LS Trader Weekly Update

This coming Monday is Martin Luther King day in the US, so the US markets will be closed on Monday, so we will have a shortened trading week. It remains to be seen whether the weakness we saw in stocks at the end of last week continues in to the new week after the long holiday weekend. For now the long term trend remains up for stocks, up for commodities and down for the US Dollar.

This coming week we are entering 3 new trades.

The LS Trader System Weekly Update

Stocks

As we wrote last week the week just gone is historically weak on average and we ended up with weakness leading in to the holiday weekend as US markets had their worst declines so far in 2010.

The Nikkei did move up towards 11000, but fell short at 10960 before ending the week slightly down. Currently the stock indices are holding above support and the long term trend is up.

Volatility Index (VIX)

The VIX posted new lows again at 1686 on Monday but then moved gradually higher for the rest of the week before closing at 1817. So, once again the markets remain very comfortable at the current levels and complacency remains high. As we have been saying for the past few weeks there will at some point in 2010 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.

Commodities

Orange juice gave up a large portion of the recent gains on Monday as the exchange doubled the daily trading limit from 10 cents per pound to 20 cents per pound (the equivalent of an extra 1000 financial spread betting points). Orange Juice ended the week lower by 12.83%.

Metals had a mixed week with big gains for Palladium and Platinum but losses for Gold, Silver and Copper. The energy markets reversed after Crude, Heating Oil and No leaded gas reached new highs but then sold off in fairly dramatic fashion.

The long term trend for Natural gas is still down after declining just over 1% for the week (February contract). Upside resistance remains in place for February Natural Gas at 6100.

Currencies

The dollar index declined marginally for the week as direction remains uncertain. Resistance at 7900 to the upside remains in place and all attempts towards this level have so far ended in failure, pushing the market lower each time. The long term trend remains down.

The so called commodity based currencies of Canada and New Zealand posted modest gains but the Australian dollar ended marginally lower having failed to push up through resistance.

The British pound had a good week, gaining 1.41% against the US dollar. We may see a test of resistance at $1.64 this week but for now the long term trend remains down.

The Euro ended the week marginally lower having earlier reached $1.4577, which is the top of the current short term range. Support at $1.42 is still in place so these 2 levels remain the range for now and a break of either should lead to a move in the direction of the breakout. For now the long term trend remains up but Friday’s sell off was fairly ugly, so a test of support at $1.42 may be seen soon.

Interest rate futures

Interest rate futures moved higher for the week with shorter term prices moving up to their highest levels in over 3 weeks. As we wrote last week, the long term trend is still up for the shorter term markets and will remain so as long as support holds. Longer term futures also gained for the week but the longer term markets have been weaker of late and are lagging the shorter term markets.

Kind Regards

Robert Stewart