LS Trader Weekly Update

The past week has seen continuing strength for stocks, renewed strength for the US dollar after a pause for the past few weeks and some new weakness in several commodity markets. The focus this week will likely be on the US dollar and the direction the dollar goes in will likely lead to an opposite move for commodities.

As before, the long term trend remains up for the dollar, commodities and stocks.

The LS Trader System Weekly Update

Stocks

From last week “Stocks continue to move higher and the S&P 500 broke out to new highs having cleared resistance. Perhaps importantly, Friday’s close was just above recent resistance and we may see a continuation higher from here.” Stocks did indeed continue higher for the week and would have had an even better week were it not for a weaker close on Friday. The S&P 500 ended the week with a 0.85% gain. Stocks remain bullish for now and the odds favour higher prices from here.

From last week “The Nikkei 225 cleared resistance at 10600 before closing at 10800 (June contract). We may now be headed for a test of the highs for the year at 10960.” The Nikkei moved higher mid week but topped out at 10855, short of new highs for the year and ended the week lower by 0.46%.

Volatility Index (VIX)

From last week “There is support entering the markets around the 17.40 level but if this fails then we will likely be headed lower to the lows of the year at 16.86.” Support at 17.40 failed, as did support at 16.86 and the VIX fell to new lows at 16.17 before recovering to close at 17. It remains to be seen as to whether we can go much lower from here.

Commodities

Crude Oil failed to clear the recent high at $83.47, making a high for the week at $83.36 before falling to a close just above the $80 level at $80.97. This led to a weekly decline of 0.70%, most of which was on Friday. We therefore remain within the recent consolidation with odds slightly favouring higher prices as the prior trend to the consolidation was up.

Gold had a volatile week but ended with a small gain of 0.53% for the week having been considerably higher earlier as once again $1150 provides upside resistance. Friday’s close at $1108 leaves the market close to $1100 support and as before if this level fails then we may see $1050. That said, Gold is also within a wedge pattern and equally a break to the upside from this wedge could lead to a move higher. For now though we sill stay on the sidelines and see what happens. A lot will depend on what happens with the US dollar and Gold, as with other metals will likely move in the opposite direction to the dollar.

Currencies

The dollar index ended the week ahead after a gain of 1.12% for the week. The index moved higher of support and remains in the trading range that has formed since the beginning of February. Bullish action on Thursday and Friday puts the bulls back in control and we may be set for a test of contract highs over the next couple of weeks. Eventually there will be a break for the sideways trading range and odds favour a move to the upside, in line with the prior trend.

The Euro was lower for the week after declining 1.61% as resistance at around the $1.38 level held firm. We may now be set for a test of contract lows at $1.3433. If that low can be taken out then we may see another wave of selling take the market down to the $1.29 area. However, if support holds then a move back up to $1.38 will likely follow.

The British Pound also decline for the week, dropping 1% but closed just above the $1.50 level at $1.5012. If $1.50 fails to hold this week then we may get a test of lows at $1.4771. As with the Euro, the trend remains down for the Pound.

Interest rate futures

Interest rate futures had a volatile week, with the 5 & 10 year notes advancing strongly at the start of the week before falling away back towards short term support. The best performer for this week was the 30 year bond which once again managed a gain for the week but closed below resistance. The long term trend remains up on the whole for the interest rate markets but the uptrend is far from convincing and could come to an end this week unless strength is seen early in the week.

Kind Regards

Robert Stewart