LS Trader Weekly Update

The past week has seen stocks move higher again and a continuation of the US dollar rally. From last week “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.” Commodity markets on the whole were lower on the back of continuing dollar strength.

The long term trend remains up for the dollar, stocks and commodities although there is weakness in some commodity sectors.

The LS Trader System Weekly Update

Stocks

From last week “Stocks remain bullish for now and the odds favour higher prices from here.” Stocks did continue higher with gains for all of the major indexes that we trade at LS Trader. The S&P 500, German Dax and Nasdaq 100 all posted new contract highs during the past week.

From last week “The Nikkei 225 (June contract) may now be headed for a test of the highs for the year at 10960.” We did a get a test of 10960 with new highs being seen at 11030. However, the market was unable to hold those gains and closed below recent resistance at 10955. Friday’s close below recent resistance may lead to a sell off for the Nikkei next week unless new highs can be posted early in the week.

Volatility Index (VIX)

The VIX had its first weekly gain in 7 weeks, ending the week up by 4.53%. There was quite a large gain for the VIX on Monday as it gapped higher at the open but was unable to hold on to the full extent of those early gains. It remains to be seen as to whether we have seen the lows for the VIX for now, but at present, contract lows at 16.17 are providing support. We may see a test of the local top at 19.34 soon.

Commodities

Gold ended the week marginally lower having earlier tested support at around the $1090 level. Strength returned to Gold on Thursday and Friday and Gold pushed higher to end the week at $1105.4 for a decline of 0.31% for the week. Once again though Gold has closed above the $1100 level and buyers keep appearing at support levels. The long term trend remains up but as before a lot will depend on what happens with the US dollar with Gold and the other metals will likely move in the opposite direction to the dollar.

Currencies

From last week “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 from the sideways trading range and odds favour a move to the upside, in line with the prior trend.” The dollar index did indeed break out of the sideways range and posted new contract highs in the process at 8252. That was a new high since June 2009 and the trend remains up.

The Euro was lower for the week again after declining 1.00%. From last week “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.”. We did get a test of contract lows and a new low was posted at $1.3266 before a move higher on Friday lead to a close above support at $1.3400. Thursday’s new lows may now provide support but the trend remains down for the Euro.

The British Pound was also lower for the week after declining 0.84% and moving back below the $1.50 level before closing at $1.4886. We may see a test of lows at $1.4771 this week. The trend remains down.

Interest rate futures

From last week “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.” The markets did take out short term support and brought the recent uptrend to an end. Further weakness was seen in the longer term 30 year bonds which reached new 4 week lows. A small bounce higher from support left the market marginally above the lows for the week but we may see a test of support this coming week.

Kind Regards

Robert Stewart