LS Trader Weekly Update 11th November 2012

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

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

Stocks

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

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

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

Commodities

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

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

Currencies

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

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

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

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

Interest rate futures

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

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update – 4th November 2012

The U.S. Presidential election is just a couple of days away and it looks as though Obama will remain for a second term, although the fight has become a lot closer over the past couple of weeks than expected. Speculation mounts over what the impact on the markets will be depending on the outcome but as we wrote last week, forget guessing and predictions and let the markets tell you where the markets want to go, simply by following the trends.

Stocks

The S&P 500 has had a mixed week but is still holding above our support target of 1380. If 1380 does get tested and gives way, the next likely target would be the 200 day moving average, which currently sits at 1366. If that were also to fail there is a considerable amount of chart space under that level so we could see a move to 1320 further out. However, for now the trend is still up. Whether we have seen the high for the year in this market is a question that remains to be answered, but it is looking increasingly likely.

The Nasdaq 100 has also had a mixed week as it continues to trade around the 200 day moving average. Support is currently in a zone between the 200 day MA and the 2600 level.

The long-term trendline that we wrote about last week has continued to support the Dax, which is the strongest of all the indices that we trade at LS Trader. Whether there is enough strength in this market to test the highs of the year remains to be seen, especially if the other global indices remain weak.

Commodities

Last week we wrote: “The 200-day MA looks like the likely next downside target around $1670”. Friday saw a huge sell-off in Gold as the market shed $42 for the day, taking the market down to $1675, and just above the 200 day moving average. The trend for now is still up but there is undoubtedly weakness in the short-term. Silver also had a weak day on Friday but as with gold, the long-term trend is still up.

Support at the prior week’s lows are still just about holding for Crude but they may be broken early this week to pave the way for a move lower towards $80.

Other commodity markets have been showing signs of weakness as well, with weakness in all markets in the softs section and potential weakness building up in the grains markets. Very few commodities are on the rise at the moment.

Currencies

We may be seeing the very early stages of strength for the US dollar. The dollar index has reached new 2 month highs and may be set to move higher. The biggest market in the basket of currencies that make up the dollar index is the Euro, and as we have covered recently here the Euro is now at a critical juncture. This critical juncture is support at $1.28, which also marks the intervening low, that if broken, would confirm a double top. A break through this potentially critical support level would confirm the double top and give a new downside target of $1.25 on the December contract.

The Japanese Yen has displayed further weakness over the past week against both the Pound and the dollar. Both markets are at resistance levels which if taken out could open the way for extended moves higher.

Interest rate futures

The interest rate futures markets have ended marginally higher and still all remain in a long-term uptrend.

The 30-year T-bond is still in a range between approximately 150 and 146, a range that has held for the past few weeks. If 150 can be taken out then the uptrend may well resume, but a breach of 146 support, which of late has been well supported, would suggest a further decline towards major support.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update – 28th October 2012

The double top on the S&P 500 has continued to exert a downward force on the S&P 500 and the potential double top on the Euro that we have written about previously may be confirmed this week as a test of the key support and intervening low between the two highs looks likely this. The outcome of that may have an impact on where the markets move for the next few weeks at least.

Additionally, the U.S. Presidential election is just over a week away and speculation mounts over who the victor will be and what the impact will be on the markets. My view is as ever the same, forget guessing and predictions and let the market tell you where the markets want to go simply by following the trends. Currently these trends are up for stocks, and mixed for the dollar and commodities.

Stocks

We have written over the past couple of weeks that the double top on the S&P 500 may take the market down to 1380 if support at 1420 was taken out. Support was taken out and the market continued lower before finding new support at 1394. This suggests that there still may be further downside ahead but for now the trend remains up.

The Nasdaq 100 continues to lead the decline and moved below the 200 day moving average as we suggested may happen last week. Friday did see a bit of a recovery and the long-term trend remains up. The shorter-term trend is down.

The Dax fell through support at 7200 early in the week but was able to regain that level on Friday as the index bounced off a long-term upward sloping trendline that has held since late June. The trend is still up for the Dax and it continues to hold up much better than its overseas counterparts. A close below 7200 will likely lead to a test of last week’s lows and a probable drop towards 6900, the next support area.

Commodities

Gold continued its recent decline and fell to $1700 before a minor recovery. This decline took the market to its lowest level in 7 weeks and below the 50 day MA. The 200-day MA looks like the likely next downside target around $1670 but for now the long-term trend is up.

Last week we wrote: “Crude remains range-bound between $94 and $88, with the long-term trend still being down. Since the trend is down, a test of $88 looks more likely, with considerable downside room should support there fail.” As expected $88 was tested and taken out and a move to $85 followed, where support has so far been found. If last week’s lows can be taken out, a move towards $80 looks on the cards.

Currencies

The currency markets have been mixed once again with the dollar advancing against some majors and declining against the others. Overall though the dollar advanced, reflected by a weekly gain of 0.59% for the dollar index, which was heavily influenced by weakness in the Euro. This advance took the index back above 80 to 6 week highs. The trend however is still down.

As covered previously, probably the most important of the forex markets at present is the Euro. A range is still in place between approximately $1.32 and $1.28 and a breakout through either level may lead to a decent move. A break through support, which at this point looks more likely, would confirm a double top and give new downside targets of $1.25 on the December contract.

Interest rate futures

Last week we wrote about the 30-year T-bond and the 3-day morning doji star pattern that had formed, suggesting that the lows of that week may provide support and some bullish momentum. On a closing basis the lows did hold and the bonds pushed higher for the week. Interestingly this week a hammer has formed on the weekly charts so there is definitely good support around 146 in this market, meaning that the uptrend is still in progress.

A change of trend to down is still in range for some markets in the sector but further weakness will be required before the trend changes to down.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update – 21st October 2012

We began last week’s update by talking about the double top that had formed on the S&P 500 and questioning whether that would end up being the high of the year. The market then began the week in bullish mood but that evaporated on Thursday and Friday, as did the week’s gains up to that point. The long-term trends remain up for stock indexes with the exception of the Nikkei, but all indices are looking under pressure in the short-term.

What is of further interest is that a potential double top could be forming in the Euro. It seems therefore that, due to the high correlation seen recently between the Euro and the S&P 500 that we may be on for some decent moves in stocks and currencies, depending on whether these patterns complete or not. For now the trend is still down for the dollar and remains mixed for commodities.

Stocks

As we discussed last week on the S&P 500’s double top, using standard pattern measurements, would project to a decline to around 1380 on the December contract. If the prior week’s lows at just under 1420 can be taken out, that will be a very realistic target.

The Nasdaq 100 remains weaker still and declined by 1.7% for the week, with a test of the 200-day moving average looking likely this week. The 200-day MA currently sits at 2634.

The Dax continues to hold up much better than its overseas counterparts, and even managed to advance for the week. Support around 7200 appears to be the key for this market. If 7200 does fail, a drop to 6900 may follow swiftly. Similarly, new highs for the year are also in range but advances for the Dax may be kept in check by weakness elsewhere.

Commodities

As expected, the uptrend for Gold did come to an end as resistance at $1800 proved to be too much for the yellow metal. The long-term trend however is still very much up.

Natural gas made another new 12 month high, albeit only by a small margin, as it continues to be the leader of the energy sector. No leaded gas and heating oil were both unable to push on, having recently both made new highs for the current move.

Crude remains range-bound between $94 and $88, with the long-term trend still being down. Since the trend is down, a test of $88 looks more likely, with considerable downside room should support there fail.

Currencies

The currency markets have seen a little more activity during the past week even though the dollar index ended the week lower by just 0.07%.

Probably the most relevant of currency markets at present is the Euro, which may be forming a double top as we mentioned above. For now a range is in place between approximately $1.32 and $1.28 and a breakout through either level may lead to a decent move, especially if the break is to the downside, where the potential is there for a drop to around $1.25 on the December contract.

As we wrote last week, the trend remains down for the dollar against virtually all of the majors but how long that continues to be the case for remains to be seen, especially if we have seen a top in stocks.

Interest rate futures

The trend across the interest rate futures sector is still very much up but upside potential still looks limited. This is an idea that seems to be present in this sector as all of the markets ended the week lower in spite of a bullish day on Friday. In the case of the 30 year T-bond, this bullish day on Friday completed a 3-day morning doji star, which is a short-term bullish reversal pattern. Whether the lows seen last week in this sector continue to provide support remains to be seen.

A change of trend to down is in range for some markets in the sector, due to a large extent to the duration of the consolidation seen over the past few months, where even though the markets have tested the highs, they have for the most part moved sideways. The shorter-term trend is beginning to look weak.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update 14th October 2012

October may yet prove to be the undoing of stocks as a double top has formed on the S&P 500, which has led to short term support being broken, culminating in a weekly loss for the index of 2.34%. Whether this ends up being the top for the year remains to be seen but we may see further downside this month. As we have written previously, October has had a tendency to be a jinx month for October with multiple crashes being seen over the past 80 or so years.

Elsewhere has seen minimal activity in the currency markets, which for the most part are consolidating at present. Commodities remain mixed but the trends are still mostly up for stocks and down for the dollar.

Stocks

As mentioned above, the S&P 500 has confirmed a double top pattern by a breach of the intervening low between the two recent highs. Taking standard pattern measurements, this would project to a decline to around 1380 on the December contract, just below the next level of support, so that appears to be a realistic target for the next few weeks.

The Nasdaq 100 was weaker still, declining by 3.36% for the week and also taking out support. Having taken out the 50 day moving average, we may now see a continuation lower towards the 200 day MA.

The Dax continues to find support in the region of the 7200 area, which appears to be the key for this market. If 7200 does fail, a drop to 6900 may follow swiftly.

The VIX remains near its lowest level since 2007, indicating that complacency is still running high in the markets. Going on the basis that the crowd is usually wrong and that the VIX is a contra indicator, we may see a rise in the VIX and a decline in stocks in the not too distant future. Last week’s decline for stocks has so far had little impact on the VIX.

Commodities

December Gold looks as though the $1800 level resistance has proven too much, at least for the near term and short-term support looks likely to be broken in the near term, suggesting an end to the uptrend for now. The long-term trend however is still very much up.

Crude had a strong move this past week, most of which came on Tuesday. The trend is still down. The trend for the other market in the sector is up, with Natural gas having reached a new 12 months high. Is this the start of a new bull market move for Natural gas? No leaded gas and heating oil both made new highs for the current move.

Currencies

The dollar index advanced by 0.39% for the week but it has been an uneventful week for the currency markets, most of which are in sideways consolidations. The trend remains down for the dollar against virtually all of the majors but how long that continues to be the case for remains to be seen, especially if we have seen a top in stocks.

Interest rate futures

The 5 year T-notes continued to pull back from the recent highs but the trend is still up. Faring better in the short term are the 10 year T-notes and the 30 year T-bond. The trend across the sector is still very much up, even though a change of trend to down is in range for some of the sector, due to a large extent to the duration of the consolidation seen over the past few months, where even though the markets have tested the highs, they have for the most part moved sideways. Upside potential continues to be limited for the shorter term markets, but the longer term markets may yet have room to move.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update 7th October 2012

The month of October is underway and so far it has seen stocks rise and the dollar fall. Commodities have been mixed once more. The long-term trends are still up for stocks, down for the dollar and mixed for commodities.

Stocks

The S&P 500 December contract advanced 1.49% for the week, erasing most of the two previous weeks’ losses and coming within a couple of ticks of the highs for the year. Support has therefore continued to hold. Friday’s candle was a doji, which suggest indecision and some resistance, not unsurprisingly at the highs of the year. The index could therefore go either way this week depending on the outcome of a likely test of 1470.

As surprising as it may seem, especially with all the chaos and uncertainty around the globe, a clear break above 1470 may open the way for a move higher towards all time highs. If the S&P 500 can clear 1470, there is little in the chart by way of resistance to stop such a move. Of course, there are many other factors that may get in the way, such as the U.S. Fiscal cliff, but technically speaking it is a possibility.

The Dax opened the week lower but found support around 7200 and has since put in a good recovery and may test the highs of the year in the week ahead.

Commodities

December Gold reached its highest level since March but failed in a test of $1800, which coincides with the March highs. If the yellow metal can clear $1800 there is little in the way of resistance on the chart to suggest that it would not make a move towards last year’s all time highs.

As is the case with several commodities markets, there are long lower shadows on the weekly charts that indicate the lows being rejected. The trend remains up for the yellow metal.

Silver remained flat for the week but had moved around during the course of the week. The weekly charts show three consecutive spinning tops/doji patterns, which suggest that the market is unsure of future direction. A break above the recent consolidation would suggest a move to our next target at 3800 was on the cards.

Last week we wrote on Crude “However, the long-term trend is still down for Crude and we may yet see a move down towards $88”. The low for Crude was $87.80 slightly surpassing our $88 target during the week before a mild recovery. The trend is still down and a test of last week’s lows likely.

Currencies

The dollar index did rise initially last week but then resumed the longer-term downtrend as the dollar resumed recent weakness. The Pound continued to find resistance at $1.63 and was lower during the week before recovering and ending the week flat. If $1.63 can be cleared, the next target would be around $1.67 but for now that resistance level is proving to be a big obstacle.

The dollar did manage to advance against the Japanese Yen, the Aussie and New Zealand dollars but was weaker against most of the other majors. It is now close to a change of trend to down against the Swiss franc.

Interest rate futures

The 5 year T-notes briefly hit new all time highs but were rejected once more as expected, so although the trend is still up, there is undoubtedly resistance at the highs and limited upside potential. All upside moves seen recently are effectively running into brick wall resistance. The trends for now all remain up in this sector.

The 30-year T-bonds remain the weakest market of the sector and will likely be the first to give a confirmed change of trend to down.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update 30th September 2012

Stocks ended the month on a weak note but did manage to advance overall for the seasonally weak month of September. The dollar advanced almost across the board and commodities were mixed.

The long-term trends are still up for stocks, down for the dollar and mixed for commodities.

Stocks

Having survived what is seasonally the worst month of the year on an historical basis, stocks now enter the jinx month of October, so known because of the crashes in 1929,1987, 1997 and the meltdown in 2008 amongst others. Although stocks have managed to advance for the month, the gains came in the first half of the month and the latter half has seen weakness. However, with the exception of the Nikkei, the long-term trends are still up.

The S&P 500 December contract formed a rounded top and ended the week lower by 1.22% but is still just about holding above support and the trend is still up. If support gives way then a drop to 1400 can be expected, and possibly a move to 1390, where good support should be found. The Nasdaq 100 sold off a bit more aggressively, bringing the uptrend to an end for now.

Commodities

Gold closed the week slightly higher and just above the long-term sloping trendline that we wrote about last week that had held since November 11. Gold did initially fall through the trendline so it is now broken and did not provide support, although the market has since moved back above the line. Sloping trendlines are often unreliable, and are much less reliable than horizontal support and resistance lines, primarily because they are not as obvious to most people and the inconsistency with drawing them. As is the case with several commodities markets, there are long lower shadows on the weekly charts that indicate the lows being rejected. The trend remains up for the yellow metal.

Silver has, as usual, had similar price action to gold, where the lows of the week were rejected. The trend is still up and the target remains at 3800.

Crude oil formed a classic hammer pattern on the weekly charts, where having been sharply lower earlier in the week, which included a move below the $90 level for the first time in 8 weeks, saw strong buying and the lows being rejected. However, the long-term trend is still down for Crude and we may yet see a move down towards $88

Currencies

We wrote last week that the dollar index was back to a level that was previously major long-term support. For the downtrend to be good generally that prior support level would have acted as support but the index pushed back above that level and closed above it. This suggests further dollar strength in the near term, even though the long-term trend is still down.

The Pound continued to find resistance at $1.63 and has since headed lower with the uptrend looking like it’s coming to an end, at least for the immediate future. Several other currencies have moved back to the middle of their current trading ranges as the dollar gains some strength in the near term.

Interest rate futures

The long-term trend remains up for the interest rate futures sector and this past week has seen these markets move higher once again, and in the case of the 5-year T notes, test all time highs. The highs of the week, which came on Friday were forcibly rejected with long upper shadows showing on the daily charts, culminating in what’s known as a shooting star pattern, which is a bearish reversal pattern. So, although the trend is still up, there is undoubtedly resistance at the highs and limited upside potential.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update 24th September 2012

Stocks and the dollar ended the week fairly flat as both for the most part remained in relatively tight ranges. Commodities were much more volatile with large moves being seen in several markets, especially the energy sector.

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

Stocks

Stocks ended the week marginally lower at the end of expiration week as September futures rolled in to December. The S&P 500 December contract ended lower by 0.49% for the week but is still clearly in an uptrend. The upside target remains in place at 1500, which would represent new multi-year highs.

The December Nasdaq 100 was slightly more bullish, advancing 0.08% for the week and making new 11 year highs once again. The trend is clearly still bullish. The Dax also advanced to new highs for the year, but the Nikkei, the only index still in a long-term downtrend ended lower. However, the trend for the Nikkei could change to up should new highs for the year be reached.

Commodities

Gold closed the week higher by 0.3% and continues to edge towards our target at $1800. Friday’s close was marginally above a long-term sloping trendline that has held since November 11. That trendline may now provide support and a test of resistance around $1800 now looks likely.

Silver ended the week flat and is consolidating at present. The trend is up and the target remains at 3800.

The grains bull market appears to have come to an end at least for the immediate future. Soybeans ended the week lower by some 6.74%, bringing the current trend to an abrupt end. Soybean meal ended lower by 7.5% for the week as the two best performing markets, both of which have been highly profitable to trade, declined along with other grains markets.

Big moves also were seen in the energy sector as Crude oil ended the week lower by 6.48%. U.S. Crude, the weakest of the energy markets fell through support and now resumes the downtrend. No leaded gas and heating oil were also sharply lower but did recover some of the declines by the end of the week.

Currencies

The dollar index ended a run of 4 losing weeks with a weekly gain of 0.52%. What is important now is that the market has risen back to a level that was previously major long-term support. Often in these circumstances prior support changes polarity to become resistance so it will be interesting to see how the index fares at this level in the week ahead.

The Pound reached our target of $1.63 but has since pulled back slightly, showing that $1.63 is still providing resistance. If that resistance can be cleared, especially on a closing basis then $1.67 will be the next target. The Euro was lower for the week and still remains in a long-term downtrend.

Interest rate futures

The long-term trend remains up for the interest rate futures sector and this past week has seen these markets move higher having sold off quite heavily in recent weeks. The lows from this past week and the prior week now look to be a good support level on the 30 year T-bond so we may see a continuation higher as long as that support area holds. However, if it gives way a change of long-term trend to down is likely.

The shorter term 5 & 10-year T notes are both stronger, with the 5-year notes not far from all time highs and still clearly in an uptrend. However, as we have written many times of late, the risk/reward here is not favourable for long-trades at present.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update 17th September 2012

It’s been another bullish week for stocks following the announcement of QE3 from the Fed. This has been bullish for stocks and commodities but bearish for bonds and the dollar. The long-term trends are now mostly up for stocks and commodities and turning bearish for the dollar.

Stocks

So far September has been another example of how unreliable seasonal tendencies are and why basing trading decisions purely on seasonality is folly. The long-term trends have been up for U.S. stocks for quite some time and have continued to be so over the past 2 weeks which our supposedly bearish.

The S&P 500 continues to look as though it may head higher towards 1500 although there was a shooting star pattern formed on Friday’s daily chart, which is a bearish reversal pattern but that’s not really too unsurprising considering the extent of the recent rally in such a short space of time. It would be a brave and foolish man to try and short this market at present and those that try to pick tops and bottoms usually end up getting hurt in a big way. As ever, the correct approach is to follow the money and simply trade with the trend, the path of least resistance.

The Nasdaq 100 was also in bullish mood once again and reached new highs since 2001. The Dax followed suit and even the Nikkei 225, the only index still in a long-term downtrend of the 4 made a nice advance. The trend is still down for the Nikkei but that may change over the coming weeks if the present bullishness continues.

This Friday is triple witching, so we can expect an increase in volatility as the stock indexes roll out of the September contracts into the December contracts.

Commodities

It’s been another good week for Gold and as we wrote last week, the yellow metal looks set for a test of $1800. If $1800 can be cleared there is little in the way chart wise to prevent a rise back towards all time highs. Silver was also bullish and we remain on track for a test of our longer-term target around 3800.

Brent Crude continued to advance and confirmed a trend change to up. It has however so far been unable to build on that and actually came off the highs of the week into Friday’s close. Heating oil also changed trend to up and now only U.S. crude is in a long-term downtrend in this sector.

Currencies

The dollar index fell 1.74% for the week and fell through the next major support level as the long-term downtrend gets back on track.

The Pound continues with its recent good run and remains on target for a test of $1.63 and further out possibly $1.67. The pound also continued higher against the Yen and may be targeting the 130 level next.

On balance the trend is shifting against the dollar versus most of the majors. The trend is still up for the dollar against the Swiss Franc and Euro but that may change if dollar weakness continues over the next couple of weeks.

Interest rate futures

As we have been writing of late, in spite of the interest rate futures sector still being in a bull market and relatively near all time highs, there was limited upside and the risk/reward for longs has not been favourable. The long-term trend is still up but this week saw some substantial moves lower, especially in the longer-term 30-year T bonds. The extended QE announced this past week by the Fed is being perceived as inflationary and is pressuring bonds. However, as before further weakness and a confirmed change of trend to down is required before attempting any short entries, but if the current short-term weakness continues that may not be far off.

Good trading

Phil Seaton

www.LSTrader.co.uk

LS Trader Weekly Update 10th September 2012

It’s been a bullish week for stocks as the U.S. indices continue to lead the way. The Dax has also had a change on long-term trend to up and only the Nikkei remains in a downtrend. The dollar has also declined and this has led to advances for commodities, especially the metals, most of which are now at multi-month highs.

This week sees the 2 day FOMC meeting on the 12th and 13th which always has the potential to move the markets, especially if something unexpected is announced. The majority of economists expect some form of QE3 to be announced, which will likely be bullish for stocks and commodities and bearish for the dollar. However, if no such move is announced we may see the opposite reaction as some form of QE3 is likely priced in to the markets already.

In addition there are a few potential market-moving events in Europe, the main focus of which will be on Wednesday.

This Friday is also quarterly forex expiration, so we will roll out of September and into December on our currency forwards.

Stocks

The seasonal September weakness is nowhere to be seen so far as the S&P 500 continued to hold on to the support level that we wrote about last week and then shot higher on Thursday and Friday. Whether the S&P 500 can continue the current upside momentum and head towards the 1500 level and potentially the 2007 highs remains to be seen. The Nasdaq 100 was also in bullish mood, once again hitting new highs since 2001.

The Dax finally confirmed a long-term trend change to up having threatened to do so for the past few weeks. This week saw the September contract hit a new high for the year having cleared April’s highs.

The Nikkei 225 is still the weakest of the indices that we trade at LS Trader and even with a decent move higher on Thursday and Friday still ended the week lower by 0.22%. The trend remains down for the Nikkei but is now up for all the other stock indices.

Commodities

Last week we wrote that Gold was likely to test the $1700 level and that September was a very strong month for the yellow metal. This week we saw a successful test of $1700 and then a strong move higher. The yellow metal now looks set for a test of $1800.

We also wrote that silver was looking set for a change of long-term trend to up and we also saw that this week. As with gold, silver is currently extremely bullish and may continue higher towards our longer term target around 3800.

According to the CFTC (Commodities Futures Trading Commission) money managers increased their net long bets on energy prices rising this week and took this figure to 4-month highs. Although we have seen strength in this sector of late the long-term trend for U.S. Crude and Brent Crude is still down but both are nearing changes of long-term trend. At present, only No leaded gasoline is in a long-term uptrend, with heating oil also gaining strength.

Currencies

The dollar index fell back through the support levels that we have been writing about recently and also dropped back below the 200 day moving average. These events led to a swift move lower and a resumption of the longer-term downtrend for the index.

The Pound continues with its recent good run, clearing the $1.59 resistance and just pushing above $1.60. Our next target is around $1.63. The pound also advanced against the Yen.

The USD/CAD finally hit and then exceeded our longer-term target at 9835 and may now continue to decline towards last summer’s lows.

Overall the dollar is currently shifting back towards long-term weakness.

Interest rate futures

Interest rate futures ended the week mostly lower but most of the sector remains near all time highs and the long-term trends are still very much up.

We still see limited upside for the sector from here and the risk/reward for longs is still not attractive, but as before further weakness and a confirmed change of trend to down is required before attempting any short entries.

Good trading

Phil Seaton

www.LSTrader.co.uk