LS Trader Weekly Update

The past week has once again been highly volatile and the month of May has so far been a very eventful one as far as market events and large swings in the markets are concerned. The EU bailout moved the markets substantially early on Monday but the effects of yet another band aid soon wore off.

Trend wise, things remain bullish for the dollar and interest rate futures but commodities and stocks are showing signs of weakness with numerous markets nearing crucial support levels. For now, US and European stocks remain in a long term uptrend as do most commodities but this may change soon.

The LS Trader System Weekly Update

Stocks

Last week we wrote that the coming week was likely to be interesting, and we were not disappointed! The EU bailout plan of $954.83 billion sent the markets soaring higher early on Monday only for the markets to reverse and resume the selling that had begun the previous week. We may now see a move lower towards the lows formed the previous week, but there are a few levels of support to hold the markets up, especially on the S&P 500.

The Asian markets look to be the weakest and may be the first to break lower with the long-term trend down for The Nikkei and the Hang Seng.

Volatility Index (VIX)

The VIX began the week considerably lower and continued lower until Thursday, where a low of 24.30 proved to be the bottom for the VIX. We then saw a move higher to the close on Thursday, which continued higher through to Friday’s close at 31.24. This is still some way off the highs seen in the week previous, but the rise towards the end of the week suggests we may see a further rise this coming week especially if stocks continue lower early in the week.

Commodities

Last week we wrote on Gold “Since Gold is priced in US dollars, it often moves in the opposite direction to Gold, but is now moving higher in spite of the continued gain in US dollars. This is a sign of a strong market and the odds favour a continuation higher to all time highs soon.” In spite of the continued rise in the US dollar, we saw Gold move higher to all time highs at $1249.7. The market rejected the $1250 level and moved lower before ending the week at $1227.8. Further weakness may be seen unless or until $1250 can be cleared, but the trend remains firmly up.

Sugar had it’s first up week in many weeks, albeit a relatively small gain. The support at 13 cents is still therefore holding and this level remains the level to watch for future direction.

Crude and the other energy markets drifted lower. June Crude declined 4.66% for the week and closed just above major support. There is a band for support around the $70 level and we may see buyers returning at these levels. If support fails then $66 will likely follow.

Currencies

It’s been another volatile week for currencies after the burst higher for the Euro on Monday, followed by selling for the rest of the week, culminating in a loss for the Euro of 2.77% for the week. The Euro crucially fell through the band of support between $1.24 and $1.25 that we wrote about last week, closing at $1.2387. The next support area is at $1.23 and if that fails then $1.20 comes in to view.

The dollar index again rallied to new highs at 86.23, for a weekly gain of 1.86%. The next target will be 88.50, although there is some minor resistance at around 87.50.

The British pound fell to 13 month lows, having taken out the support area from the March lows at $1.4771 that we wrote about last week and just piercing our target of $1.45 by 5 cents before closing slightly higher at $1.4558.

Interest rate futures

Interest rate futures were higher again and the uptrend resumes for the 5 & 10 Year notes and the 30-Year T Bond. The short term 3 month Eurodollars moved higher for most of the week from support at 9900 before falling towards the end of the week and may now move down to test 9900 support again.

Kind Regards

Robert Stewart