LS Trader Weekly Update

The recent correction in many markets has continued this week but stocks have held up well and may well test new highs for the year in the week ahead. The long term trends are still unaffected in spite of the correction that has affected many commodity markets  and the long term trends are still up for stocks and commodities and down for the dollar.

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The LS Trader System Weekly Update

Stocks

The stock markets ended the week were they began, having recovered from some short term weakness mid week. The S&P closed above the psychological 1100 level for the second straight week and this may lead to a test of new highs for the year this coming week. The Asian markets ended the week lower in spite of some strength on Friday.

The long term trend remains up for the stock markets on the whole and this is normally a strong period of the year for stocks so we may see moves higher between now and the end of the year.

This week is Triple Witching week for stocks and on a historical basis is often a strong week with large gains often being seen on Triple Witching Friday. The odds are therefore with higher prices for stocks between now and the end of the year.

The VIX moved higher mid week but ended the week just slightly up but is still at very low levels and may still be headed back towards lows for the year at 20.10 as complacency remains in the markets.

Commodities

Gold continued the recent correction and many commodities followed gold lower. We are now back down to the lowest levels seen in a few weeks but still remain just ahead of support at $1100. Support at that level will likely be tested and if support holds then we may see a move back higher for gold but if support fails then the sell off will likely continue possibly back towards $1000 and dragging the other metals with it. In spite of the current correction the long term trend is very much up for Gold as it is in all the metals.

Crude oil broke out of the recent trading range that we wrote about last week having decisively taken out support at $75. The January contract closed just below the $70 level and may now be headed further south towards support at $66. No leaded gasoline and heating oil followed Crude lower and whilst the long term trend remains up for these 3 markets that may change if weakness continues.

The Natural gas downtrend halted after a rally cleared short-term resistance. The long term trend remains down for Natural gas.

Currencies

The dollar index moved higher for the second straight week moving close to its highest level in six weeks. The March contract may be headed higher towards the 7800 level over the next week or so. The trend is still down for the Dollar against most of the majors but that may be on the verge of changing, as the dollar is looking set for a bounce higher.

The British pound fell through short term support and may now be headed lower towards October lows at $1.57. The Swiss franc also continued its sell off having failed to stay above the 10000 level. The Swiss franc may now be headed towards a test of support at 9500.

The Euro, like the Swiss franc also took out short term support having been firmly rejected over the $1.50 level. The next support level is around the $1.44 level.

Interest rate futures

Interest rate futures continued to head lower and are now just above support levels which will likely be tested this week. If support fails then the recent uptrend in interest rate futures may well be over and we may see new contract lows soon.

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Kind Regards

Robert Stewart