may provide some support.

The Euro was unable to clear $1.34 resistance and this failure led to a move down back towards $1.30, a level that will likely be tested this week. A break of $1.30 would likely see a test of the February lows and failure there may op en the way for a move further down towards $1.2640. The trend remains down.

Interest rate futures

The morning star reversal patterns that formed in the interest rate futures sector 3 weeks ago have proven to be a strong reversal, as they often are, and the 5 & 10 year T notes as well as the 30 year Bonds have continued to advance higher and the long term uptrend which narrowly stayed in place looks to be getting back on track. We may yet see a continuation higher towards the highs of the year.

However, as we wrote last week, should the market eventually break the low of the morning star pattern, which is now a key support area, there could be some large moves lower as such a move would not only break that pattern but also change the long term trend to down.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 2nd April 2012

The past week has seen stocks push on to new highs but then pull back slightly into the weekend. Nevertheless, stocks still ended up having their best first quarter in 14 years, with large gains being seen in the S&P 500, Nasdaq 100 and the Nikkei 225.

Elsewhere we have seen continued short-term weakness for the US dollar, which has continued to decline against most of the majors, but commodities have remained mixed. The long-term trends are still up for stocks but mixed for the dollar and commodities.

Stocks

The S&P 500 did manage another week of gains but did pull back in the latter part of the week having earlier hit new highs. The trend is still very much up and the index has just about managed to close north of the 1400 level. We wrote last week that a close back above 1400 would be bullish and that is what we have seen last week but the market has so far been unable to push on from there.

Typically, the start of new quarters and new months end up being bullish for the first couple of trading days so we may see another go at last week’s highs in the next few days. Additionally, there are some fairly long lower shadows on some of the daily candles and this indicates that the lows are being rejected and that buyers are still stepping in at the lows. On a seasonal basis April is a good month but as ever price and trend is far more important than any seasonal indicator or tendency.

Commodities

Gold ended the week higher by 0.42% but having had a brief look above the 200 day moving average on Tuesday, where it ran into the $1700 level, ended back below the 200 day MA. The long-term trend is still down and conditions bearish as long as $1700 resistance holds.

Crude has fallen to its lowest level in six weeks and has taken out the $104 level on a closing basis that has been acting as support recently. The long term trend is still up but aside for support from the psychological $100 level, there is little in the way of support until the 200 day moving average, which currently sits around the $97 level.

Coffee put in its first up week in eleven weeks but the trend is still clearly down, although a test of the $1.90 resistance area looks likely again in the near future.

Currencies

The dollar index ended the week lower for a third straight week and may continue further down. 7950 was taken out, as was the 7932 level that we wrote about last week so we may now see a test of the February low at 7842 (June contract).

The British Pound has continued with short-term strength and is now looking to break out of the box range that it has been in for the past couple of months to the upside and is now on the verge of a change of long-term trend to up.

Interest rate futures

Interest rate futures rose for the second straight week, continuing higher from the morning star reversal patterns that formed a couple of weeks ago, which continue to provide support. The long-term trend is still up across the sector, and with the expectation increasing that “Helicopter Ben” will start the printing press running again with more QE3 in the not too distant future, yields may continue their recent decline, sending prices higher once more.

However, should the market eventually break the low of the morning star pattern, which is now a key support area, there could be some large moves lower.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 26th March 2012

The past week has seen stocks continue to stall, following on from the loss of momentum seen the week earlier. Of the 4 stock indexes that we trade at LS Trader, only the Nasdaq ended the week ahead and this week saw the Nasdaq 100 hit a new 11 year high.

Last week we wrote “Contrary to popular opinion, doji are not reversal signals in and of themselves but more an indication that the bullishness has lost a bit of momentum and are often just the markets pausing for breath before continuing higher. That said, they do present a possible warning for the short term.” As mentioned above, these doji have so far translated into some small short term weakness and there are now similar formations on the Nasdaq 100 daily chart.

Stocks

The warnings that we wrote about for stocks and the S&P 500 last week did lead to a down week but not by much. The S&P 500 retreated 0.31% for the week but the spinning top that has formed on the weekly charts could once again be a further potential warning of more weakness ahead in the short term. However, the trends, both long and short term are still up and these factors are more important than the loss of momentum until there is confirmation of a down move, which as yet we do not have. The 1400 level was taken out but the market has been unable to make a weekly close above that leve so far. A weekly close above 1400 would be bullish.

We wrote last week that a correction was due on the Dax and we did see that with a weekly decline of 2.12%. As with the other indexes though the trend is still up and as long as short term support holds (on a closing basis the 7000 level is still holding) then the upside target at 7680 is still in play.

Commodities

Gold ended the week below the 200 day moving average once again but buyers did come back in at $1627 and the market may now continue higher to test the 200 day MA. The trend however remains down.

Continuing its major downtrend is Coffee, which this week completed a 10th consecutive down week. There was a semblance of buying on Friday but the trend is still clearly down.From the energy sector, the only gainer was No Leaded Gas, which pushed through resistance intra day to reach its highest level since July 08. However, there was a bit of profit taking on Friday, which has taken the market down to close right on a support level from prior highs. If the trend is good the prior highs should provide support and lead to a continuation higher, otherwise we may see some short term weakness.

Currencies

The dollar index ended the week lower for a second straight week and may continue further down. 7950 did get taken out in tra day but held on a closing basis. A close below 7950, or more precisely last week’s low at 7932 would be bearish short term and would likely lead to a test of the February low at 7842.

Interest rate futures

We wrote last week “There are many hedge funds that are itching to short interest rate futures so if last week’s lows do get taken out we could see further selling pressure. For now though the long term trends are still up.” The prior week’s lows did hold, albeit only just, but this did lead to a formation of quite a strong reversal on a couple of the markets, a morning doji star formed on both the 5 & 10 year T notes. The morning doji star is quite a strong reversal pattern so short term strength may continue. However, this makes the low of the pattern a very key support point and if support there fails there could be some large moves lower.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 19th March 2012

The past week has been another bullish week for stocks but the initial bullishness did wear off a bit by the end of the week, as evidenced by the smaller bodied candles/northern dojis. Contrary to popular opinion, dojis are not reversal signals in and of themselves but more an indication that the bullishness has lost a bit of momentum and are often just the markets pausing for breath before continuing higher. That said, they do present a possible warning for the short term.

Bullishness in stocks has translated as it often does to dollar weakness, and although the dollar began the week in quite a strong fashion that developed into weakness by the end of the week. Therefore is the same old story with the trends being up for stocks and mixed for the dollar and commodities.

Stocks

As covered in the introduction, stocks have continued in bullish fashion but some warnings are present in the short term that a possible loss of momentum is upon us. Not really surprising considering the extent of recent moves higher and the fact that the June S&P 500 is now banging its head against the 1400 level.

The other indexes also look good in spite of similar hesitation patterns forming as the Dax advanced 3.85% for the week. The 2011 high at 7680 will be a longer term upside target now that the Dax appears to have firmly closed above 7000. However, a correction is due and we may see some weakness before that target is reached, if indeed it is in this current uptrend.

Commodities

Soybeans have continued their bull run, this week advancing by 2.76%. The upside target remains at 1450 for beans and this past week has also seen bean oil and meal following along nicely, with meal being the most bullish of the sector.

Gold ended the week down by 3.25% and continues the long-term downtrend. This past week saw the yellow metal move once again below the often watched 200 day moving average. Copper fared better, advancing by 0.51% for the week and still remains in a long term uptrend with a test of 40000 being the critical level.

Currencies

The dollar index ended the week lower by 0.51% having earlier made an upside breakout that eventually reversed. The trend for the index is still up as it is for the dollar against a few of the major currencies.

The Aussie dollar fell to a 7 week low against the dollar but then made a recovery, forming a nice hammer pattern on the weekly chart and we also saw a similar pattern of trading for the kiwi. The Canadian dollar continues to be the weakest of the 3 commodity currencies and is still in a long term downtrend whereas the trend for the other 2 is still up.

In spite of a bit of a pause from weakness towards the tail end of the week, the Yen continues to be the whipping boy of the currency markets, having declined for a seventh straight week, this past week declining by a further 1.01%. Resistance has appeared at 8400 but if that can be cleared then our target at 8500 is still on the cards.

Both the Euro and the Pound advanced for the week against the dollar but the trend is still down for both markets.

Interest rate futures

We wrote last week “We may see some decent moves lower should those support levels eventually give way”. We were referring to the medium term support levels that have held the interest rate futures markets up very well of late. This week those support levels were tested and support failed, leading to quite a dramatic sell off, which in the case of the 30 year T Bonds, this mean a weekly decline of 2.76%. There are many h edge funds that are itching to short interest rate futures so if last week’s lows do get taken out we could see further selling pressure. For now though the long term trends are still up.

Kind Regards

Robert Stewart