Weekly Update 5th May – LS Trader

Stocks have once again reached new all time highs and Friday saw some exuberant buying and price action in several markets. The best six months of the year for stocks are now over and we enter the historically weak May to September period. As we wrote last week, this does not mean that prices will move lower over this period and the near record levels of bullish sentiment may continue to drive prices higher. However, as a warning for stock bulls, when sentiment is at such extreme levels when the sell-off does eventually appear, it can often be swift and deep.

Long term trends are still up for stocks, bonds and the dollar and down for commodities. For the time being none of these long term trends look like they will change in the near term.

Stocks

We wrote last week that we would continue to favour the bullish scenario as long as key support on the S&P 500 held. This week has seen stocks push higher and reach new all time highs. This led to the S&P 500 moving above 1600 for the first time in history and one argument for the bulls is the fact that the index managed to close above that threshold.

The Dow 30, which is not a market we trade at LS Trader due to it’s historical lack of trending properties, briefly cleared the psychological 15,000 level on Friday but then swiftly reversed in what was quite a volatile day.

The Nikkei managed to clear the 14000 level, closing at a new multi-year high at 14200. This week saw prices reach their highest since June 2008 and the trend is still clearly up.

Commodities

We have been writing recently about our expectation for increased volatility in the metals markets and we have seen further volatility this week, albeit less than the two prior weeks. Both gold and silver have been unable to clear key resistance levels and the trend remains down. If resistance holds we may yet see a push lower to new lows for the current move.

The grains markets have been mostly higher this week but overall the trend remains down across the sector with the exception of Oats. Our proprietary trend analysis still points to lower prices in 2013 and in some cases significantly lower prices, more than exceeding the 2012 lows. For now we have to wait for price action to confirm and then jump on board for the resultant downtrend once it gets underway.

Coffee had a decent 2 day rally but we still have a bear market set up of lower lows and lower highs and we may yet see this market turn lower once more and make new lows for the year. Feeder cattle made a nice decisive move to the downside following the roll to the August contract and we now look for a further decline to test the April lows.

The energy sector had a very bullish week, which postpones the bearish outlook for the near term. Longer term the trend is still down for the sector with the exception being natural gas.

Currencies

The dollar has had a mixed week, with the dollar index falling below key support at 8178 but then putting in quite a decent reversal. This suggests that last week’s low, which also correlated with a bounce from the 200 day moving average, may be the bottom for the time being and potentially the beginnings of a new uptrend which may test the April high at 8366 and further out a test of the 2012 high at 8481.

Last week we wrote that GBP/USD may press slightly higher to the 50% retracement levels before resuming the longer term downtrend. The pound did narrowly exceed the 50% retracement level but failed to push on further. If last week’s highs can be cleared, a further advance towards $1.5750 may follow but this will not likely happen if the dollar strengthens elsewhere and weakness in the direction of the long term downtrend appears more likely.

The dollar continues to flirt with parity against the Yen and the latter part of the week saw a decent bullish recovery following earlier weakness. This momentum suggests another test of parity near term but whether there is sufficient momentum to finally break through remains to be seen. A sold break above 100 should lead to a move higher to around 105.

Interest rate futures

The trend remains up for interest rates but having pushed to new highs, a sharp reversal was seen on Friday. The selling on Friday was so extreme that the price action engulfed prices for the prior 8 trading days. Such extreme selling is normally an indication of a reversal so we may see lower prices near term. Longer term the uptrend is still intact.

Good trading

Phil Seaton

Weekly Update 28th April 2013 – LS Trader

As April moves into the last two trading days, many will be contemplating the old adage of sell in May and go away. On a seasonal basis, the best six months of the year for stocks end on Tuesday 30th. However, seasonal tendencies are just that, tendencies, and they are far from reliable. Of far more import is the technical set up, and to a lesser extent, extreme levels of bullish sentiment, which still remain in play. Extreme levels of sentiment often compliment key market turning points so although the technical picture is still bullish for stocks, a reversal cannot be ruled out.

Based on LS Trader’s proprietary trend analysis, the long term trends are still up for stocks, bonds and the dollar and down for commodities.

Stocks

The S&P 500 continued higher this week with the key factor in this market being that key support is still holding. As long as the key support level holds then we must favour the bullish scenario and a push to new all time highs. However, should support fail then the bullish scenario could quickly unravel with a swift move back to 1477 basis the June contract.

The Nikkei reached our upside target of 14000 but has run into resistance. A bearish engulfing pattern was printed on the daily charts on Friday. This 14000 level, which is psychological round number resistance, is now key to this market. The reason this level is significant is that the Nikkei is very highly correlated with they Yen, and the Yen is also struggling to hold parity with the US dollar. Basis the June contract, USD/JPY reached 9993 and has since failed to clear parity in several attempts. In line with the Nikkei, USD/JPY was lower on Friday. If USD/JPY can clear 100 then this would be bullish for the Nikkei as a weaker Yen is bullish for Japanese stocks. However, if 100 holds then both markets will likely move lower in tandem. The trends for the Nikkei and USD/JPY have both been profitable for the LS Trader system, and the system continues to ride these trends at present and will continue to do so until support is breached.

Commodities

Last week we wrote that a bounce and increased volatility can be expected in the metals and that the trends were down. This week we did see a large bounce in the metals but nowhere near sufficient to change the long term trend, which still remains firmly down. Gold ended the week higher by 4.16% and in spite of the rally from the lows posted on the 16th April, which has been impressive, lower prices may yet follow. If the bearish scenario is still playing out and a move to new lows is on the cards, then gold will need to push lower almost immediately next week, otherwise a continued rally to test the underside of the support shelf that held this market up for so long may be tested.

Silver’s 2-week rally has been less impressive than gold and the downtrend remains firmly intact for now, although if gold does continue higher then we can expect higher silver prices too. Copper prices did narrowly fall to new lows for the current move and the LS Trader system remains bearish the sector.

Currencies

The dollar index has sold off during the past 3 days in a counter trend move and may continue a bit lower near term. However, the uptrend remains intact as long as 8178 holds on the June contract. Things are amiss for the dollar below that level.

The surprise move for the week came from GBP/USD, which put in a decent rally that took cable above the 38.2% retracement of the decline from the start of the year. However, this move was not confirmed by the Euro or the Swiss franc, so may be short lived. Possibly a continuation slightly higher from here to the 50% retracement levels before a resumption of the longer term downtrend.

The U.S dollar did have another go at parity against the Yen, with Monday posting a high at 9987. However, once more this key level held firm and the longer it does so the more likely the market is to reverse. As written previously this level represents the 50% retracement area of the decline from 2007 on USD/JPY as well as the psychological parity level, so we can continue to expect strong resistance, and possibly a pull back.

Interest rate futures

The long bond advanced by 0.51% for the week and as we wrote last week may now target the 150-153 area. The 5-year note still looks as though it has further room to the upside and may yet reach 125, although the trend is clearly mature. The trend for the sector remains up.

Good trading

Phil Seaton

P.S. Take the LS Trader system for a 30 day test drive by clicking here

Weekly Update 22nd April 2013 – LS Trader

Stocks saw some selling this week, which is in line with our recent comments about sentiment levels being so high that a correction at a minimum was due. As April moves into the last few trading days, many will be contemplating the old adage of sell in May and go away. This may prove to be an excellent strategy this year as far as stock indices are concerned. Commercial funds remain heavily net short of the S&P 500 so it is likely that there will be a lid on further advances. A resumption of the long term dollar uptrend may also begin to pressure stocks and further pressure commodities. The coming weeks are likely to present more short selling than buying opportunities in most markets.

The commodity bear market has continued with heavy selling seen in metals and energies. The long term trends are mostly down for commodities, but are still up for stocks and the dollar.

Stocks

The S&P 500 has just narrowly held on to key support, forming a bull sash pattern on Friday’s daily chart. Contrary to popular opinion about candlestick patterns, the best signals come from failed candlestick patterns, so a close below Thursday’s low, which would also take out support, would be bearish and suggest further selling back to 1477 basis the June contract.

The Dax continues to lag and may be the first of the indices that we trade at LS Trader to complete a change of trend to down. The Nikkei continues to advance and this week reached its highest level since August 2008, following a weekly advance of 1.60%. The upside target for the Nikkei remains at 14000.

Commodities

We have been writing about the bear case for metals for quite a few weeks and recent price action has confirmed that view. Last week we were looking for 1425 on gold and 2400 on silver. The markets reached and sailed past those levels in the heaviest selling seen in decades. There is little doubt that the markets are now beginning to price in deflation instead of the commonly held, and erroneous in our view, expectation of inflation. Both of these markets are oversold, but as we have said many times before, markets can remain oversold for longer than people can imagine possible. That said, a bounce and increased volatility can be expected but the trends remain down and lower prices could yet be seen.

We also wrote last week that further weakness in the energy sector could be expected and we have also seen that, although the selling was steep, it was not quite of the magnitude seen in silver and gold. Commodity markets are beginning to echo 2008 and we should see substantially lower commodity prices for most of 2013.

Currencies

The dollar index pressed lower this week but has since recovered. The long term trend remains up for the index as indeed it does for the dollar against several of the majors. The dollar index should now push higher once more towards the highs of the year, especially should last week’s lows hold firm.

A dollar rally against the majors is looking imminent, especially should support levels be taken out this week. The pound in particular looks set for further declines and new lows for the year could be seen in the next few weeks.

The U.S dollar has had another good week against the Yen and once more a test of parity looks to be on the cards. As written previously this level represents the 50% retracement area of the decline from 2007 as well as the psychological parity level, so we can expect strong resistance, and possibly a pull back. However, should parity be exceeded, don’t rule out a continuation higher.

Interest rate futures

Interest rate futures have been relatively flat, but the long bond led to way this week with a 0.40% advance. There is a good possibility that we will see yields falling to record lows and new all time high prices in the sector and the long bond may now target the 150-153 area. The long term trends are up.

Good trading

Phil Seaton

Weekly Update 14th April 2013 – LS Trader

Stocks rose to new all time highs as optimism continues to rise. According to polls in America run by CNN, Americans have not been so optimistic since January 2007, just before the financial meltdown. Typically when optimism reaches such extremes, the end of a trend is near simply because everyone who wants to buy is already in the market and there are few new buyers left to push the markets higher. Additionally, according to COT data (commitment of traders) commercial funds are near record short positions still. However, the flip side of all of this is that hedge funds are at record long positions, so there is a huge fight underway in stock indices and soon one side or the other will give way.

Commodities have been mostly bearish and look to be continuing the long term bear market and the dollar has been weak for the past week.

Stocks

In last week’s LS Trader update we wrote: “The rejection of the lows on Friday led to the formation of a hammer on the daily charts, which is bullish and also confirms the support area around 1540.” The market never looked back from that level and the S&P 500 cash finally pushed to new all time highs and having reached new highs, accelerated higher, almost reaching the psychological 1600 level. The cash S&P 500 stalled at 1597.35 and then pulled back to Friday’s close. Basis the cash index, the prior highs at 1576 may now form support with that level being the top of a support zone between 1576 and 1538. Should the market fall below 1538, a sharp sell off back to 1477 as a minimum may follow. For now the trends are clearly up for U.S. stocks, which are undoubtedly in a bull market.

Global stock indices such as the Nikkei and the Dax also remain in uptrends but the Dax is lagging. The Nikkei continues to advance and this week reached its highest level since August 2008. The next upside target if the bull run continues will be the 14000 area.

Commodities

In recent weeks we have been writing about the bear case for gold and silver and have written extensively about a likely test of a critical support level in both markets, which was 2628 on silver and 1527 on gold. Both those levels were tested and broken this week with heavy selling being seen especially on Friday. We now look lower towards 1425 on Gold and 2400 on silver. The long term trends are very much down for the sector with only palladium remaining in an uptrend.

The metals were not the only commodities under pressure as the past week has also been bearish for the energy sector. Steep sell-offs were seen in all the energy markets with the exception of natural gas, which is now the only market in the sector still in a long term uptrend. Further weakness in this sector can be expected.

Currencies

The dollar has declined almost across the board this week and the dollar index tested support twice. Due to the proximity of the index to support it is very likely that support will be tested and possibly broken this week, bringing a pause to the long term uptrend for the index.

In spite of recent dollar strength, the Euro just narrowly held on to the long term uptrend, although a change of trend to down is very much within range in the near term. If the Euro can clear resistance from last week’s highs, which is also the area of the 38.2% retracement of the decline from January, we may see a continuation higher to the $1.33-1.34 area.

The U.S dollar’s sole advance came against the Yen, where the dollar pushed up almost to parity but did reach 4 year highs. Whether this level, which is also the 50% retracement area of the decline from 2007 proves too much at this juncture remains to be seen. We may see some weakness over the coming weeks before the longer term trend resumes with potential over the coming months for the dollar to push much higher.

Interest rate futures

The interest rate futures sector was marginally lower this week but the markets recovered well from lower prices seen mid week. The long bond may now continue higher towards the November highs and the 150 area, while the shorter term markets remain close to all time highs. The trend is still up and we may yet see higher prices and yields falling to record lows.

Good trading

Phil Seaton

Weekly Update 7th April 2013 – LS Trader

Stocks initially rose to new highs for the current move but then backed off. Stocks remain at a critical juncture as we covered in last week’s update and the prospect for a large move one way or the other seems increasingly likely, especially if the markets break to the downside.

Commodities have been mostly bearish and look to be continuing the long term bear market, and currencies have been mixed. Interesting times and plenty of good trading opportunities lie ahead.

Stocks

The S&P 500 cash came within 3 points of an all time high but then backed off before finding support just below 1540. The index therefore still remains below the all time intra-day high basis the cash S&P 500 at 1576.09 reached on 11 October 2007. Whether we see new all time highs still remains to be seen. The rejection of the lows on Friday led to the formation of a hammer on the daily charts, which is bullish and also confirms the support area around 1540. However, should that support area be breached we may see a sharp sell off back to the 1477 area of the February low.

Commodities

Gold ended lower for the week but has recovered since falling below the February low mid-week. This recovery is in the formation of a morning star pattern, which is a bullish reversal pattern, but the trend is still very much down. Resistance for June gold remains in place around $1620 and the market is short term bearish below that level. Silver followed a similar path to gold, but was more bearish, ending the week lower by 3.89%. Silver also fell below the February lows that we have written about for the past few weeks, and unlike gold, closed below them. This may lead to a test of the June lows around 2628. Last week’s lows now become critical support for both of these markets, and should those support levels be broken, we may see an acceleration to the downside.

Most commodities had a bearish week and crude was no exception. The long term trend for crude oil has been down for quite some time and the market was unable to complete a change of trend this week and subsequently had a bearish week as did all markets in the energy sector with the exception of natural gas.

Grains in particular had a bearish week. Regular readers will know that the LS Trader system is bearish on grains and our long term trend analysis calls for lower grains prices in 2013 that should completely erase the bull market from last year. This projection remains on track and we may see further declines in the week ahead.

Currencies

The dollar has had quite a volatile week and in particular the dollar index has been quite volatile. Thursday saw the index push to a new high for the current move, only for the market to more than erase those gains on Friday and fall to almost a 2 week low. This reversal may now pressure the market further in the short term, but long term the trend remains up. Should the index be able to clear last week’s high in the coming week, we will likely see an immediate resumption of the long term uptrend.

The Euro fell to new lows for the current move but quickly recovered and went on a 3 day rally. The Euro has so far failed to generate sufficient weakness for a change of trend to down, so the long term uptrend remains in place. We may now see the uptrend resume and we may see a continuation higher to around $1.3360.

Interest rate futures

In last week’s update on the 30 year T bond we wrote “This makes Monday’s trading key for this market as a move lower would confirm the resistance level, but a break may lead to a continuation higher over the coming weeks.” Monday was a bullish day for the long term bonds and the week culminated with a decent 3 day rally that has taken the market to its highest level in 16 weeks. The long bond may now continue higher towards the November highs and the 150 area.

The 5 and 10 year notes also had bullish weeks, with the former pushing to new all time highs. The long term trends are mostly up for this sector.

Good trading

Phil Seaton

Weekly Update 30th March 2013 – LS Trader

Stocks have continued to edge higher during a week that has seen relatively little volatility in the currency markets, which have mostly traded sideways. The big price moves this week have come from the commodity sector, in particular the grains markets, which have continued their long term bear market trend with sharp selling on Thursday. This is very much in line with LS Trader’s proprietary trend analysis, which continues to look for lower grains prices in 2013.

Monday is a Bank Holiday in the UK, but US markets are open as normal so we should see a return to more normal trading following a quite week this week.

Stocks

The S&P 500 hit a new all time closing high this week but still remains below the all time intra-day high basis the cash S&P 500 at 1576.09 reached on 11 October 2007. We may well see that level tested this week as the markets are typically bullish following a long holiday weekend.

The Nasdaq 100 remains just below the 2815 resistance level on the June contract, and that level will likely be tested this week. Our highly profitable Nikkei trade continues to run, but as per the US indices that we trade at LS Trader, the range remains tight.

One thing that is of importance is the near record short position that has built up by commercial funds as reported in last weeks COT (Commitment of Traders) report. Commercial funds moved to within 1% of their record net short position. At the same time, hedge funds have reached a record net long position. With both major players at such extremes, a big move is in the offing and it could go either way. This battle between commercials and hedgers probably explains the tight range seen in stocks and suggests that a break of the range, either up or down could trigger a large move. In 2007, commercial selling began a month ahead of the 2007 top and we all know what happened then. If selling breaks through support, watch out below.

Commodities

Resistance for June gold remains in place around $1620 and the market is short term bearish below that level. Critical support remains in place at the February low. Silver has edged lower and is approaching critical support likely ahead of gold. The February lows remain the key levels to watch for both markets.

Last week we wrote on U.S crude: “Friday saw a bullish engulfing pattern printed on the daily charts which suggests upside momentum may continue next week and that we may see a test of $95 on the May contract.” The 200 day moving average appears to have provided support once again for crude and this led to a bullish week and a gain of 3.76%. The $100 barrel level is once again in range, as is a change of trend to up.

Currencies

In last week’s update we wrote that critical resistance on the June dollar index at 83.42 needed to be cleared in short order for the uptrend to continue near term. Initially we saw the index move lower but it did regain and go on to exceed the resistance level, posting a new high for the current move at 83.52. That level now is the new resistance level that needs to be cleared to keep the dollar bull trend intact. For now the long-term trend is up.

The Euro fell to its lowest level since November and may be heading lower for a test of critical support at $1.27 basis the June contract. If that level can be taken out, an extended decline towards $1.21 may follow over the coming months. A move such as this will not unfold in a straight line and there will be some corrections along the way. The trend for the long term looks lower.

Interest rate futures

Interest rate futures shot higher this week for a third straight week. As was the case last week, the long term trend is still up for Eurodollars and 5 year T-notes, but remains down for the 10 year and 30 year markets. The 30 year T Bonds reached a critical resistance level on Thursday and then edged lower, forming a spinning top on the daily charts. This makes Monday’s trading key for this market as a move lower would confirm the resistance level, but a break may lead to a continuation higher over the coming weeks.

Good trading

Phil Seaton

Weekly Update 24th March 2013 – LS Trader

The past week has seen stocks unable to reach new all time highs and has also seen some further dollar weakness. Commodities have remained mixed, but are mostly trending lower as before. The long term trends still remain intact, which are currently up for stocks and the dollar and mostly down for commodities.

Stocks

The S&P 500 fell short of hitting all time highs once again and as we wrote in last week’s update, this continues to be bearish divergence from the Dow, which has hit all time highs recently and basis the June futures contract, came within 5 ticks of doing so again this week. Basis the cash S&P 500, the market is some 20 points away from all time highs of 1576.09 on 11 October 2007. It still remains unclear as to whether we will see those all time highs reached in this market.

The all time highs on the Dow have also been unconfirmed by the Nasdaq 100, which is obviously a long way from all time highs, but the Nasdaq also remains below its 2012 high. 2815 on the June contract remains the key resistance level on this market.

The Nikkei hit new 4 ½ year highs this week but ended the week up by just 0.08% following a decline late in the week. The long term trend is still very much up and this will continue to be the case for the foreseeable future, due to the extent and duration of the recent rise, which as we wrote about last week has so far generated in excess of 3150 spread betting points profit for the LS Trader system, and the trade is still in progress.

Commodities

Gold and silver are historically highly correlated so when we see moves such as we have in the past week where gold has risen and silver has declined, this usually precedes a trend reversal. The divergence between these 2 highly correlated metals will not likely continue for much longer and it could be that the bear sash pattern printed on silver’s daily chart on Friday, may take both metals back down towards the critical support shelf that we wrote about last week. If these markets do head down further towards support, a break of key support could open the door for a larger decline, but if support holds, we may get a further bounce for gold, followed by silver. The longer term trend remains down for both markets.

As we suggested may happen last week, Crude Oil did test and break short term resistance in what was quite a volatile week for the black stuff. The 200 day moving average appears to have provided support and Friday saw a bullish engulfing pattern printed on the daily charts which suggests upside momentum may continue next week and that we may see a test of $95 on the May contract.

The recent highs at 140.30 on orange juice appear to be critical as the market has been unable to clear that level following several attempts. This may pressure the market lower if further attempts fail. Major resistance stands at 144.15, the December 2012 high, which remains for now the upside target.

Last week we wrote about our target of 136.16 on April Feeder cattle and suggested that if that level was reached and subsequently broken, we may see an extended decline. This week saw feeders continue to decline and fall as far as 136.78 so that scenario remains intact.

Coffee also continued lower having resumed the long term downtrend and we still have initial targets at 130, and may see a move as low as 123 further out.

Currencies

The dollar has seen a continuation of short term, counter trend weakness against most of the majors during the past week. Critical resistance at 83.48 on the June dollar index is still holding and that level needs to be cleared in fairly short order for the uptrend to continue in the near term. The longer term uptrend still remains intact for now.

The British pound trend ended this week following a continuation of short term strength in GBP/USD but this was still a nice profitable downtrend, netting the LS Trader system just shy of 600 pips profit.

Interest rate futures

Interest rate futures have edged higher for a second week with only the 3 month Eurodollars ending lower. Eurodollars have been in a long term uptrend for what seems like forever but there are signs that this could be changing soon. This week saw quite a decent uptick in volatility in this market and a fairly decent drop in prices that took the market lower than it has been in 7 weeks.

The long term trend is still up for Eurodollars and 5 year T-notes, but remains down for the 10 year and 30 year markets.

Good trading

Phil Seaton

Weekly Update 17th March 2013 – LS Trader

The LS Trader System has continued with its strong start to the year as for the most part the markets are trending fairly well and this has led to the system reaching new equity highs for the year.

The week has also seen continuing new all time highs for stocks and the dollar has shown a bit of temporary weakness. Commodities have for the most part continued south in line with LS Trader’s expectations and proprietary trend analysis.

Stocks

The stock markets continue to press higher, reaching either new all time highs as in the case of the Dow, new multi-year highs in the Dax and the Nikkei, and closing in on all time highs on the S&P 500. Since the S&P 500 is the real stock index, the failure to so far reach new all time highs is bearish divergence, but since the lag is small and we may see that index catch up and hit all time highs this week, it may not be significant. Basis the cash S&P 500, the all time high was set at 1576.09 on 11 October 2007. Friday’s close was 1560.7.

The Nikkei this week hit its highest level since September 2008 basis the daily continuation chart and remains the most profitable trade of the year to date for the LS Trader system. Since the trade was entered on 21st November 2012, we have banked 485 points profit from December contract, 2360 from the March rollover and currently have 320 points profit from the June contract for a total of 3165 spread betting points profit, making it a very profitable trade indeed.

Commodities

Gold and silver continue to drift sideways in a tight range as they have for the past couple of weeks. As we wrote last week, a critical support shelf is within range for both markets and that will be the critical level for both of these markets during the coming weeks. If support does hold then we may see a decent bounce higher, but a break of key support could open the door for a larger decline. The longer term trend remains down.

US Crude has continued with recent counter trend strength and has managed to push back above the 200 day moving average. The longer term trend remains down but resistance may be tested this week.

Orange juice had another bullish week, crossing 140 briefly before pulling back slightly into the close. A continuation towards 144.15, the December 2012 high may still follow. That level is critical resistance so if the market can get beyond that, we may see a decent move higher.

Coffee looks set to resume the long term downtrend and we have initial targets at 130 and may further out see a decline to around 123. Feeder cattle, which is another commodity that the LS Trader System is bearish on, may now continue the profitable downtrend towards major support at 136.16, the 2009 low. If support there can be taken out then we may see a very significant downtrend over the coming months.

Currencies

This past week saw quarterly currency expiration as the March contracts rolled forward to June. The week also saw dollar strength continue during the first half of the week, but then sold off on Thursday and Friday across the board.

The dollar index climbed to 8342, just 8 pips shy of our 8350 target but then sold off quite sharply during the past 2 trading days of the week. This for now is just counter trend weakness for the dollar and the longer term uptrend is still intact.

The Euro, which is almost an exact mirror image of the dollar index had fallen to its lowest level since December, but then recovered Thursday and Friday. The trend remains up for the Euro.

The British pound fell to its lowest level since June 2010 but then put in a fairly decent recovery in line with late dollar weakness seen elsewhere. The trend is still very much down for the Pound.

Interest rate futures

Interest rate futures have edged higher once more with the shorter term markets still leading the way. The 5 year T notes and 3 month Eurodollars remain in a long term uptrend but the trend is down for both the 10 year and the 30 year bond.

Good trading

Phil Seaton

Weekly Update 10th March 2013 – LS Trader

The past week has seen the Dow 30 reach a new all time high, completing the recovery from the March 2009 lows. Of import though is the fact that both the S&P 500 and Nasdaq 100 lag behind. Perhaps most interesting is the fact that the dollar has continued to rise along with stocks. Historically, stocks and the dollar are inversely correlated, so the fact that the dollar continues to rise as do stocks, bodes well for further dollar strength, a move that will likely accelerate once stocks start to correct.

Last week we wrote about the break of the downward sloping trendline on the dollar index that has held in place since 2002. This week marks the fifth anniversary of the major dollar index bottom at 70.70. Since then, in spite of huge amounts of stimulus and most commentators expecting inflation and the death of the dollar, the dollar has in fact risen 17%. Based on our analysis, the dollar still has much further to run to the upside.

This coming week sees quarterly stock and forex expiration as the March contracts roll forward to June.

Stocks

As mentioned above, the Dow 30 reached new all time highs this week but the S&P 500 failed to do so in spite of making new highs for the current move. The chart set-ups are obviously still bullish, but further strength will need to be confirmed by the S&P 500 also reaching all time highs. Until that happens, there is a good possibility of a reversal, but for now the trends are clearly up across the sector. Basis the cash S&P 500, the market still has 25 points to advance to the 2007 high.

The Nikkei remains the strongest of the indices that we trade at LS Trader based on the strength of the current move, and this week saw the index rise to its highest level since September 08. Having this week cleared resistance at 12200, the path is now clear for a continuation towards 14000. The Nikkei trade is currently the most profitable trade for the LS Trader system this year, with 2360 spread betting points profit just from the March contract alone. Add to that the 485 points that we banked from the December contract, and we have a total profit of 2845 spread betting points from a single trade since we entered back on the 21st November last year.

Commodities

Gold has drifted sideways in a tight range over the past week, suggesting that a bigger move is just ahead. The critical support shelf is within range and that will be the critical level for this market. If support holds that may lead to a rally higher, but if it fails, a sharp drop may follow. Silver has a similar set up.

US Crude did drop below $90 as we suggested may happen in last week’s update. The market has since rallied and is now testing the 200 day moving average, which may act as resistance. The trend is still down and our targets at $87 remain in place for now.

Orange juice held on to the 120 support area and climbed steadily until Friday’s sharp advance of 6.9% took juice to its highest level this year. The weekly advance of 10.09% is the largest weekly advance in months and keeps the uptrend intact. We may now see a continuation towards 144.15, the December 2012 high. That level is critical resistance.

Currencies

The dollar index completed a fifth straight week of advances and may now continue to the next resistance level around 8350.

The British pound continues to get whipped, this week perhaps critically, closing below $1.50. AS we have written in recent weeks, there is now little in the way of chart support to prevent a decline of several hundred more spread betting points. The pound has now closed lower in 10 of the past 12 weeks.

The USD/JPY took out the recent highs to resume the longer term uptrend. If last week’s highs can be taken out, the next target will be just north of 97 on the way back towards parity further out.

Interest rate futures

It’s been a bearish week for interest rate futures, all of which have ended the week lower by some considerable margin. The 30 year T-Bond printed a huge bearish reversal pattern which took the market to new lows for the current move. The other markets in the sector printed similar price moves but remain slightly stronger than the longer term bond.

Good trading

Phil Seaton

Weekly Update 3rd March 2013 – LS Trader

The LS Trader system has continued its strong start to the year in spite of an increasing level of volatility seen in several markets. There are however a handful of markets that continue to trend well, and these markets are generating more than enough profit to offset the volatile markets.

Two things occurred this week that are of particular interest. Their long term importance will only be known after several more weeks. The first factor came in a market that we don’t trade at LS Trader, but it is nevertheless a major market and one we keep an eye on, the Dow 30. On Monday, the Dow formed a key reversal day that completely engulfed the entire price range of the prior 20 days! I can’t recall a key reversal day engulfing that many prior days’ range, although much of those prior 20 days have seen relatively low volatility. Considering the extent of this reversal, it is perhaps surprising that the Dow recovered so quickly and went on to post new multi-year highs. In the space of just a few days, there is a strong argument for the bull and bear case for stock indices!

The second key event, which is also potentially significant, is the bullish break of a downward sloping trendline on the dollar index that has held in place since 2002. We have written in previous weeks that we expected the dollar to rally in the near term and this adds some fuel to the bullish dollar argument.

Stocks

The S&P 500 has followed a similar price course to the Dow mentioned above, apart from the fact that the key reversal was not so evident. The S&P 500 however has failed to recover to new highs, so that will be the focus point in the coming week.

The Nikkei remains the strongest of the indices that we trade at LS Trader, and this week closed at a new multi-year high. Last week we wrote that a move and close above 11570 would be bullish and that has so far been the case, with the March contract reaching 11715. This has been another extremely profitable trade for the LS Trader system, and it continues to run.

Commodities

Copper completed its change of trend to down as the metals sector continues to be under pressure. However, of perhaps major importance to this sector is the critical support shelf that is within range for both gold and silver.

Brent crude has continued sharply lower following the completion of an evening star pattern on the weekly charts that we wrote about last week. In fact, with the exception of natural gas, the entire sector has taken a bettering over the past 2 weeks. Heating oil in particular has continued its near vertical decline, crossing below the 200 day moving average. A change of trend to down is within range this week. US Light crude (we trade both Brent and US Crude at LS Trader) has also continued its recent weakness, also moving below the 200 day moving average. US Crude has for some time been in a long term downtrend according to LS Trader’s proprietary trend identification and may now head further south towards $87 basis the April contract should $90 support give way.

In last week’s update we wrote that May wheat looked set to trade below $7 a bushel for the first time since June last year, and that did happen. Wheat dipped as low as $6.975 before mounting a small recovery, but the trend is still bearish.

Currencies

The dollar index completed the breakout and change of trend that we suggest may happen last week.

The British pound continues its bear trend, taking out the prior week’s lows as expected. On a closing basis $1.50 is just about holding, but should the market close this week below $1.50, look out below. There is little in the way of chart support to prevent a decline of a further several hundred spread betting points in this market.

The LS Trader system finally exited USD/JPY following a large reversal day on Monday that brought the trend for now to an end. This has been an extremely profitable trade since we entered last year back on the 15th November at 8070 basis the December contract. This single trade banked as impressive 1131 spread betting points profit.

Interest rate futures

Short-term strength has continued in the interest rate futures sector, which appears to have bottomed out around 4 weeks ago, at least for the time being. The shorter term markets have once more been the most bullish in the sector which is as expected, since the shorter term markets never completed a change of trend to down according to LS Trader’s trend analysis. Both the 5-year T notes and 3 month Eurodollars, are within range of their recent highs.

Good trading

Phil Seaton