LS Trader Weekly Update

The past week has seen stocks continue to march higher with new highs being seen virtually across the board in the world’s stock indexes. There was also some weakness for the US dollar and strength seen in the metals sector.

The long term trends in the major market sectors remain as before, which is up for the dollar, stocks and commodities.

The LS Trader System Weekly Update

Stocks

The stock markets continue to move higher with new highs being seen in the major indexes. From last week “The Nasdaq 100 is struggling at the resistance from the August 08 highs and if resistance holds then a pullback may be on the cards. Otherwise a continuation higher to around 2040 may follow.” The resistance was cleared and the Nasdaq 100 added 2.05% for the week and closed at 1992. We will likely see a test of 2000 this week and if this is cleared we may see a move higher to 2040 next.

The S&P 500 moved up to within a whisker of the 1200 level, which may provide some resistance. Friday’s close at 1192.6 was the highest close for the S&P 500 since September 2008. The Dow also posted new highs and is also within reach of a round number, having closed at 10953. Therefore, all 3 US stock indexes are near psychological round numbers and it will be interesting to see the markets reaction if those levels are tested this coming week. The trend is firmly up for now.

Volatility Index (VIX)

The VIX declined 7.61% for the week and reached new lows for the year at 16.06 before closing at 16.14. Complacency continues in the markets but we may see volatility picking up later this month depending on the market’s reaction to earnings.

Commodities

From last week “Gold advanced 1.87% for the week and broke up through the top of the wedge pattern that we have mentioned recently, which is a bullish sign”. Gold was sharply higher this week after 7 straight up days ended with the market closing just below resistance. If resistance at $1165 can be decisively cleared then a continuation higher to the highs posted earlier this year at $1230 may follow. The other metals were all higher and the trend remains up for metals.

Also from last week “We will likely see Crude Oil test the January highs at $85.43 this week”. Crude did test and clear the January highs and went on to post new highs since October 2008 before selling off with 3 down days to finish the week with a small gain of 0.06%. In spite of the selling there has been buying interest at $84 and support may come in at around $83 if further weakness is seen this week.

Currencies

The dollar index was marginally lower for the week again but the long term trend is still up. A few of the majors pushed higher against the dollar, especially the Australian and Canadian dollars, which both broke out to new highs. The Canadian dollar even broke parity with the US dollar for the first time since July 2008 before pulling back to the close on Friday at 9949.

The Euro was higher for the week, rising from support at $1.34. In the short term there is a range between $1.34 and $1.36 and a break of either level could give rise to movement. Long term the trend is down.

The British Pound moved higher for the week again and tested the resistance at $1.5375 that we wrote about last week. The resistance was taken out and the market reached its highest level in 6 weeks before pulling back and closing at $1.5363 but the long term trend remains down.

Interest rate futures

Interest rate futures were higher for the week and the long term trend remains up for the shorter term markets. The 30 year bond posted its lowest price in over 10 weeks on Monday before moving higher for the rest of the week. The long term trend remains down for the 30 year bond.

Kind Regards

Robert Stewart