LS Trader Weekly Update 2nd July 2012

Friday saw some big moves in the markets following events in Europe and some large reversals followed. Up to that point the dollar had been gaining and stocks for the most part had been in retreat. That all changed on Friday as stocks and commodities short higher and the dollar lower. It remains to be seen as to whether this is any more than a one-day move or the beginning of some new trends. The long-term trends are so far unaffected so the odds favour this being just a short-term move but time will tell.

Long-term trends remain mixed for stocks, mostly down for commodities and up for the dollar and bonds.

Stocks

The S&P 500 headed lower initially to support around 1300 and as could be seen by the lower shadows on the daily candles, there was demand around 1300. Friday saw a huge move higher, which took out the rece nt highs and took the market back to resistance at 1360. Friday’s close at 1356.4 on the September contract is a new high close for the current move and that is potentially bullish. 1360 resistance still needs to be cleared. If it can then we may still see a move potentially up to the highs of the year around 1408.

The Nasdaq 100 moved in similar fashion, this time finding support from just over 2500, but falling just short of the recent highs. The target will now be resistance at 2626 on the September contract.

Commodities

Commodities had a highly bullish day on Friday as the dollar collapsed. Metals and energies had big reversal moves, which for most markets were counter to the long-term trend. Gold looked to be heading for the recent lows until Friday’s reversal and may now have another go at the $1640 resistance level. The long-term trend remains down.

Crude advanced 9.36% on Friday having fallen to new 18 month lows on Thursday. Friday’s rally suggests that the downtrend is over for now and that a break of short-term resistance will follow. The long-term trend is still however very much down.

The grains sector had bullish moves, lead by Wheat, which advanced 10.15% for the week, reaching its highest level since September last year. Soybeans also broke out to new highs since 2008, advancing 3.8% for the week. The prior resistance area around 1400 should now provide support.

Currencies

The dollar had been slowing gaining throughout the week until a big reversal on Friday. The dollar index declined 1.51% on Friday and tested the 50-day moving average. The index will likely test key support at 8140 in the coming week. If support there fails the next support level does not come in until 7900.

The Pound had a bullish week, most of the bull move came on Frid ay. The Pound looks set to test the 200 day moving average again this week and the recent highs and just below $1.58. The long-term trend is still up for the Pound, the only market still in an uptrend against the dollar.

The long-term trend is still down on the Euro but Friday’s reversal suggests a test of the 50-day moving average and the recent highs just below $1.28. Overall the long-term trend still favours the dollar.

Interest rate futures

Interest rate futures ended the week pretty flat but had been considerably higher earlier in the week prior to Friday’s sell-off. The long-term trend is still up across the interest rate futures sector and the markets are still holding above short-term support. The 50-day moving average is still in range and is looking like it may be tested. There is good support in the area of the 50-day MA so if the markets do get as low as that a bounce may be expected.

Good Trading

Phil Seaton

LS Trader Weekly Update 25th June 2012

Stocks began the week in bullish fashion but were unable to continue to push higher after initial strength. The dollar saw the inverse of that move and recovered well after initial weakness at the start of the week. The dollar formed a few morning star/evening star reversal patterns which are short-term bullish for the dollar and for the most part the long-term trend still favours the dollar.

Commodities markets remain in a long-term downtrend with energies and metals showing continued weakness.

Stocks

The S&P 500 cleared the 1340 area resistance level and pushed higher initially before running in to resistance around 1360. The index then pushed lower from there and fell back through the prior 1340 resistance level which due to change of polarity should really have acted as support if the market was solid in the short term. This led to a move down to 1317.5 before support was found. The S&P 500 then formed a bullish harami pattern on Friday that suggests that the selling may have run out of momentum. The pre-market futures will give a clearer picture of short-term direction if last week’s lows hold firm. The trend is still up for the S&P 500 and we may yet see a move potentially up to the highs of the year around 1408.

Both the Nasdaq 100 and S&P 500 are still in long-term up-trends. The trend for the Nikkei and Dax is still down, the latter being held down this week by the 50 day moving average.

Commodities

Gold failed once again to clear resistance around $1650 and moved lower. The long-term trend is still down and we may now see a test of the recent lows formed in May at $1529.3 on the August contract. Silver is also approaching a key long-term support level, a break of which may lead to a decent downside move.

US Crude oil fell through support at $81 that we wrote about last week and almost reached our $77 downside target but found some support at $77.56. The trend is still down and $81 may now provide some short-term resistance. Brent Crude has also fallen to 18-month lows as the downtrend for the energy sector continues.

Currencies

It’s been a better week for the dollar following the short-term weakness that has been evident in the couple of prior weeks. This week has seen the dollar index regain the 8200 level having formed a morning star bullish reversal pattern from support at just below 8150. These lows should now provide support and may form a base for the index to move back towards the recent highs at 8400 on the September contract.

Other major currencies have also seen similar reversal patterns, with an evening star forming on the Australian dollar, which took the Aussie back below the 200-day moving average. The long-term trend is still down and last week’s highs should now provide resistance.

The dollar came within a few pips of an upside breakout against the Yen and we may see such a move this week. It seems that the seemingly ever-present threat of the Bank of Japan stepping in to weaken the Yen is supporting the market. The British Pound is also pressing higher against the Yen.

The Euro hit a wall of resistance early in the week and has moved lower during the course of the week and may now move further lower to test the recent lows, the downtrend remaining intact.

Interest rate futures

The long-term trend is still up across the interest rate futures sector and the longer term markets are still holding above short-term support. The 10 year T-note and the 30 year T Bond remain the most bullish but we may see a test of support again this week and a test of the 50 day moving average, which is now coming in to range.
Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 18th June 2012

The past week has seen stock indexes continue to move higher following the bounce from the 200-day moving average seen a couple of weeks or so ago. As was the case during the previous week, the stock index advance has been met with dollar weakness. Some strength in the coming week for U.S stock indexes may see the up-trend resume. Overall the trend for the dollar is up, commodities are still down and stock indexes are mixed.

There are some key events in the week ahead which have the potential to make considerable moves in the markets, such as the outcome of the Greek election and the U.S. Federal (FOMC) meeting on Wednesday.

Stocks

The S&P 500 initially advanced to test the 1340 area that we have been writing about recently as key but was unable to clear it. The index then pulled back but recovered to close the week at the week’s high. This suggests that there may well be sufficient momentum to keep the market moving up through the 1340 level. If the 1340 level can be cleared we may see a move potentially up to the highs of the year around 1408.

A move above the 1340 level on the S&P 500 would be a bullish sign and from a technical perspective the uptrend would be back in progress. Such a move would likely see a move higher for the Nasdaq 100. Both the Nasdaq 100 and S&P 500 are still in long-term up-trends. The trend for the Nikkei and Dax is still down.

Commodities

Gold advanced by 2.31% for the week and may yet reach our target of $1675. The long-term trend is still down.

Crude oil has gone mostly sideways over the past week but is still very much in a long-term downtrend. There are some signs that a short term bottom may be forming around 8100 but some consolidation following the prior sharp decline is not all that unsurprising. If 8100 gives way, the next target is still $77.

The overall trend for commodities is still down with Coffee showing continued weakness. The grains markets were also lower almost across the board. Soybean Meal hit new all time highs but was unable to continue higher and moved back into the range but the trend is still bullish long-term.

Currencies

The dollar index fell through the 8220 level again as the dollar lost ground across the board. This past Friday was quarterly currency expiration so we are now trading the September contracts.

The Euro did clear the prior resistance level that we have been writing about recently but was unable to hold above it. This led to a move lower followed by a recover by the end of the week. The market has now closed with a doji right on the level in question so the Euro can certainly go in either d irection in the short-term.

The British pound, which remains in a long-term uptrend against the dollar broke above the change of polarity resistance level that we have written about previously and may now continue higher towards $1.60.

All the other majors moved higher against the dollar but the long-term trend still favors the dollar against all markets except the Pound. The New Zealand dollar in particular had a good week, advancing by 2.68% and the Aussie also got back above parity with the dollar (the September contract closed at 1.0003) and now looks like it will test the 200 day moving average in the coming week. The long-term trend for both is still down but short-term momentum is up.

Interest rate futures

Interest rate futures were sharply lower on Monday and took out support on the 5 year T-note. The 10 year T note just about held on to support and both markets formed a large hammer pattern on the daily charts, indicating that at least for now the lows are being rejected. The long-term trend is still up across the sector.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 11th June 2012

The past week has seen stock indexes recover some of their recent losses with a bounce from the 200-day moving average. As ever we have seen the inverse of the stock indexes move with declines for the dollar. The long term trends are still mostly intact however, and are still up for the dollar, down for commodities and mixed for stock indexes.This week is triple witching on Friday so stock index futures roll out of June into the September contracts. Forex futures also roll on Friday.

Stocks

The S&P 500 fell to new lows for the current move dipped below the 200 day moving average but then bounced higher and has formed a bullish engulfing pattern on the weekly charts. The long-term trend is still therefore up but only just. A break below last week’s lows would change the trend to down. As for the shorter term, the market is s till below resistance from the change of polarity where prior support becomes resistance so needs to push above the 1340-1345 area that we have been writing about the past few weeks in order to be considered bullish.

The Nasdaq 100 is still the strongest of the major indexes and remains above change of polarity support. It also held above the 200 day moving average and also formed a bullish engulfing pattern on the weekly charts. As with the S&P 500, the Nasdaq also finds itself near change of polarity resistance and that resistance area will need to be taken out if this rally is going to continue.

Commodities

The gold rally stalled before reaching $1675 and the reversal took the yellow metal back below the $1600 level that should have acted as support if the market was strong. This suggests that there may be further weakness ahead and that we may yet see another test of the year’s l ows.

The long-term trend for Silver is still up but only just. However, silver continues to find very good support between 2620 and 2700 as evidence by the series of hammers on the weekly charts where the lows are being rejected. Similar price action can be traced back all the way to October so it is clear that this is a key support zone. As long as this support holds then the up trend is still in place and the outlook remains bullish. A break of that support zone may though open the way to considerable downside. One negative for silver though is failure to clear 3000 and the fact that prior resistance did not act as support around 2900. As with gold, this is not normally indicative of a solid market. If either of these markets were solid in the short-term both of those levels should have held.

Crude oil managed a small advance this week, ending the week higher by 1.05% but the trend is still very much down. The past week was in fact the first up week in 6 but it was far from convincing. The longer-term target remains around $77 to the downside.

Currencies

The dollar index fell to just below our 8220 support level before moving higher and recovering some of the week’s losses. The trend is still up and the market has closed back above 8220, ending the week at 8256. Last week’s lows will now be the new support area and the trend remains up as long as those levels hold.

The British Pound just about held on to the long-term uptrend but the shorter-term trend is still down. The prior support level acted as resistance around $1.56 and pushed the Pound lower from there. The range is now between last week’s highs and the lows of the current move. A break of either level could be good for a decent move in the direction of the breakout.

The Euro had similar price action to the Pound and also stalled at a prior change of polarity and has moved low er since. The long-term downtrend is still intact and the targets remain at 12100 and further out as low as 11800.

Interest rate futures

Interest rate futures ended the week lower across the board for the longer-term markets. The weekly charts show dark cloud cover patterns on the 30-year T-bond and the 5 & 10 year T notes. These are bearish reversal patterns and suggest further short-term weakness ahead. However, the long-term trends are still up for the sector and the markets are holding above support. As long as this remains the case, interest rate futures should be considered bullish.t

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 4th June 2012

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

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

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

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

Stocks

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

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

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

Commodities

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

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

Currencies

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

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

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

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

Interest rate futures

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

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 28th May 2012

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

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

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

Stocks

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

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

Commodities

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

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

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

Currencies

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

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

Interest rate futures

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

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

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

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 21st May 2012

Stocks have continued their recent decline and this week has seen some sharp moves lower. The long-term trend for stocks is still up but that may not continue for much longer if this weakness persists. Stock weakness has as ever been met with demand for the dollar, which continues to rise. Commodities overall have continued to suffer although there have been some exceptions, the trends are mostly down for commodities.

Stocks

Last week we wrote: “The S&P 500 broke out of the box range with a break of support at 1350. This pattern would point to a move lower towards 1290 but first key support at 1340 needs to be taken out.” 1340 support gave way on Monday and there was no looking back as the S&P fell to 1289.9 just as we said it might. Due to change of polarity, 1340 should now act as resistance and may help to pressure t he market lower should any rally attempts reach that high and fail. The trend still remains up for the S&P 500 in the long term but that may change. The 200-day moving average at 1265 remains a very viable downside target.

Of all the indexes that we trade at LS Trader, only the Nikkei is below the 200 day moving average. The Dax has tested it this week and has so far bounced off it, but it remains a target for both the Nasdaq 100 and the S&P 500. If all the indexes move below the 200 MA we may see considerably more selling.

One thing to note is that the VIX is on the rise having made an upside breakout this week and has reached its highest level this year. This is an indication the fear is returning to the stock markets and that people are paying larger premiums to protect their stock portfolios from downside risk. The 30 level has been quite an important level for the VIX over the past couple of years and that may be where we are heading next. If the V IX does reach 30, stocks will be lower.

Commodities

For the past few weeks we have been writing about our downside target of $1528.6 for June Gold. This level was reached this week and it has been met with buying. A fairly decent rally has followed from there but how much further the rally can continue for remains to be seen. The long-term trend is still down and the market continues to form lower highs and lower lows. Clearly last week’s lows are now key support as they match up with the late December lows and will be needed to be taken out for the downtrend to continue. If support here can be cleared the next downside target would be $1494.

Crude was sharply lower this past week, ending with a weekly decline of 4.86% and easily falling through our target of $93.50. The next target will be $90 and subsequently $85 if $90 fails to hold. The trend is down for Crude as it is also for Heati ng Oil. Only No leaded gas is still in a long-term uptrend but that may also change in the not too distant future.

Currencies

We wrote last week “the Euro had made a downside break from a descending triangle so we can take the height of that triangle and subtract from $1.30 to give a target of around $1.26, or more accurately $1.2640, which are the lows of the year.” The Euro fell to within 4 ticks of this target at 12644 and as expected support has so far come in. This led to the formation of a bullish engulfing pattern on Friday, confirming support from the prior lows back in January. However, the trend is still very much down and should the Euro rally from here it is likely to meet very stiff resistance at the prior support zone between $1.2975 and $1.3000.

The commodity based currencies continue to take a heavy hit and even the Canadian dollar, the strongest of the 3 commodity based currencies ended lower by 2.11% for the week. This brings a long-term change of trend to up for USD/CAD into range. This past week saw the Aussie dollar give a confirmed change of trend to down and the 9600 level will be the next downside target.

Interest rate futures

The trend for interest rate futures continues to be up but there are signs once again that the markets may be reluctant to push much higher from here. The 5-year T-note formed a dark cloud cover and was subsequently followed by a couple of doji, so indecision is certainly present at current levels. A close below the prior resistance levels, which should now be providing support due to change of polarity, would be short-term bearish and may lead to a correction. The 10-year T-note is holding up better than the 5-year, and the 30-year T-bond also had a strong week but both have a hanging man pattern formation on Friday’s daily chart . This is potentially a short-term bearish reversal, which would be confirmed by a close below the low of the hanging man patterns.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 14th May 2012

Stocks have continued the seasonal May weakness and only the Dax has managed a small gain from the stock indexes that we trade at LS Trader this past week. All the indexes are now some way below their 50-day moving averages but the long-term trend is still up.

The dollar continued recent strength and advanced across the board taking out some key levels in the process. The dollar index now looks poised for a breakout higher and this may lead to continued weakness for commodities and further pressure stocks. The long-term trends are now mainly down for the commodities markets with only few exceptions but still remain up for stocks.

Stocks

The S&P 500 broke out of the box range with a break of support at 1350. This pattern would point to a move lower towards 1290 but first key support at 1340 needs to be taken out. 1340 is significant as it was a prior resistance level from the highs of 2011, formed almost a year ago. This resistance level is clearly visible on the weekly chart, and due to change of polarity, prior resistance becomes support. It is interesting to note that this level was respected this week with the low of the week being at 1339.5 before closing higher at 1350. For now though the long-term trend is still up.

The Dax has been the most bullish index of the week, being the only index to manage a gain. Following a sharply lower open on Monday, strong buying ensued during the day, forming a meeting lines pattern. The Dax was able to hold support from the lows of the week and end ahead by 0.30%. This suggests good support at last week’s lows around 6370. As with the S&P 500, the Dax has a change of polarity from last year’s highs at 6471, so the attempt to move below that level was rejected.

The Nasdaq 100 did move below 2625 but held up just above the 2575 lev el that we wrote about last week. The trend remains up.

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

Commodities

Last week we wrote on Gold “A test of the April lows at $1613 looks likely and if that support level fails then a move to the year’s lows at $1528.6 would become the target.” Gold sailed through $1613 support and ended the week down by 3.72% for the week before closing out at $1584. The year’s lows as $1528.6 may now be the next destination is there is not much in the way of support between here and the current price.

Crude did test and move below the 200-day moving average and also got a bounce higher before moving lower once again. This bounce was not all that surprising considering the extent of the decline in such a short period but the trend is now down and if last week’s lows can be taken out the next target will be circa $93.50.

Overall commodities are heading lower at present.

Currencies

We wrote last week that a few key support and resistance areas would likely be tested in the week ahead and that is what happened. As we have been writing of late, no support level was more important than the $1.30 level on the Euro and that gave way. That also meant that the Euro had made a downside break from a descending triangle so we can take the height of that triangle and subtract from $1.30 to give a targ et of around $1.26, or more accurately $1.2640, which are the lows of the year.

The dollar was higher across the board and this has led to the dollar index moving right to the top of the recent range with a breakout likely in the week ahead. Such a move would likely lead to continuing gains for the dollar against the major currencies and would put stocks and commodities under further pressure.

The commodity based currencies continue to be hit as a move back towards the risk-off trade has been evident, hence the move out of the riskier currencies and into the U.S dollar.

Interest rate futures

Interest rate futures were higher for the week with the exception of the 3-month Eurodollar. The 5 & 10 year T notes both reached record highs and the laggard of the longer-term markets, the 30-year T Bond also pressed higher. There are signs however of waning momentum and higher prices ar e being rejected intra-day as seen by the long upper shadows. The trend remains up but the upside may be limited, especially for the 30 year Bond.

Good Trading

Phil Seaton

LS Trader Weekly Update – Monday 7th May 2012

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

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

Stocks

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

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

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

Commodities

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

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

Currencies

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

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

Interest rate futures

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

Good Trading

Phil Seaton
www.LSTrader.co.uk

LS Trader Weekly Update – Monday 30th April 2012

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

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

Stocks

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

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

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

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

Commodities

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

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

Currencies

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

Interest rate futures

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

Good Trading

Phil Seaton