LS Trader Weekly Update

As we bring the curtain down on 2009 and move in to 2010 the long term trends remain as they have been for much of the past year with the long term trends being up in stocks and commodities and down in the US dollar.
The dollar though has been showing signs of strength and is the most likely of the above 3 sectors to give a long term trend change first.

2009 was a highly volatile year on the whole, with the main exception being the stock markets over the second half of the year, which for the most part moved quietly higher. 2010 may begin in a similar volatile fashion as investors position themselves for the year ahead but on the whole, 2010 is likely to be a less volatile year than 2009 with the exception of the stock markets, which will likely see an increase in volatility at some stage this year.

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The LS Trader System Weekly Update

Stocks

2009 had the worst January on record but still ended up with gains by the end of the year after a strong rally from the March lows pushed the market ever higher through to the end of the year. On a seasonal basis this strength can often be seen continuing through to February.

For the year, the Nadsaq was the best performer from the US stock indexes, gaining 43.9%. The S&P 500 gained 23.5% and the Dow ended with an 18.8% gain. The trend remains up for stocks but the first 5 days of January could give some clues as to what may happen through 2010.

Volatility Index (VIX)

The VIX ended higher for the week and moved up slightly from the lows of the year, which ended up being 1925. The close for the year ended at 2168, which is still a very low level. At some point in 2010 there will almost certainly be a correction of decent size in the stock markets and a probable large move higher in the VIX as fear returns to the markets and traders look to protect themselves. Currently though the stock markets (S&P 500) are comfortable at these levels.

Commodities

Copper continued the move higher that has been intact for most of 2009. New contract highs were reached on the last trading day of the year and the trend remains up. Copper has gained 123% for the year, which is a big trend and may yet continue higher.
The long term trend is still up for the metals sector although there remains short term weakness in Gold and Silver.

Crude oil edged higher for the week, gaining 1.68% and reached the $80 level that we mentioned last week, which was actually the high for the week before the market moved slightly lower to the close.

The long term trend is still up for energies with the exception of Natural gas, which once again failed to clear the 6000 and pushed lower from there.

Currencies

The dollar index ended the week slightly higher having moved around a bit during the shortened trading week. We have still 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 had a mixed week have first posted new contract lows early in the week before a reversal took the pound back above $1.60 and closing at $1.6146. The long term trend remains down for the pound.

The Euro ended the week higher but remains undecided on which direction to take. Support at $1.42 has so far held firm and this level will have to be taken out for a change of long term trend.

Interest rate futures

Interest rate futures reached new contract lows on the last trading day of the year before moving higher to the close. The trend is down for long term interest rates but still up for shorter term rates. Shorter term markets may be set for a test of support soon. Whether this support level holds of gives way will indicate the direction of these markets in the near term.

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Kind Regards

Robert Stewart