LS Trader System Update 13th January 2013

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

Stocks

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

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

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

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

Commodities

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

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

Currencies

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

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

Interest rate futures

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

Good trading

Phil Seaton

LS Trader Weekly Update 6th January 2013

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

Stocks

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

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

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

Commodities

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

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

Currencies

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

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

Interest rate futures

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

Good trading

Phil Seaton

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

LS Trader Weekly Update 30th December 2012

We’d like to wish all LS Trader readers and subscribers a Very Happy and Prosperous New Year!

Last week we wrote about the Santa Claus rally, which historically often brings a short and sweet rally to global stock indices during the last five trading days of the year and the first two trading days of the New Year. Unless something dramatic happens over the next 3 trading days, the Santa Rally will have failed to materialize. Based on historic data this points to a bear market for stocks in 2013 or at the very least, stock indices fall to much lower prices at some stage during the year ahead. This year, the focus has been much more on the fiscal cliff, and at the time of writing, the inability for Washington to reach an agreement to avert the crisis. Such an agreement may yet be reached, but how much impact that has on the stock markets remains to be seen.

With just one shortened trading day of the year left, the long term trend is still up for stocks, with the exception being the Nasdaq 100. The trend is still down for the dollar, with the exception still being the Yen, and is still mixed for commodities.

The aforementioned long term trends will likely change at some stage in 2013, with long-term chart structures pointing to weakness for stock indices and commodities, and a probable dollar rally. The question is, when will these changes occur? The answer is that we have to wait for the markets to show us where they want to go and simply follow the developing trends. Those that try to jump the gun and make predictions on where the markets are going and when they will turn, are often thwarted by the markets.

Stocks

The S&P 500 traded lower on each of the 4 trading days of the past week as volatility continues to pick up. The huge spike down on the 21st, which was subsequently largely retraced during the same day, was exceeded this week with a flurry of late selling on Friday. Such a move, as already mentioned has all but certainly put paid to any hopes for a Santa rally and although the long-term trend is still up, a change of trend to down is within range should there be further selling during the week ahead.

The Nasdaq 100, which has been the weakest of the stock indices we trade at LS Trader, ended the week lower by 2.8% and may now continue lower to the next support level around 2515 on the March contract.

The Nikkei 225 was the only index to rise this week, as the Japanese index rallied for a seventh straight week, advancing by a further 2.57%. Does this mean the rally is over? No. Sometimes markets can rally for an extended period and much longer than 7 weeks. That said, the Nikkei could be pulled back if weakness in other global indices extends, but the next target, assuming the trend remains intact will be 10800.

Commodities

The grains sector has remained under pressure this year as the unwinding of the bull market seen earlier this year continues. The long term trend is down across the sector and we may see an extended down move for grains in 2013.

The metals markets have remained mixed, with gold and silver essentially moving sideways. The long term trend for both remains up but that may change next year. Palladium remains the strongest of the sector.

The energy sector was higher, with advances seen in all markets with the exception of Natural Gas, which ended the week flat. The trend remains up for the sector with the exception of U.S. Crude.

Currencies

The dollar has been mixed this past week but the majority of moves have marginally favoured the dollar. The dollar index has printed a spinning top on the weekly charts, which is indicative of uncertainty in the currency markets.

Once again the big move has come from the dollar/yen, which advanced 2.21% this week, for a seventh week of gains. The trend remains bullish with support just north of 8300 on the March contract.

Interest rate futures

The hammer type patterns printed on the weekly charts of the interest rate futures markets that we wrote about during last week’s updates were the bottom, at least for the near term as the sector moved higher this week. There still appears to be limited upside but for now the long-term trend remains up across the sector.

Good trading

Phil Seaton

LS Trader Weekly Update 23rd December 2012

LS Trader would like to wish all our readers a very Happy Christmas. We hope you all enjoy the festive break.

The week ahead is supposedly the week of the Santa Claus rally, which often brings a short and sweet rally to global stock indices during the last five trading days of the year and the first two trading days of the New Year. Will Santa call this year? That remains to be seen. What we can say is that in the years that the Santa rally has not occurred, bear markets usually follow the next year, or at the very least, stock indices fall to much lower prices during the year. It would seem that this year the focus is likely to be more on the rhetoric coming out of Washington than any seasonal patterns or tendencies.

As we enter the final trading week of the year, the long term trends are up for stocks (exception being the Nasdaq 100), down for the dollar (exception being against the Yen) and mixed for commodities.

Stocks

In what was an extremely volatile week, the S&P 500 managed to end higher by 1.19% but it had made a large round trip in order to get there. On Tuesday the index reached its highest level for the current move and was beginning to look like a test of the highs of the year was on the cards. We then saw some weakness and a recovery, until the fireworks on Friday! Friday saw the largest one day move on the S&P 500 in a long time as the market collapsed in precipitous fashion only to find support at 1391.7 and then launch a strong recovery.

The sell-off was apparently triggered by news that a deal to end the fiscal cliff was unlikely to be reached when the market was expecting a resolution, and that had already been priced in. The sell-off and recovery suggests this was just a knee jerk reaction and that an agreement will be reached before the deadline, but the extreme selling may be a preview of what may happen should an agreement not be reached by the deadline.

The S&P 500 was not the only market affected as selling also hit the Nasdaq 100 on Friday, and to a lesser extent, the Nikkei 225. The Nikkei had earlier in the week reached our longer term target at 10200. The Nikkei also staged a good recovery following the sell-off and the trend remains up.

The Dax was seemingly unaffected and eased through quarterly expiration, ending the week ahead by 0.69%, also reaching our target of the May 2011 highs at 7700.

Commodities

Commodities have been very mixed this past week with some sectors advancing and some selling off sharply. Gold and silver have both continued recent weakness and although the long-term trend is up for both markets, both have hit multi-month lows this past week. Copper and Palladium also fell as the metals sector took a hit for the week.

Another sector under pressure has been the grain markets, which have continued to unravel the bull market seen earlier this year. The current chart patterns suggest that there is a good possibility that much if not all of the recent bull run will be erased in 2013. This will present some highly profitable spread betting opportunities over the coming months.

Some strength has been seen in the energies markets, all of which ended the week higher. The trend is still up for most of these markets, with the exception of U.S. Light Crude.

Currencies

The dollar index fell almost exactly to our target at 7900, reaching a low of 7901 before putting in a decent recovery, forming a hammer pattern on the weekly charts. The trend is still mostly against the dollar and we may yet see some further weakness before a larger dollar rally is seen in 2013.

Once again the British Pound rally has halted at $1.63 for the third time this year and this level now represents very strong resistance. That said, should the market be able to test and break through that level, a rapid rally to $1.67 may follow.

Interest rate futures

Interest rate futures all ended the week lower, but each of the markets put in a recovery during the later part of the week. Hammer type patterns have been seen on the weekly charts in the longer term markets, indicating support at the lower levels. As has been the case for what seems like forever, the long-term trends are still up and considerable further weakness will be required before that changes.

Good trading

Phil Seaton

You can sign up for a 30 day trial of the LS Trader System by clicking here

LS Trader Weekly Update 16th December 2012

The FOMC meeting came and went during the past week and delivered pretty much what market participants had expected, further stimulus. This led to further downside pressure for the dollar but did not do much for U.S. stocks, which have lagged behind their overseas counterparts.

As we move in to the last two trading weeks of the year, the long term trends are up for stocks, down for the dollar and mixed for commodities.

Stocks

The S&P 500 began the week in relatively convincing fashion, breaking through prior resistance and then continuing higher, but the latter half of the week saw the earlier gains erased. The trend is still up for the S&P 500 but this week’s price action has not been convincing.

The past week was even less convincing for the Nasdaq 100, the only stock index that we trade at LS Trader that is still currently in a long-term downtrend. The week ended with three strong selling days, which took the March contract back below the 200 day moving average.

The Dax added a fourth straight week of gains and now that the market has been able to hold above prior resistance, which should now act as support, we may see a move towards the May 2011 highs around 7700.

The Nikkei was the strongest of the stock indices and advanced 2.35% for the week, easily taking out our 9700 target in the process. The next target is our longer term upside target at 10200, which are the highs of the year so far.

Commodities

Gold and silver have both been further pressured this week as both metals declined for a third consecutive week. The trend is still up for both of these metals but there appears to be little buying at present.

Copper and Palladium fared considerably better, both continuing their recent up moves. Palladium has made a strong move higher over the past 7 weeks, rising from 589 to its present level of 702. The current level represents the highs of Q3 and is therefore likely to provide some resistance. However, if that resistance can be cleared look for a continuation higher to the highs of the year posed in February.

One commodity market that is trending very well and has done for several months is Coffee. Coffee, according to our proprietary trend indicators at LS Trader has been in a long-term downtrend since the middle of 2011, and this week has fallen to its lowest level of the year. Due to the extent of the recent trend, we may see further weakness into January and the market may yet head down further towards 13500 and possibly as low as 13000.

Currencies

With the exception of continuing its recent advance against the Yen, the dollar has declined across the board and the trend for the dollar is therefore very much down.

The dollar index, which is the best indicator of the general trend of the dollar since it is the dollar versus a basket of currencies, ended the week lower by 1.11%. This equated to the dollar’s lowest level in 8 weeks and keeps the trend for the index, and for the dollar overall, down. The next target will be support at 7900 and if that fails, the September low at 7872.

The past week has also seen quarterly forex expiration so the December contract has been rolled forward into March.

Interest rate futures

In spite of helicopter Ben’s promise to continue to buy bonds, the interest rate futures sector was lower, with the exception of the 3 month Eurodollar, which ended flat. The long-term trend remains up across the sector but how long the continues to be the case remains to be seen.

Good trading

Phil Seaton

You can sign up for a 30 day trial of the LS Trader System by clicking here

LS Trader Weekly Update 9th December 2012

The stock indices that we trade at LS Trader have continued to edge higher as we head towards the period known for the Santa Claus rally, which is generally bullish for stocks. Currency markets have been mixed with the trends now mostly against the dollar and commodity markets have also been mixed.

This week sees the FOMC meeting on Tuesday 11th.

Stocks

The S&P 500 advanced for a third straight, even though it was a minimal gain, but remains in a long-term uptrend and may yet move higher. Whether we see a test of the highs of the year remains to be seen, for now it certainly looks possible.

The Nasdaq 100, by far the weakest of the U.S. indices and still in a long-term downtrend, ended lower by 1.49% and remains below the 200 day moving average. The index may find resistance at the 200 day moving average and also slightly higher at 2700 should it reach that far. For now it remains range bound.

The Dax remains the strongest of the indices we trade at LS Trader and this past week hit new highs for the year as we suggested may happen in last week’s update. The May 2011 highs around 7700 will be the next target should the market be able to hold above prior resistance, which if the move is good, should provide some support.

The Nikkei also moved higher for a fourth consecutive week and remains on track for our target at 9700. Further out we may see a continuation higher towards the highs of the year at 10200.

Commodities

Gold continued its decline that began with heavy selling during the previous week. This selling continued and took the market below support and as low as $1684. There is some evidence of buying at those lows as seen by the long lower shadows on the daily candles, including a hammer on Friday. The trend is still up, with support between $1675 and $1684. Silver traded in a similar fashion to gold and also looks to be finding some short term support.

Palladium remains the strongest of the metals, and closed out a fifth straight week of advances. Copper also gained.

Currencies

The forex markets have been much more active this past week with several pairs experiencing some volatility. The USD/JPY ended the week flat but had been considerably higher and lower at different stages throughout the week and has therefore formed a long legged doji on the weekly chart, a pattern that indicates total confusion and indecision in this market. The almost identical weekly pattern happened in the previous week so for the short term there is no trend but the long term trend is still up. If support holds, and at this stage that is quite a big if, them the highs of the year formed in Q2 may still be tested.

The higher yielding commodity based currencies of Australia, Canada and New Zealand all gained this week, as did the British Pound, but the Euro fell and the dollar index advanced. Overall, a mixed bag for currencies, but the long term trends on balance are currently against the dollar once more.

Interest rate futures

As with the currencies, there has been considerable uncertainty in the interest rate futures sector. Both the 5 & 10 year T-notes formed doji on the weekly charts and the 30 year T bond ended marginally lower. For now the trend is still up across the sector with limited upside potential for the shorter term markets. However, the much-anticipated sell-off that many have been calling for since early 2011 has still yet to materialize and the trend is still up across the sector.

Good trading

Phil Seaton

You can sign up for a 30 day trial of the LS Trader System by clicking here

LS Trader Weekly Update 2nd December 2012

December often presents some good trending markets and plenty of good spread betting opportunities. Seasonally we’re in a strong period of year where risk-on is seen more often than not and we hear about the oft-mentioned Santa Claus rally. December is a strong month for stock indexes, and if we see that strength this year we can expect a weaker dollar and higher commodity prices. Since 1950, December has been the best performing month for the S&P 500.

Stocks

The S&P 500 advanced 0.65% for the week as the uptrend remains in place. This has kept the market above the 200 day moving average and we may yet see a continuation higher and possibly a test of the highs of the year before the trading year comes to a close.

The Nasdaq 100 made a stronger move to the upside, ending ahead by 1.65% for the week but still remains in a long-term downtrend due to the extent of the recent sell-off. The Dax may still be set to hit new highs for the year before the end of the year having gained over 400 points in the last two trading weeks alone. That momentum may be sufficient to carry the index above resistance.

It’s been a third week of advances for the Nikkei and we remain on track for our target at 9700. Further out we may see a continuation higher towards the highs of the year at 10200. As is shown on the weekly chart, there is little from a technical perspective to impede such an advance. From a long-term perspective, this week saw a 62% retracement of the steep decline from the end of March to the lows in June.

Commodities

The commodities markets have seen a bit more action this week than the stock index and forex markets have, in particular Gold. Gold was the subject of a huge sell order of 7800 contracts on Wednesday, allegedly a tactical operation by a U.S. hedge fund with $14 billion under management, aimed at sending the market lower and triggering anticipated stops at $1730, in that hope that those stops would lead to a cascade of further selling, which was what happened.

Gold fell all the way to support before making a recovery late on Wednesday and a further advance back to $1730 on Thursday before the selling resumed on Friday. Key support is for now still holding and the trend remains up but there may well be further swings for gold, and indeed the other metals markets in the week ahead. Silver as usual followed gold’s movements closely, even though there were no such operations in the silver market.

Copper was this week the most bullish of the metals and managed a weekly advance of 3.14%, closely followed by Palladium, which also managed to move ahead by 2.85% in spite of also being subject to some mid-week selling, but later recovering to make new highs for the current move.

Currencies

The forex markets have for the most part been fairly quiet, with many majors ending the week roughly where they began. This is perhaps best indicated by the dollar index, which ended lower by just 0.09% for the week.

The biggest moves as has been the case recently came from the Yen, which having gained some strength mid-week, was then subject to further weakness into the weekend. The USD/JPY continues to present good spread betting opportunities and there is potential for the current trend to continue much further over the coming weeks. The trends are for the most part against the dollar and that may continue in the run up to the end of the year if we see the anticipated risk-on rallies elsewhere.

Interest rate futures

The interest rate futures markets advanced yet again, with the strongest move in terms of weekly percentage gain coming from the 30 year T-bond. The trend remains up across the sector and a change of trend to down seemingly remains a way off and is unlikely to be seen this year unless we see a major event happening over the next 4 weeks.

Good trading

Phil Seaton

You can sign up for a 30 day trial of the LS Trader System by clicking here

LS Trader Weekly Update 25th November 2012

In last week’s LS Trader update we wrote about whether the reversal seen on the prior Friday was a pause in the recent weakness or the beginning of a recovery. The price action seen during the past week suggests that it was the beginning of a recovery and a move back to risk-on, a position that may continue further over the coming weeks.

Stocks

The support that we had identified previously at 1340 on the December S&P 500 looks as though it may be the bottom for the immediate future, as the S&P 500 has continued higher for 5 straight trading days. The index is now back up above the 200 day moving average and a move towards the highs of the year over the coming weeks may be on the cards.

Due to the extent of weakness over the past several weeks, the trend is still down for the Nasdaq and we did see continued strength on Monday as expected, which continued throughout the week.

Last week we wrote: “The Dax is still the strongest of the indices and is still very much in a long-term uptrend in spite of short-term weakness.” Strength returned in force for the Dax during the past week as the market rallied some 5%, suggesting that we may see new highs for the year in the not too distant future.

As expected, the Nikkei 225 completed the change of trend to up having taken out key resistance. The Nikkei was not quite as strong as the Dax but still managed to advance 3.68% for the week and the trend is now up. We’re now looking for a continuation higher towards 9700.

Commodities

Commodities benefited from a switch back to risk-on and this was highlighted by sharp moves higher for metals and to a lesser extent, energies.

Gold, as we suggested would happen last week, broke up through resistance at $1740 on Friday and this led to strong buying, including buying from George Soros. The trend for gold has remained up throughout the recent period of general market weakness and we will now likely see a continuation higher to test critical resistance at $1800. This level has held firm several times so stiff resistance can be expected. Should the market be able to clear that level, we would be at new highs for the year and the possibility of a move towards all time highs would come back into focus.

Palladium was the most bullish of the metals, advancing by 6.57% for the week and resuming the long-term uptrend in the process, followed by silver, which also made a strong advance, gaining 5.39% for the week. The trends remain up across the board for metals.

January Light Crude had a mixed week again but did manage to move above the $88 resistance level but still remains in a downtrend. Brent Crude continues to be stronger, and this week advanced by 2.28%. The trend for Brent is up.

Currencies

Recent dollar strength came to an abrupt end as weakness for the dollar cam in almost across the board as risk-on became the strategy of choice one again. This led to some sharp reversals of recent trends against all markets, with the sole exception being against the Yen, which continues to be weaker still. We have written previously about our expectation for a much weaker Yen and that move continues to play out in the markets at present, with the next target at 84.00. Short Yen positions continue to offer excellent spread betting opportunities as the current trend progresses.

Interest rate futures

The interest rate futures markets were all weaker this week but the long term uptrends are still intact. Whether last week’s weakness is the beginnings of a larger move lower remains to be seen. Considerable further selling will be required before a change of trend to down is confirmed.

Good trading

Phil Seaton

You can sign up for a 30 day trial of the LS Trader System by clicking here

LS Trader Weekly Update 18th November 2012

The long-term trends according to the LS Trader proprietary trading rules are now mixed for stocks following continued weakness from the U.S. indices, especially the Nasdaq 100. The trend has continued to shift towards the dollar and commodities are still mixed but currently mostly bearish. The recovery late on Friday for stocks, which recovered some of the recent losses as well as some weakness for the dollar on Friday are about the only things that suggest a possible pause in the move to risk-off and further stock index weakness and dollar strength. The week ahead promises to be interesting and we will see whether the moves late on Friday were just a pause in the larger move or the beginnings of a recovery.

Stocks

We wrote last week that the S&P 500 would likely be heading lower towards 1320 and that still looks to be on as the S&P 500 has added another week of declines to its recent weakness. This week saw the first close below the 200 day moving average since June. There were signs late on Friday that we may see a bit of a dead cat bounce as support was found around 1340. The trend is still up but possibly not for long.

The Nasdaq 100 continued with its very weak performance, and completed a change of long-term trend to down for the first time in quite a while. The Nasdaq is normally the front runner for moves in the U.S. indices and when it is it tends to lead the way. It has been the weakest of U.S. markets during the recent sell-off. Friday did however see quite a strong rejection of lows as a hammer type candle formed on the daily charts. This suggests possibly some more strength on Monday but the trend is now down.

The Dax tested the lows of the prior week as expected and continued lower, reaching a 10-week low in the process. The Dax is still the strongest of the indices and is still very much in a long-term uptrend in spite of short-term weakness.

The Nikkei 225 was by far the best performing index with 2 huge up days, on Thursday and Friday. The trend is still down for the Nikkei but that will change if last week’s bullish price action continues much longer.

Commodities

Gold was unable to clear resistance at $1740 and has drifted lower this week but the trend still remains up. Support will likely be found around the 200 day moving average and the lows of the morning star pattern that formed during the previous week, all around the $1670 level. A break below that level would be considered bearish, but for now the trend is up and a test of $1740 looks more likely. Silver as usual continues to move in a very similar fashion to gold.

Crude has had a mixed week and remains within the range between approximately $84 and $88. The trend is still down. Crude continues to be the weakest of the energy sector, with no leaded gasoline currently the strongest.

Currencies

We have been writing of late about our expectations for an extended move higher for the dollar and that move continues to gain pace as the dollar has advanced almost across the board this week. The long-term trends are now favouring the dollar against most of the majors.

The largest move was seen in the dollar/yen, which soared higher this week on expectation of further weakening from the Bank of Japan. This move easily took out recent resistance as the long-term uptrend resumed. We may now see a continuation towards 8400 further out.

Interest rate futures

The interest rate futures continue to advance, keeping the long-term uptrend intact. The 30-year T-bond may yet continue higher to test all time highs around 15450. The 5 & 10 year T-Notes have also continued higher but the upside appears limited for both of these two markets. The long-term trend is still very much up across the sector.

Good trading

Phil Seaton

P.S. You can sign up for the LS Trader financial spread betting system here

LS Trader Weekly Update 11th November 2012

As expected, Obama won the U.S. Presidential election and is now in place for a second term. Opinions are divided as to whether that is a good thing or not. One thing we can say is that the markets were not particularly bullish on the outcome, although much of that is likely due to the focus now shifting towards the fiscal cliff, something which we will probably be hearing all too much about between now and the 1st January 2013.

The long-term trends are still up for stocks, but possibly not for long, mixed for the dollar and commodities. The past week has seen a shift towards risk-off as stocks have continued to sell off, and money has flowed in to the dollar and Yen.

Stocks

We have been writing about the 1380 level and 200 day moving average as a likely target for the S&P 500, and both were hit this week. As we also wrote last week, if these 2 levels could be taken out that we would likely see a continuation lower towards 1320, so that will be the next focus.

The Nasdaq 100 crashed through the 200 day moving average and the 2600 support level and will change trend to down for the first time in a long time soon if the current weakness continues.

The long-term trendline on the Dax that we have been writing about for the last couple of weeks was finally taken out this week, and decisively so. Friday did see a bit of a recovery with a hammer type candle on the daily charts (not quite a hammer as the lower shadow is not quite twice the length of the body) but this does show some buying returning to the market at just north of 7000. Whether that continues and is a support area remains to be confirmed. It’s likely that the lows of last week will be tested again soon.

Commodities

For the past couple of weeks we’ve been expecting gold to fall to the 200-day MA around $1670 and that happened this week. Gold fell to exactly the 200 day MA and that was the bottom of the short-term downtrend and also formed the low of a 3 day morning star bullish reversal pattern. From there gold has continued higher and may now target the $1750 area. The long-term trend remains up.

The $84 support level is still holding for December Crude but the trend remains down. Should support continue to hold there should be resistance at $88. $84 down and $88 up remain the levels to focus on for short-term direction.

Currencies

Last week we wrote “We may be seeing the very early stages of strength for the US dollar.” As the stock market has continued with weakness, a continuing shift towards risk-off is underway and that means money flows towards the dollar and the Yen.

The dollar index has continued higher and now looks set to test the 200 day moving average but for now the trend is still down. Continued weakness in the Euro will assist the rise of the dollar index.

The biggest market in the basket of currencies that make up the dollar index is the Euro, and as we have covered recently here the Euro has been building up for potentially a large move should it be able to break out of the recent range and take out support, a break of which would confirm that a double top was in place. Following the break of that support and confirmation of the double top, we now have a new downside target of $1.25 on the December contract.

The resistance levels that we mentioned in last week’s update held firm for both the Pound and the Dollar against Japanese Yen. This and the move towards risk-off led to the Yen strengthening and has brought the recent Yen weakness to an end for now.

Interest rate futures

The interest rate futures markets have all risen today, leaving the long-term uptrend intact. The 30-year T-bond finally broke out of the range and may now continue higher to test all time highs around 15450. Once again those calling for a top in these markets and selling short prematurely have come up wanting again.

Good trading

Phil Seaton

www.LSTrader.co.uk