LS Trader Weekly Update

The past week has seen the stock markets continue higher from support and continued short term weakness for the US Dollar. We have also seen new all time highs in Gold as well as a bit more strength in energy markets such as Crude Oil. As of now the long term trends are still up for European and US stock indexes, up for the US Dollar, up for interest rate futures and clearly up for Gold.

The LS Trader System Weekly Update

Stocks

Last week we wrote on the S&P 500: “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.” The S&P 500 cleared and closed above the 1100 level, reaching new highs for the week of 1117.1 and may now continue higher, although the price action of the past 3 days suggest some tiredness in this market. The long term trend remains up.

Volatility Index (VIX)

The VIX declined again as the stock markets rose and a measure of complacency returned to the markets. The VIX was lower for the week 17.25% and Friday’s closing price is the lowest on the VIX for 6 weeks. As we wrote last week, the VIX will likely continue lower until we get another wave of selling in the stock markets.

Commodities

August Gold closed at new all time highs Friday at $1258.3 for a weekly gain of 2.28%. Friday’s close was above the top of the recent ascending triangle pattern that has formed and may lead to a continuation higher especially if we get a second consecutive close above the prior resistance level around $1255. Adding the height of the recent triangle to the top of the range gives a possible target of $1335. Failure to get another close above $1255 may however push the market back down towards the $1200 level.

Crude continued higher this week and broke out of the recent trading range and reached its highest price in 5 weeks. Last week’s highs of $78.13 on the July contract was above the recent resistance area. We now move forward to the August contract, which continues to trade at a premium of over $1 per barrel. We may now get a test of $80 soon but failure to clear that level may open the door to new selling and a move back towards the bottom of the recent range.

Coffee in particular had a strong week for the second consecutive week and gained 10.95% for the week continuing the advance from the breakout from the prior trading range.

Currencies

The northern doji that we mentioned last week on the Dollar index on the 7^th June looks like it may be the top for now. The Dollar index declined 2.21% for the week and fell down to the support area, with Friday’s close of 8597 holding the market right on support. Buyers will need to return to the dollar early on Monday or support will be taken out and the market will possibly target the 83.40 area to the downside. The long term trend is still up and a move to 9000 remains the longer term target to the upside.

Last week we wrote that there was resistance around the $1.2150 area on the Euro and that that level may be tested in the coming week, which it was. The test was successful and pushed the market higher to the $1.2400 level that we said may follow and the market posted a high for the week at $1.2426 before closing marginally below $1.24 resistance at $1.2371, for a weekly gain of 2.38%. Last week’s move higher was likely short covering as there are many shorts in the market at present so if $1.24 is cleared again we may see further short covering and a continuation higher towards the $1.27 area. Further out we are likely to see new selling and a return possibly to the lows around $1.18-1.19.

The British Pound cleared resistance at $1.4774 and went further to $1.4890 at one stage before closing at $1.4796, which is above the prior resistance level. This suggests a further move to the upside towards $1.5050. The long term trend remains down.

Interest rate futures

Interest rate futures were pretty flat for the second week running with the markets undecided on future direction. The long term trends overall remain up for this sector.

Kind Regards

Robert Stewart