Weekly Update 8th June 2014 – LS Trader

Stocks have risen to new all time highs once more in spite of supposed seasonal weakness. Complacency is reaching near historic proportions as the VIX has fallen to its lowest level since 2007, as volatility has continued to decline. These levels in the VIX indicate an almost complete absence for fear from stock market participants, and coupled with the rise of the S&P 500 towards major resistance at 2000 discussed below, may be indicative of a major top in stock markets in the coming weeks. For now however the markets are bullish and trending higher, so we will continue to ride those trends until there is evidence to the contrary by a break of key support levels.

Stocks

The S&P 500 made new all time highs once again, as it continues its path higher for a possible test of the major psychological 2000 level. Should the index rise to test that level, massive resistance can be expected.

The Nasdaq 100 posted a new 12-year high at 3800.25 on Friday, closing the week at 3798, and continues to be highly bullish. The RSI has risen to 74.61, which is a good indication of the strength of the recent trend. The March high should now provide support; so higher prices are expected as long as this level holds.

From last week “The Dax easily rose to new highs and looks set to move higher still, as another psychological round number comes in to focus, in this case the 10,000 level.” The Dax reached and exceeded 10,000 as expected, posting a new all time high of 10,017 on Thursday. However, the range of the past 2 weeks has been fairly tight, so the market cannot be classed as being overly impulsive. As with the Nasdaq 100, the horizontal trendline across the double top between the January and May high should now provide support. Things would be amiss on a move and close below that level.

Commodities

The grains markets have been bearish of late, and several markets from the grains sector have seen large declines, particularly rough rice, which effectively fell off a cliff once trend defining critical support was broken. The decline in rice was the largest of the moves from the sector, spanning some 930 spread betting points from Monday’s open to the low on Thursday. A small reversal was seen on Friday, but the trend is very much down.

Palladium rose to slight new highs since August 2011 once again and we continue to target a further rise towards 870.

London cocoa continues to climb and has once again posted new highs since September 2011. As before, we continue to target further strength, possibly to as high as the next level of technical resistance at 2089. A move above 2000 would next bolster this view.

Currencies

The currency markets, which have for the most part been so quiet of late and have been trading at record low levels of volatility, suddenly woke up on Thursday around the time of the ECB announcement. This led to a very volatile trading day in the currency markets, but not one that has as yet influenced or changed the long-term trends, all of which still remain intact.

Interest rate futures

Interest rate futures have continued with weakness that began during the prior week, but have so far just about managed to hold support. The long-term trend remains up across the sector but the short-term trend is coming under pressure and each of the 5 interest rate futures that we trade at LS Trader looks set to test support in the coming days. A breach of support would bring the trends to an end for the near term, but would not alter the longer-term bullish outlook.

Good trading

Phil Seaton

LS Trader

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