LS Trader Weekly Update

It’s been an eventful week in which we have seen a sharp increase in volatility, especially in the stock indexes but also in some commodities and currencies. The long term trends remain unchanged and are still up for stocks, commodities and the US dollar.

The LS Trader System Weekly Update

Stocks

There were 2 days of heavy selling for the stock indexes, which were Tuesday and Friday. Stocks began the week higher with the S&P 500, Nasdaq 100 and German Dax all posting new highs for the year before we saw a sell off, and all the indexes ended the week down.

The Nasdaq 100 fell short of our target of 2070 and ended the week down by 2.65%. The weekly chart is showing a reversal pattern for the first time since the lows on February 5^th so we may now be coming to the end of the stock rally for now.

The S&P 500 fell to its lowest level in nearly 4 weeks and support at around the 1180 area will be the level to watch early this week. Failure here may lead to a decline back to the 1140 area.

For now the trend in stocks remains up but a test of support is likely this week.

Volatility Index (VIX)

The VIX was sharply higher during the past week, gaining some 32.67% in the space of just 5 trading days as fear returned to the markets. The VIX hit a high for the week at 23.20, which is its highest level in 10 weeks, before closing the week at 22.05. We may see a move higher towards the levels last seen on February 5^th around 29.22, when the stock markets reversed from the lows.

Commodities

As we wrote last week, Gold reached and cleared resistance at $1170 and rallied up to $1182, which is its highest level in 22 weeks. There is little in the way of resistance to prevent the market continuing higher towards all time highs around $1230.

Copper did test and breach short term support as we indicated may happen last week and Copper remains the weakest of the metals sector. Palladium was also lower for the week but both Platinum and Silver were higher.

Energies were lower early in the week with Crude briefly falling through support before recovering well, as did No Leaded gas. We may get a test of resistance for Crude Oil this week. There is a band of resistance on the June contract at around $87.25 to $87.60. Previous attempts at this level have been met with selling so this will be the level to watch. A successful breakout may provide the impetus for another go at $100 further out.

Both Heating Oil and No leaded gas continue to be the strong markets in this sector with both markets reaching new contract highs during the past week.

Sugar was lower once again, having fallen 3.81% during the past week. This has been a substantial downtrend that has lasted 11 straight down weeks. Sugar is one market that has trended very well over the past year or so; first we saw a large trend to the upside and now a large trend to the downside. Last Friday’s close has this market back down to the levels of 12 months ago.

Currencies

From last week on the Dollar Index “We may yet see a test of those highs at 8252 this coming week.” We did get that test and the market moved higher to new highs for the year at 82.87 before moving lower again back to within the lateral trading range. The trend remains up however and support should be seen at the 8000 level, if the market falls that far.

Interest rate futures

Interest rate futures were sharply higher this past week and the short term futures, which we mentioned last week were close to an upside breakout, moved up through resistance to new contract highs. The divergence that we also mentioned last week between the long term trends, being up for the 5 & 10 year T notes but down for the 30 year bond also broke after the 30 year bonds also rallied sharply, aligning the long term trends to up across the sector.

Kind Regards

Robert Stewart