LS Trader Weekly Update – Monday 18th July 2011

Volatility has continued to be the order of the day across most market sectors as indecision remains rife amongst traders and investors. The long-term trends remain mixed and sustained trends are lacking in most markets, although there are a few exceptions.

Stocks

The indecision has remained present in stocks but overall indexes are lower over the past week. The long term trend still remains up for the S&P 500 and the Germax Dax but the trend in the other major indexes are down.

The S&P 500 ended the week considerably lower than it began, but had also been lower during the week. Long lower shadows on the daily charts show lower prices being rejected and for now the long term trend remains up. Support remains in place around the 1290 to 1300 area and we may see a move higher towards 1340 if support holds but a bre ak of that support area will likely point to lower prices.

Commodities

Crude once again was unable to clear the $100 level and resistance from the $100 level and the prior week’s bearish engulfing pattern kept a lid on gains for Crude although this will likely change should crude be able to regain and close above $100.

Last week on gold we wrote: “We may now see a test of $1560 resistance, a level that will likely determine near-time price action for the yellow metal. Much may depend on the US dollar, but a break above $1560 may lead to another go at all time highs.” Gold did indeed test and clear $1560 resistance before going on to make new all time highs. Silver also followed gold’s lead higher, breaking out of the recent consolidation to the upside.

Big mover of the week was Cotton, which shed 12.66% for the week and closed below the 100 level for the first time since early Jan uary. The decent for Cotton has been as rapid as the rise and cotton has now fallen for the past 6 weeks consecutively. This may lead to some sideways action and consolidation before the downtrend resumes. The next major support point comes in around 80, although a second consecutive close below 100 would be ideal for that scenario.

Currencies

The dollar index ended the week higher having bounced off short-term support around 7440. For the most part the index has been moving sideways and is currently in a short-term range between approximately 7450 and 7650. The wider range spans form 7330 to 7700.

The Euro broke out of the triangle formation that we wrote about last week to the downside and having fallen to it’s lowest level in several weeks and falling through good support mounted a decent recovery and took that market back to within the range. We may yet see a decline towards $1.32 an d the declines of early last week gave a clear image of just how fast these markets can fall. The Euro still looks as though it may be forming a large topping pattern with a series of lower highs and lower lows, which is bearish.

The Pound also made a breakout to the downside but mirrored the Euro’s movements and climbed higher by the end of the week.

Interest rate futures

We wrote last week about the dangers of prematurely considering that a trend has changed before getting confirmation of a change of trend and said that even though many are bearish on this sector, prices can still move higher. We saw that again this week with interest rate futures markets moving higher again and resuming the uptrend. As has been the case for some considerable time, the shorter-term markets such as the 5 year and 10 year notes remain stronger that the longer term 30 year bond. The sector as whole remain s in a long term uptrend.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 11th July 2011

The long-term trends are still mixed for stock indexes even though the past week has been quite bullish. Trends are also mixed for commodities and are still down for the dollar. Volatility has been present of late in many markets and sectors but we could be on the verge of some decent breakout moves soon.

Stocks

The indecision that has been present in the stock markets for the past couple of weeks finally broke out into a decent directional move early in the week and the markets continued higher until a disappointing jobs report from the US led to some weakness on Friday.

We wrote last week that the formation on the weekly charts over the past few weeks had been of a quasi morning star pattern and noted that that was a bullish reversal pattern. In addition, the S&P 500 ended the recent run of lower highs, which is an other bullish indication. Friday’s high was right on a resistance level and the market pushed lower but if the market can clear Friday’s high this week we may see another go at the highs of the year.

The Nasdaq 100 had a strong week but stalled just short of the year’s highs having recovered amazingly well from last month’s weakness.

The long-term trend remains up for the S&P 500, as it also does for the German Dax, but all the other indexes that we trade at LS Trader are in a long-term downtrend.

Commodities

Crude ended the week higher but was rejected at just below the $100 level, forming a bearish engulfing pattern on Friday. If resistance at $100 continues to hold we may see a move lower towards support at $90. Heating oil and no leaded gas were considerably higher and no leaded gasoline may continue higher towards the highs of the year.

Gold found support in the $1 470-1480 area and bounced sharply higher, ending a 2-week losing streak. We may now see a test of $1560 resistance, a level that will likely determine near-time price action for the yellow metal. Much may depend on the US dollar, but a break above $1560 may lead to another go at all time highs.

Currencies

The dollar index ended the week higher having bounced off short-term support around 7440. For the most part the index has been moving sideways and is currently in a short-term range between approximately 7450 and 7650. The wider range spans form 7330 to 7700.

The Euro is in a triangle formation, which could eventually lead to a sizeable breakout. For now the long term trend is up but the market is now down towards the bottom of the triangle. When we have a triangle we can take the range from the widest point of the triangle and then add or subtract that from the eventual breakout point for our target. The current range is around 1000 pips so a downside breakout could see a move down to approximately $1.32

Interest rate futures

We wrote last week about the dangers of prematurely considering that a trend has changed before getting confirmation of a change of trend, and right on cue the interest rate futures markets reversed yet again and remain in a long-term up-trend.

As we wrote last week, on a fundamental basis interest rate futures should probably be much lower than they are and that the markets are seemingly completely ignoring fundamentals at present. This is why we rely on the price and price action as our primary indicators as although many are bearish on this sector, prices can still move higher.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 4th July 2011

The coming week will be a shortened trading week due to the July 4th Independence Day holiday in the US.

The past week has seen bullish action from stocks, bucking short-term weakness and a renewal of US dollar weakness. The markets are seemingly trading in a schizophrenic style, with extreme moves in either direction following each other. Long-term direction currently remains unclear for most markets.

The long-term trends are mixed for stock indexes, mixed for commodities but still down for the dollar.

Stocks

We have been writing for the past couple of weeks about indecision in the stock markets, highlighting in particular the doji patterns that had been formed on the last 2 weeks’ weekly charts. A long green candle followed these 2 doji candles, and this is bullish. The formation on the weekly charts over the pa st few weeks is of a quasi morning star pattern, and this is a bullish reversal pattern from the recent lows. We also wrote that the recent lows may provide some support and they did, but few would have foreseen the bullish action from support which blasted straight through 1295 resistance and also took out the recent high, breaking the trend of lower highs.

The long-term trend remains up for the S&P 500, as it also does for the German Dax, but all the other indexes that we trade at LS Trader are in a long term downtrend.

Commodities

After recent weakness, the energy sector had a fairly strong week and Crude snapped a five-week losing streak to bounce higher from support at $90. The other energy markets followed Crude higher.

Gold declined for a second straight week and closed below the $1500 level for the first time in several weeks and the next likely target will be a test o f support around the $1460-1470 area. The long-term trend remains up for now. Silver continues to mirror Gold’s movements and also moved lower.

The grains sector has been mixed, with Corn and Wheat falling like stones but the other markets holding up relatively well. Agricultural markets also remain strong in the short term having recovered much of their recent weakness.

Currencies

The dollar index failed to clear the 7700 resistance level and this failure led to new weakness for the dollar and a fairly decent move to the downside in the direction of the long-term trend. As we have been writing of late, in spite of short-term dollar strength, which has been evident over the past several weeks, the long-term trend has remained down and many currencies have remained above short-term support.

The Swiss Franc pushed to new all time highs early in the week but then came off those highs whereas other major currencies and higher risk currencies have fared well and moved higher having held support.

Interest rate futures

Interest rate futures underwent a steep sell-off almost across the board, with only the short term 3 month Eurodollars holding up reasonably well. The other markets in this sector all sold off sharply bringing an end to the recent bullish run. Due to the duration of the recent uptrend considerable further weakness will be required for a change of long-term trend to down.

It is worth noting though that the dollar has made similar moves over the past few months leading many people to consider that the trend has changed, only for a reversal to occur and the long term trend resume itself once again. This same kind of price action could also occur in the interest rate futures sector. Fundamentally, as we have written before, this sector should probably be much lower than it is but we have seen many times that the markets seemingly completely ignore fundamentals on many occasions and many market participants are unsure of future direction.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 28th June 2011

Stocks managed to rise over the past week albeit in fairly volatile fashion. Early weakness was followed by a mid-week move higher and then weakness to close out the week. Commodities for the most part were lower and the dollar moved higher.

The long term trends are mostly down now for stock indexes, mixed for commodities but still down for the dollar.

Stocks

For the second straight week we have a doji pattern on the weekly S&P 500 chart, which represents indecision. The S&P 500 had moved higher in the week but cam back to close just above the lows of the week. The long term trend remains up for the S&P 500, as it also does for the German Dax, but all the other indexes that we trade at LS Trader are now in a long term downtrend.

As we wrote in last week’s update, the prior week’s lows on the S&P 50 0 September contract may provide some support but if they are taken out then the next target will be the March lows, which currently sit at 1248.5 on the September contract. To the upside there is resistance at 1295.

The Nasdaq 100, Nikkei 225 and Hang Seng all managed gains for the week but the trend remains down and these markets may yet resume the downtrend. 9800 should provide some resistance for the Nikkei, with support around 9300. A break of either of these 2 levels could lead to some movement. Having failed to continue up through 2256, the Nasdaq 100 may target the 2175 support area.

Commodities

We wrote last week about the long term trendline that had been providing support for Gold that was at $1520 as well as further support at 1511 and wrote that a breach of those support levels may lead to a decline towards $1460. Gold did fall through those 2 levels and briefly pierced $150 0 before closing just north of $1500 at $1500.9. Further weakness may be seen this coming week.

Crude ended the week lower by 2.45% but is so far finding support at $90. A break of support here will likely bring further declines to at least $85 with the next support at around $83.50.

There has been general commodity weakness over the past couple of weeks with only a couple of exceptions. Orange Juice has been particularly strong and Sugar has also made a major recovery from the recent steep sell-off. Sugar is still currently in a long term downtrend but that may change soon if short term strength continues sufficiently. Other markets that have seen some renewed strength of late include the agricultural cattle markets. These still remain in a long term downtrend for now.

Currencies

The dollar index pushed higher again in the short term and the focus will still be on the resistance level at 7700. For now the long term trend remains down but this may change over the coming weeks if the dollar continues to rally.

The British Pound in particular is looking weak and may be heading for a test of major support possibly as soon as this week against the US dollar. The pound has also been weak against the Yen. The US dollar has also been gaining strength against the Canadian dollar, which may continue to rise towards parity. The US dollar has not been at parity against the Canadian dollar since March.

Interest rate futures

The long term trend remains bullish across the interest rate futures sector with prices hitting new highs for the year and yields falling to their lowest levels of the year. The longer term 30 year bond is still lagging behind their 2010 highs and it remains to be seen if the longer term market can continue higher to test those highs.

Kind Regards
Robert Stewar

LS Trader Weekly Update – Monday 13th June 2011

Stocks have continued their recent short-term weakness and indexes have been lower across the board this past week. The dollar has also had another bounce higher particularly in the last 3 days of last week. Long term trends are still intact although that may change soon for stocks if we get much further weakness. For now the trends are up for stocks, down for the dollar and commodities remain mixed.

Stocks

As we have been writing of late, the S&P 500 continues to form lower highs and lower lows, which is a bear market set up. The past week was also the sixth straight week of declines. Last week we wrote “We may now see a continuation lower to test 1290. If support there gives way then there is little to stop a decline all the way to the March lows around 1240.” 1290 support was tested and did give way so the March lows wil l be the next downside target.

We also wrote last week about seasonal weakness and that the Nasdaq may decline towards 2250. The declines ended up being steeper than that and the index sailed through 2250, reaching 2217.8 and may now head for the next support area at 2200.

Commodities

Gold moved to $1555 early in the week but has since pulled back to 1529. The long-term trendline that has been supporting Gold is still holding and may provide some support around $1500. We may yet see a continuation higher to test all time highs at $1577.7 on the August contract but that to an extent may depend on what happens to the dollar.

August Crude closed narrowly below the $100 level at $99.85 but is forming an interesting short term pattern with tightening price action. A breakout from this pattern may lead to a decent move in the direction of the breakout.

The daily charts still show a large number of long lower shadows on the daily candles showing support for the market is still in place. These lower levels may be tested this week though. More major support is in around $95.

Currencies

The dollar index had a good bounce during the later half of the week and did not fall as far as the March lows as yet, and last week’s gains brought and end to the prior 3 week losing streak. The long term trend is still very much against the dollar but we may see a bounce higher in the short term. Support for the dollar index is at last week’s lows at just under 7400 and further down at the March lows but bulls (not that there are many at present for the dollar) will be targeting the 7700 area. Sentiment is down to only 6% bullish and may yet fall further towards 3-4% bullish but with the vast majority being bearish another bounce higher may well be on the cards in the not too distant futu re.

As continues to be the case for the past few weeks, both the Swiss Franc and the New Zealand dollar continue to fare better than the other major currencies and both of these markets hit all time highs again this week.

Ben Bernanke this week indicated that there would not be a further round of easing, known as QE3 but if economic data continues to come out as bad as it has of late some further form of easing seems likely.

Interest rate futures

Interest rate futures continue their gradually climb, ending the week marginally higher. Yields remain near their lows of the year and prices stay near their highest level since November. The long-term trend remains up across the sector.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 6th June 2011

The dollar’s recent bounce looks to be over at least for now and long-term weakness is back on track with the dollar being lower against most of the major currencies. Stocks also continue to look weak but the long term trends are still intact and these are currently up for stocks, mixed for commodities and down for the dollar.

Stocks

The S&P 500 began the week well, including a break above the downward sloping trend line that we wrote about last week but then Wednesday saw major selling and this took the market back below the trendline and even below 1300. This was a fifth straight down week for the S&P 500. We wrote last week that the market is forming lower highs and lower lows, which is a bear market set up and that trend has continued this week with stocks beginning to look bearish. We may now see a continuation lower to test 1290. If support there gives way then there is little to stop a decline all the way to the March lows around 1240.

As we also wrote last week, we are now into a seasonally weak period for stocks and June brings an end to the best 8 months of the year for the Nasdaq. So far that seasonal weakness is playing out and we may see the Nasdaq decline further towards 2250.

The long-term trend remains up for all of the indexes that we trade at LS Trader with the exception of the Nikkei, which continues to be the weakest of the indexes and the most likely to give a sell signal.

Commodities

The long-term trendline that has been supporting Gold is still holding and currently dissects the market at around $1500. The past week has seen Gold hit $1550 again and reach its highest level in 4 weeks with the long-term trend remaining up and bullish. If the market can push up above $1550 there is little in the chart to suggest that the market won’t continue higher to test all time highs, currently at $1577.7 on the August contract.

Considering the weakness of the dollar, one would probably expect Crude to be faring better than it currently is. Friday saw the August contract close narrowly above $100. As before, a glance at the daily charts shows a large number of long lower shadows on the daily candles over the past few weeks and this continues to show that support is in for the market around the $96 level. If the market were eventually to break below that level it could lead to strong selling bit for now the trend remains up.

Currencies

A third straight week of declines has been seen for the dollar index and we may now see a move lower to test the March lows. The dollar normally enjoys safe have status and an inverse relationship with stocks so recent stock index declines should in theory have benefited the dollar. However, we have been writing here for quite some time that the dollar is enjoying less of a safe haven status than it used to, primarily because of the increasing awareness of the extreme flaws of the current reserve currency, a status that may be under serious threat over the coming years.

With US debt levels soaring out of control and the US heading for the debt limit threshold they will either have to default on their loans or continue to debase their currency as they have for the past few years. With Friday’s job number coming in well below expectation, QE3 is very much on the cards and this would spell further dollar weakness.

As we have been writing recently, both the Swiss Franc and the New Zealand dollar continue to fare better than the other major currencies with both of these markets hitting all time highs this week. It would appear to be only a matter of time before the other major currencies join the party and resume their long-term up-trends. The only likely spanner in the works for this scenario will be further weakness for stocks, which may lead to some dollar buying.This week is quarterly forex expiration so the June contract rolls forward to September.

Interest rate futures

Interest rate futures continue to climb gradually as yields continue to fall to new lows for the year, leading prices to their highest level since November. The November highs will be the next target for this sector. The long-term trend remains up across the sector.

Kind Regards

Robert Stewart

LS Trader Weekly Update – Monday 30th May 2011

The week ahead is a shortened trading week due to the Bank Holiday in the UK and the Memorial Day Holiday in the US. The coming week promises to be an interesting one as there are a couple of key levels to be tested that could lead to a reaction one way or the other. The dollar has resumed long term weakness and this has been to the benefit of commodities.

Stocks

Typically the 2 days following Memorial Day are quite bullish for stocks. The S&P 500 is heading for fourth test of downward sloping trendline from the highs on the 2nd May. Sloping trendlines are not as reliable as horizontal ones but this is an interesting short-term pattern. If The S&P 500 can break above the trendline then it may continue higher towards the May 2nd highs. Conversely, another failure to break the trendline may lead to aggressive selling. Currently the market is forming lower highs and lower lows, which is a bear market set up but a break above the trendline will break that.

We are however now entering into a seasonally weak period for stocks. June brings an end to the best 8 months of the year for the Nasdaq.

The weakest of the indexes is still the Nikkei and this index remains the most likely to break down first. Last week saw a decline into the support zone between 9335 and 9400 but the lower end of support has so far held firm.

Commodities

The long term trendline that has been supporting Gold of late continues to hold and still applies to the August contract, which we rolled into last week. Gold also pushed through short term resistance at $1526.80 that we wrote about last week and may now continue towards recent all time highs.

Crude continues to hold support around $95 and closed above the $100 level on the August contract after a gain of 0.68% for the week. The long lower shadows on the bottom of several of the daily candles are still in evidence and are also present on the weekly candles. This continues to show that the lower are being rejected and that buyers are returning to the markets at the lower levels just above $95. The long term trend remains up.

Currencies

The recent rally for the dollar appears to have fizzled out, at least for now and the past week saw the dollar index decline.

initially continued higher, moving above 7600 for a second time but once again being unable to stay above that level. If the index can regain and close above 7600 the next target will be resistance from the shooting star pattern formed on 1st April.

We wrote last week that the Swiss Franc and the New Zealand dollar had been holding up better than the other currencies as this continued to be the case over that past week. The Franc continued its recent long-term uptrend against the dollar hit new all time highs on Friday while the New Zealand dollar also continued its recent bullrun and cleared the highs of the year at 8100.

Interest rate futures

The Interest rate futures sector continues to be bullish with yields falling to new lows for the year and prices hitting new highs. The long-term trend remains up across the sector.

Kind Regards

Robert Stewart

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