LS Trader Weekly Update

Stocks continued the recent rally and posted new highs for the year as recent dollar strength took a pause. Commodities also had a strong week for the most part as several markets headed higher again. The long term trends remain intact and are still up for stocks and commodities and down for the dollar. Of all of these trends, the long term trend for the dollar looks most likely to change first.

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The LS Trader System Weekly Update

Stocks continued the recent rally and posted new highs for the year as recent dollar strength took a pause. Commodities also had a strong week for the most part as several markets headed higher again. The long term trends remain intact and are still up for stocks and commodities and down for the dollar. Of all of these trends, the long term trend for the dollar looks most likely to change first.

Stocks

The S&P moved to new highs for the year, as did the Nasdaq 100 and the German Dax as the seasonal Santa Claus rally arrived a couple of days early, leading to 4 straight days of gains. We will likely see a continuation of this rally over the next few days and the probability of new highs again is on the cards.

Another week of gains for the Nikkei took the market up to its highest level since early October and to within reach of new highs for the year.

Volatility Index (VIX)

The VIX moved lower for the week and posted new lows for the year at 1947. This reading shows that the stock markets (S&P 500) are still comfortable at the current levels in spite of new highs being made.

Commodities

With the exception of Gold, metals moved higher again for the week. Weakness was seen early in the week for Palladium and Platinum but these market recovered from the lows posted on Tuesday to rally sharply higher. Copper had a strong week, posting new contract highs and reaching its highest level since August 2008. The long term trend is still up for the metals sector.

Crude oil continued the rally from the previous week, gaining just shy of 5% for the week. The February contract may now be set for a test of the $80 level. The long term trend is still up for energies with the exception of Natural gas, which is pushing towards a long term change of trend to up as well. Currently Natural gas is struggling with resistance at 6000 (February contract).

Sugar continues to do well having once again broken out to new highs for the year. We also saw new highs for the year in Orange juice, but Cotton, Coffee and Cocoa drifted lower.

Currencies

The dollar index declined for the week having earlier reached new contract and multi week highs on Tuesday and Wednesday. We have so far yet to see sufficient strength in the US dollar to confirm a change of trend and for now the trend remains down but this may change soon.

The British pound continued lower again and took out the $1.60 level. The pound remains on target for a test of major support from the October lows at $1.57. Support for the Swiss franc at 9500 continued to hold and the long term trend remains up.

As expected, the Euro moved higher for the week after the sharp declines from the previous week. The anticipated strong support at $1.42 put further declines on hold after lows for the week were posted Tuesday at $1.4215. Support at $1.42 will have to be taken out for a change of long term trend.

Interest rate futures

Interest rate futures headed lower led by longer term interest rates. There was weakness across the board for interest rate futures but longer term bonds broke lower first by taking out support. If longer term bonds continue lower then the other interest rate futures will follow lower and we may be at the beginning of a new downtrend for this sector.

Kind Regards

Robert Stewart