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

LS Trader Weekly Update – Monday 12th March 2012

The past week has been quite a volatile one with some large moves seen in stocks, commodities and currencies. Much of the losses incurred by these declines were almost completely erased by the end of the week and some markets made a complete recovery and actually ended the week higher.

Long-term trends are still up for stocks and still mixed for the dollar and commodities.

Stocks

We wrote last week that momentum on the S&P 500 may be running out of steam and right on cue weakness came in to the market, taking the market out of the recent bull channel and bring to an end the recent rally. The correction was however short lived and the S&P 500 made almost a complete recovery by the end of the week and is now only a few points off recent highs.

The Nasdaq 100 was not immune to early weakness but it did make a complete recovery and even went on to make new highs, albeit narrowly, and completed a tenth straight week of gains. However, in spite of making new highs and a new high close it’s not all bullish for the Nasdaq as there is a formation of a dragonly doji/hanging man pattern on the weekly charts, which is a bearish sign for the short term. It would not therefore be surprising to see a new test of last week’s lows in the not too distant future.

Commodities

April Crude moved around a bit during the week but did end up with an advance of 0.66%. Upside resistance is in at the local top at $110.55 but if the market can reach and clear that we would be looking at a further rise towards last year’s highs at $114.

Soybeans continued in bullish fashion until Friday where we saw some weakness. It’s been a very strong move of late so some selling pressure is not all that unusual and an further rise towards 1450 is still a possibility but we may see some further weakness in the short term prior to that.

Metals all ended the week lower but the whole sector had been significantly lower earlier in the week and the weekly charts show long lower shadows on many of the metal charts, which is bullish. The trend remains mixed for metals with the long term trends being up for some but still down for gold. Gold is currently grappling with the 200 day moving average but a move above 1800 will be required for a confirmed change of trend to up.

Currencies

The dollar index advanced for the second consecutive week, this time gaining 0.78%. This move was once again facilitated by advances against the ended the Euro, Pound and Japanese yen. We wrote last week that we were still looking for a move higher to 8200 in the USD/JPY and that should that level be taken out that 8500 would come into focus a nd that is the case now since 8200 resistance was cleared on Friday.

Respective resistance levels at $1.35 and $1.60 for the Euro and the Pound continue to look like a short term top and the failure to take out those levels has pressured both markets lower and downside breakouts look to be on the cards for both markets, with a $1.52 target for the Pound and $1.27 for the Euro.

Interest rate futures

Interest rate futures all ended the week lower but all continue to hold on to medium term support. The 5 year note formed a hammer pattern at support, which is a bullish reversal pattern, indicating buyers are trying to hammer out a bottom and push prices higher once again. As we wrote last week, we may see some decent moves lower should those support levels eventually give way but for now a continuation towards the higher end of the recent ranges looks more likely.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 5th March 2012

The past week has seen stock indexes continue to climb higher but there are signs that momentum may be beginning to wane. The dollar has also advanced for the week overall and commodities have been mixed. With a few exceptions volatility is at much lower levels than it has been for much of the past 2-3 years and many markets are trending well.

Long-term trends are up for stocks and mixed for the dollar and for commodities.

Stocks

The S&P 500 advanced by 0.40% for the week and the trend is clearly still up. However, there are signs that the momentum may be running out of steam. The bull channel that we have been writing about for several weeks is just about holding on a closing basis but the market is right on that lower trendline as of Friday’s close. If the lower level holds then we may yet see a move back towards t he top of the channel and the 1385 target.

The Nasdaq 100 continues to lead the way as far as the indexes are concerned with this past week being the ninth straight up week, for a weekly gain of 1.61%. The weekly chart still looks bullish but the daily charts are showing some indecision with a northern doji printed on Friday.

Commodities

April Crude cleared $110 on Thursday before pulling back on Friday but the trend remains up and it was a similar story for heating oil and no leaded gas. The trend remains up for all three markets at present but it remains to be seen as to whether last week’s weakness translates to a stronger pull back. Last week’s highs in all three markets will be the resistance levels that will need to be cleared.

Last week we wrote about the indecision that was present in gold and that was clearly resolved this past week with a steep sell off on Wednesday, whi ch took the market easily through he $1765 support area. The long term trend remains down but last week’s lows may provide support, as may the 200 day moving average which currently sits at $1765. Silver ended up sharply lower also on Wednesday but the trend still remains up.

Soybeans had a very bullish week, moving ahead 3.59% for the week for a third consecutive week of gains. The soybeans chart still looks bullish with little in the way of resistance between current levels and the September highs around 1450.

Currencies

The dollar index ended the week higher by 1.35% helped mainly by gains against the Euro, Pound and Japanese yen. We wrote last week that we were looking for a move higher to 8200 in the USD/JPY pairing and that level was almost reached this last week. If that resistance level can be cleared there is little in the charts by way of resistance until around the 8500 level.

Both the Euro and the Pound made sharp reversals lower having been rejected at $1.35 and $1.61 respectively. The long-term trend remains down for both of these currencies and lower prices may be ahead.

Interest rate futures

Interest rate futures continue to hold on to medium term support and both the 5 & 10 year notes advanced but the longer term 30 year bonds ended slightly lower. The long-term trend is still up across the sector and these markets must still be considered bullish as long as medium term support holds. We may however see some decent moves lower should those support levels eventually give way but for now a continuation towards the higher end of the recent ranges looks more likely.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 27th February 2012

The past week has seen stock indexes continue to climb higher, in some cases to new multi-year highs. We have also on balance seen the dollar continue recent weakness and commodities advance.

Long-term trends are up for stocks and are heading that way for commodities. The trend for the dollar is up on balance but may be changing soon.

Stocks

Friday’s high on the S&P 500 was the highest level seen since May 2008 and as we wrote last week this gives us our next target at 1385. We wrote a couple of week’s ago about the importance of the lower support from the bull channel holding and it did again this week, bouncing directly off it on Thursday before pushing to new highs. just about this week, and new highs for the year followed.

The Dax hit another new high since August and ended the week ahead by 0.37%. As was the case with the S&P 500 and with the prior week, the Dax continues to find support from the trendline that has held since December last year. Each decline towards the trendline is being met with buying.

The trend for stock indexes remains up across the board and we may yet see new highs, especially if these markets remain in the bull channels. However, although the Dow and Nasdaq 100 have cleared their 2008 highs, the S&P 500 has not and as we have written many times before, the S&P 500 is the most important of the indexes so the 1385 level will be an important level to watch as failure there will likely put the brakes on the other indexes.

Commodities

Crude oil remains in a highly bullish trend and looks to be heading towards last year’s highs around $114. The current chart shows no sign as yet of a reversal and there is nothing in the chart to suggest that the market won’ t reach that level, aside from the fact that the market is possibly a little overextended in the short term. The weekly advance for Crude was an impressive 5.96%. No leaded gas and heating oil are also on a bullish run and are following crude higher.

Gold advanced 2.93% for the week, forming a bullish candle on the weekly charts but that does not perhaps tell the full story as the last 3 trading days of the week were spinning tops and Friday was a down day. This is why the Japanese Candlestick traders counselled against using candles on weekly charts, and only using daily charts, as much of the message can be lost on a weekly chart. That said, the recent highs around $1765 may now provide some support due to change of polarity where prior resistance becomes support.

Currencies

The dollar index ended the week lower by 1.33% and now looks to be heading lower to the 7800 level and the 200 d ay moving average. For now the long term trend is up overall for the dollar but with much more continued weakness that may change soon.

The British Pound continues to trade within the box range between $1.56 and $1.59. A break of either level may give rise to a decent move but for now the trend is down. For the box range to continue, resistance around $1.59 needs to hold to send the pound lower again. The Pound had a good week against the Yen, giving a confirmed change of trend to up for the first time since July last year.

For the second week running one of the big moves of the week was in USD/JPY, with a 1.93% gain for the dollar. This has taken the dollar back above the 8000 level, which suggests a continuation higher towards 8200.

Interest rate futures

Interest rate futures headed lower and tested medium term support as expected, which held once again, leaving futures slightly ahead for the week. The long-term trend still remains up for the sector.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 20th February 2012

The past week has seen stocks reach and move above our long-standing target of 1355 on the S&P 500 and U.S. stocks have now all but erased their losses since June 2008. The trend remains up for stocks with indexes either at or near multi year highs (the Dow 30 hit a 4 year highs this past week and the Nasdaq 100 reached its highest level since 2001).

Considering the above the dollar has held up quite well and with the exception of against the Australian and New Zealand dollars, still remains in a long term uptrend.

Stocks

For the past several weeks we have been writing about our 1355 target on the March S&P 500 and it was finally reached and cleared this week and we now have new targets at 1385. We wrote last week about the importance of the lower support from the bull channel holding and it did just about this w eek, and new highs for the year followed.

The Dax also moved higher, reaching its highest level since August and continues to find support from the trendline that has held since December last year. Each decline towards the trendline is being met with buying and this week was no exception as Thursday’s lows bounced exactly off this trendline, propelling the market to new highs on Friday. This week also saw a change of long term trend to up for the Nikkei, so the trend is now up across the board for all the indexes we trade at LS Trader.

Commodities

Last week we wrote on Crude “The market remains above the 200 day moving average and the trend is still up so an upside breakout remains more likely” and we did see a breakout to the upside. April Crude reached its highest level since September last year and the trend remains up. Heating oil and No leaded gas followed Crude higher and gasoline is now moving towards last year’s highs and we may see those levels tested this week.

We have a third consecutive doji on the weekly chart on Gold so indecision in this market is very much the current status. Buyers are so far coming in just above $1700 but if that level fails we may see a move lower towards the 200 day moving average and support around $1650. The long-term trend still remains down and resistance is still in place at $1770 on the April contract.

Currencies

The dollar index ended the week higher by 0.29% and does appear to have formed some decent short-term support around 7850 with support provided by the stick sandwich pattern and the bullish engulfing pattern that we wrote about last week. The long-term trend remains up for the dollar overall but is down against the Aussie and New Zealand dollars.

The British Pound did not quite make it as far down as $1.56 and t he 50 day moving average but did make quite a strong recovery on Thursday and Friday. Resistance is still in place at the 200 day moving average around $1.59 and that may be tested this week.

Big move of the week came as the Yen declined against the dollar by 2.41% for the week, a move that saw the dollar push above the 200 day moving average for the first time since April last year. More significant than that though was the break above the highs formed on the 31st October last year. The trend is now up for the USD/JPY.

Interest rate futures

Interest rate futures ended the week lower and the uptrend may be coming to an end, at least for the near term. Longer term markets are holding up slightly better than the shorter-term markets and medium term support is still holding. Those support levels may be tested this week.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 13th February 2012

The past week has seen stocks and the dollar end the week relatively flat although stocks did rise to new highs for the year. The trend for the dollar remains up overall and commodities remain mixed.

Stocks

For the past several weeks we have been writing about our 1355 target on the March S&P 500 and this past week saw the market rise to 1352.3 before pulling back to close the week at 1340.6. This resulted in a small gain for the week of 0.11%. In spite of the small correction towards the end of the trading week, the S&P 500 remains in a bull channel and the trend is still up. The bottom of the bull channel is currently around 1325 and it will be interesting to see if that lower support line of the channel is hit this week and if it once again hits support.

Last week we wrote that resistance at 1355 can be expect ed but if it can be taken out we could see a move to the next target at 1385, and that still applies, especially of support at the bottom of the channel holds.

Commodities

Crude ended the week ahead but remains within the box range that it has been in for the past several weeks. The market remains above the 200 day moving average and the trend is still up so an upside breakout remains more likely although this would change on a break below $95.

Gold ended the week lower by higher by 0.86%. Last week we wrote that in spite of recent strength Gold was showing signs of a possible turn. We also wrote “The weekly bars show a doji, which at resistance can be a prelude to a turn, but the stronger signal comes on the daily charts where there is a large bearish engulfing pattern. This could lead to a move lower.” So far the move lower has been reasonably well contained but the long term trend doe s remain down. On the April contract there is resistance around $1770 but the next level of support is not until $1650.

Grains are not doing a great deal and the trend remains down. Most of the grains markets are showing numerous doji candles, which represent indecision. A break to the downside continues to look more likely.

Currencies

The dollar index did briefly fall through a short term support level but had regained it by the end of the week. Medium term support at 7800 is still holding so the medium term trend is still up for the indexs as is the long term trend. On the daily charts there was a stick sandwich support pattern followed by a bullish engulfing pattern on Friday so there is certainly some buying pressure coming in around 7850.

Last week we wrote that the British Pound looked to be heading for the 200 day moving average, at that point around $1.59, and that is exac tly where the pound reached before reversing and making a move lower. The trend remains down for the Pound and it may now be heading down towards the 50 day moving average around $1.56.

Interest rate futures

Interest rate futures ended the week pretty much flat but all of the markets had been lower earlier in the week. All of the markets did hold at short term support and the trend remains up across the sector.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 6th February 2012

It’s been another week or risk on, which has seen stocks continue in bullish mode and the dollar continue its recent weakness. The trend continues to be up for stocks and is still up overall for the dollar but that may be going to change. Commodities for the most part have continued to benefit from dollar weakness.

Stocks

January ended the month up, which according to the January Barometer means that there is a good chance of stocks ending the year higher. At present things are continuing in a bullish fashion and risk-on remains the primary strategy for traders.

We have been writing about the likely target of 1355 on the S&P 500 March contract and that still looks to be the likely destination. Resistance at 1355 can be expected but if it can be taken out we could see a move to the next target at 1385. We will review from there if and when that target is reached.

The Nasdaq 100 once again continues to lead the way, which as we wrote last week is generally the most bullish set up. The Nasdaq 100 is now approaching 11 year highs. The Dax is also moving higher having recently changed long-term trend to up. Of all the indexes that we trade at LS Trader, the Nikkei is the weakest and still in a long-term downtrend. Whether that changes or not remains to be seen.

Commodities

Crude found support on from the 200 day moving average but still ended the week lower by 1.73%, ending the week once again below the $100 level. If support at $95 fails then a move to $93 will likely follow.

Gold ended the week higher by 0.33% but is showing signs of a possible turn. The weekly bars show a doji, which at resistance can be a prelude to a turn, but the stronger signal comes on the daily charts where there is a lar ge bearish engulfing pattern. This could lead to a move lower. If however, the market can close above the bearish engulfing pattern we may see a move higher towards $1800. For now the trend is still down for Gold. We have similar action on silver, but the reversal pattern on gold looks stronger.

Currencies

The risk-on move has continued, as has dollar weakness. The dollar index though ended the week flat and has so far not fallen to the next support level at 7800. There are a series of lower shadows on the daily candles, which suggest some buying coming in around the lows of last week.

Last week we wrote about the ultimate risk-on currency, the Australian dollar and said that close on its heels was the New Zealand dollar. Both of these currencies continued higher and these are the first 2 markets to give a change of trend to up. The third commodity currency is the Canadian dollar and tha t may be the next to give a change of trend.

The pound has also continued its good run and may be heading for the 200 day moving average, currently around $1.59.

Interest rate futures

Interest rate futures continued to climb higher until Friday, where having made new highs initially, heavy selling followed. The trend is still up across the sector.

Kind Regards

Robert Stewart

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