LS Trader Weekly Update

The past week saw the stock markets move lower early in the week and then recover on Tuesday. The week ahead promises to be interesting as the stock markets are now sitting at a key short term level and could move either way over the next few days.

Stocks

The S&P 500 began the week lower but found support at 1050 before working its way back up to 1100, closing at 1100.6. There have been a few failures to clear this level of late with resistance currently coming from the psychological 1100 level as well as from the 200 day moving average (currently sitting at 1103). In the short term the markets could go either way with short term support at 1050 and strong resistance at 1129.

The strongest of the US markets this week was the Nasdaq 100 which added 3.98% for the week whilst the Dow 30 added 3.25% having earlier pierced 10000 but finding support there.

Volatility Index (VIX)

Another down week for the VIX as complacency remains the order of the day for stock traders. The VIX was lower by 10.59% and closed at its lowest weekly close for 12 weeks at 23.47. There is good support for this market around 23, so we may see the VIX move higher this week.

Commodities

August Gold continues to drift sideways in the short term and we now have a range forming between $1175 support and $1220 resistance. The long term trend is still up but short term direction will be clearer once we have a breakout from this range. For now the best place is to be on the sidelines.

September Crude oil advanced 3.40% for the week but has still been unable to clear the $80 level, with resistance at contract highs of $80.82. A break above $80.82 may lead to some short covering and a decent push higher but until that resistance level is cleared a move back towards the bottom of the range at $71.50 remains equally on the cards. The long term trend is still down for Crude.

Currencies

Although only by a fraction of 1%, the Dollar Index fell for a seventh straight week but seems to be finding support from the 8225 area. Long term the trend is still up but if support at 8225 fails then a move lower to test 8000 may follow.

The Euro failed to make any impact on the $1.30 level, although it did briefly run as high as $1.3029 before pulling back towards some short term support around $1.27. Friday’s close at $1.292 suggests another test of $1.30 this week but new failure will likely see at least $1.27 to the downside. The long term trend is still down for the Euro.

The British Pound was lower during the early part of the week, bottoming out mid week around the $1.51 area. Friday’s close at $1.5419 is just below major resistance in the $1.55 area and the long term trend remains down until that level is crossed. It is looking increasingly likely that the Pound may break though that resistance level soon but for now resistance is still intact.

Interest rate futures

Interest rate futures had a week of relatively small losses by Friday’s close, the 5 & 10 year notes and the 30 year T Bond all made new contract highs during the week before giving up their gains. The trend is clearly still up but much will depend on the stock markets this week as interest rate futures generally have an inverse relationship with stock indexes.

Kind Regards

Robert Stewart