LS Trader Weekly Update

The past week saw the stock markets continue in the mixed fashion that we have seen of late and the markets remain undecided on future direction. We have also seen commodities begin to pick up, with some markets making decent moves to the upside and have seen continued weakness for the US Dollar.

Stocks

The 1100 area and the 200 day moving average continue to act like magnets for the S&P 500 (September contract) which traded within a range of less than 35 points for the whole week. The weekly chart shows a doji pattern, which is indicative of indecision. Friday’s close was just below the 1100 level on the September contract at 1098.3. Clearly this market can go in either direction at the moment, especially in the short term, but the long term trend remains down.

The Dow 30 actually tested the resistance area at 10535, set on the 21^st June but was unable to clear it. The fact that the Dow tested this level shows that this market is stronger than the S&P 500, which did not get close to testing the resistance level set on the same day in June at 1129.

The Nasdaq 100 also tested 1900 but also failed at that level, ending the week down by 0.61%.

Volatility Index (VIX)

The VIX was relatively quiet, ending the week up by just 0.13% and closing at 23.5 having earlier in the week tested the support at 23 that we wrote about last week. This level is still a support area for this market.

Commodities

Commodities on the whole had a good week, but Gold was one of the markets that were down for the week, falling 0.65% before closing at $1183.9 (December contract). We had earlier in the week seen a decline to $1159.3 but the market recovered from there and looks a bit more bullish short term having held above the 200 day moving average.

Crude ended the week flat and continues to trade within a sideways range that spans from $71.50 to $80. A break of either should give rise to some movement.

The grains sector had a strong week with big the biggest advance of 10.94% for Wheat. There were also gains for the Soybeans markets, Corn, Oats and Rough Rice. And there were also gains for Sugar and Coffee, which both look to be resuming the longer term uptrend.

Currencies

The Dollar Index fell for an eighth straight week as money continues to move out of the dollar and looks to be set for a test of longer term support around 81. For now the long term trend remains up for the dollar index.

Last week we wrote that the British Pound looked set to break through long term resistance at $1.55 and did so, pushing up to its highest level since February at $1.5693. The prior resistance area at $1.55 now has a change of polarity and should act as support for the market.

The Euro finally cleared the $1.30 level but has not been convincing in doing so. The Euro gained 1.04% against the dollar for the week and closed at $1.3054 having been as highs as $1.3106 on Thursday. There is some resistance around the $1.30 level and the long term trend is down.

Interest rate futures

Interest rate futures continued the long term uptrend having initially continued lower from the previous week. A bullish engulfing pattern formed on Wednesday in both the 5 & 10 year T notes and the markets continued higher from there. Both these markets proceeded to make new contract highs and the 30 year bond is not far behind. The long term trend remains up in each of these 3 markets.

Kind Regards

Robert Stewart