LS Trader Weekly Update

The past week has seen a continuation of the recent high volatility and we continue to see large moves in many markets. The long term trends remain as before, which is up for the dollar and interest rate futures but commodities and stocks are now beginning to head lower, with markets from both the stock and commodity sectors either giving a trend change to down or being very close to doing so.

There was some buying late in the day on Friday in many markets that halted the selling which had been in place for much of the week but this was possibly just short covering ahead of the weekend. The week ahead will give a clearer picture.

The LS Trader System Weekly Update

Stocks

Last week we wrote: “We may 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.”

We did get a move lower and the S&P 500 fell 4.47% for the week, taking out some of the support levels that we wrote about last week. The S&P did move higher on Friday from the lows of the day at 1051.50 and we may get another test of those lows this coming week. There is also major support from the 5^th February lows at 1035.9 and if those lows are taken out then we could see a big move lower. For now the trend remains up.

We also wrote last week that the Asian markets were the weakest and may be the first to break lower with the long-term trend down for The Nikkei and the Hang Seng. Both of these markets did indeed move lower with the Nikkei taking out the lows from the 6^th May.

Volatility Index (VIX)

From last week “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. The VIX rose to its highest level since March 2009 posting a new high for this year at 48.20 before closing at 40.10 for a gain of 28.36 for the week. If we get a move lower in stocks to test the February lows then the VIX will move higher still

Commodities

Last week we wrote on Gold “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.” We did get further weakness and may see another test of the $1165-$1170 support area. The long term trend is still up and will continue to be as long as support holds.

Sugar continued to move higher and the recent downtrend may be coming to an end. The market continues higher from support at 13 cents and is likely to test resistance this week.

From last week on Crude Oil “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.” $70 support did fail and we did quickly see $66 as expected and actually went even lower than that before a small recovery late on Friday. The long term trend is now down for Crude and the other energy markets may follow suit soon if Crude continues lower.

Currencies

The Euro fell to new lows at $1.2140 before moving higher and ending the week ahead by 1.61% to bring a 6-week losing streak to an end. The trend remains down and the lows formed last week may
now provide support.

The dollar index ended the week lower by 0.80% having earlier reached new contract highs at 87.62, just above the level that we identified last week as minor resistance. The long term trend remains up but there has been some weakness seen in the dollar index over the past 3 sessions.

The British pound was lower again after falling another 0.59% during the past week against the US dollar and closing at a new weekly low close of $1.4472. The Pound was also lower against the Japanese Yen, which had a good week gaining 3.18% against the Pound and 2.7% against the dollar.

The commodity-based currencies of Australia, New Zealand and Canada were all lower and we may be at the start of a new downtrend in these markets. The Canadian dollar still remains above long term support around 9200 and the trend remains up as long as this level holds.

Interest rate futures

Interest rate futures were higher again and the uptrend continues for the 5 & 10 Year notes and the 30-Year T Bond. The longer tem 30-year bond was the strongest, having gained 2.33% for the week with the weakest of the gainers being the 5-year notes, which only added 0.55% for the week. The short term 3 month Eurodollars were lower for the week and closed right on the support level at 9900 that we wrote last week may be tested in the week ahead.

Kind Regards

Robert Stewart