LS Trader Weekly Update

The major support levels in several markets could be tested as numerous markets are in sideways ranges with clear levels of support and resistance. As of now the long term trends are still up for European and US stock indexes, up for the US Dollar and up for interest rate futures.

The LS Trader System Weekly Update

Stocks

Last week we wrote on the S&P 500: “We now look to support at 1036 to the downside and resistance at 1107 to the upside. A break of either level could lead to a decent move in the direction of the breakout.” The S&P 500 (September) fell to 1037.5, just fractionally above the support we mentioned last week but buyers came in at this level, sending the market back up towards the top of the range, for a gain of 2.18% for the week. We have a range now between 1036 and 1100 and a break of either level should be good for a move of around 65 points in the direction of the breakout.

Asian stocks, which have been weaker than US and European stocks of late were also higher. The Nikkei remains below the 10000 level, which may be tested again this week and the Hang Seng is also closing in on the 20000 level, with the market so far unable to hold the highs at 20040. Friday’s close of 19848 was just below short term resistance so the markets reaction at the open on Monday will give an indication of where we may be headed next week. The long term trend remains down for the Asian markets.

Volatility Index (VIX)

The VIX ended the week lower by 18.97% as stocks moved higher and will likely continue lower until we get another wave of selling in the stock markets.

Commodities

August Gold reached new all time highs during the past week as the market rallied up to new highs at $1254.5. The market was however unable to close above the resistance at $1250 and pulled back to the $1220 area where buyers returned on Friday, taking the market back up to close at $1230.2. The long term trend remains up, but as before unless we get a close above the all time highs the market remains susceptible to a pullback towards support around the $1170 area.

Crude is another market that is within a lateral trading range, albeit a fairly wide range from the lows at $67.15 to the highs at $76.30. As we have continually seen recently, $76 seems a bridge to far for Crude and as long as resistance holds at this level then a move back towards the bottom of the range at around $67 remains on the cards.

Currencies

The Dollar index hit new contract highs on Monday at 88.80 and formed a northern doji, indicating some tiredness at this level. A pullback followed but buying returned on Friday around the 8700 level. The trend still remains up and a move to 9000 remains the target to the upside.

The Euro fell to new 4½ year lows again during the past week with a new low at $1.1884 before edging higher. We rolled out of the June contract and in to September, banking an excellent 1305 points on the trade so far that we have been short of for several weeks. We remain short the Euro and the trend remains down. There is some resistance around the $1.2150 area that may be tested this week, which if cleared may clear the path for a go at $1.2400, primarily on short covering. To the downside, a break through support at $1.1884 may lead to renewed selling.

Resistance at $1.4774 got the better of the British Pound once again, and for the fourth straight week the market has been unable to clear this level and each attempt at it has been met with selling. This is quite a major resistance level as not only is it the level of the past month’s highs but we also have a change of polarity from prior support at the same level. If the Pound can clear this level then we may see a move higher to at least $1.5050.The current range spans form support at $1.4230 to resistance at $1.4774.

Interest rate futures

Interest rate futures were pretty flat for the week having been lower for most of it. Friday’s upmove suggests that bond traders are not quite so convinced of the economic recovery that the politicians would have us believe is underway.

Kind Regards

Robert Stewart