LS Trader Weekly Update

The past week has seen US stocks continue to move higher but still remain within the overall lateral trading range. Last week’s US jobs figure sent the markets tumbling at the US open on Friday but then show a strong recovery. We may see a breakout for stocks this coming week.

Stocks

The S&P 500 gained 1.93% for the week but was still unable to clear strong resistance at 1129 in spite of several attempts at doing so. The current formation between 1129 and the 1100 area suggests that a break of either may give rise to a decent move in the direction of the breakout. The long term trend remains down.

The German Dax remains the strongest of the stock indexes that we trade and the only one that remains in a long term uptrend. During the past week the Dax moved up to its highest level since September 2008, showing the strength of the European market above the US markets, which remain considerably below their highs of this year and ever further behind their highs of September 08.

Volatility Index (VIX)

The VIX remains relatively quiet, ending the week down and actually reaching its lowest level since the 3^rd May. Friday’s close at 21.74 is the lowest close for 15 weeks, showing the continued complacency with current stock levels in spite of the negative data that continues to be reported.

Commodities

December Gold rose back above the $1200 level, closing at $1205.3 for a weekly gain of 1.81%. As we have been writing recently, Gold continues to hold well above the 200 day moving average and the long term trend is up with support around $1160 currently looking solid.

Crude however did not fare so well and we have some bearish patterns forming at the $83 resistance area. The past 4 bars have formed a tower top/evening star pattern which points to lower prices short term and suggest that $83 may be the top for now. Conversely, the September contract still closed above $80 support, which having acted as resistance for so long should now provide some measure of support. In view of this it’s probably best to stay out of this market for now and see what develops. Long term the trend is down as it is for the whole of the energy sector.

The grains markets continue to be strong albeit with some large moves and some limit days. September Wheat ended the week up by 9.86% but had previously been as high as 841, before closing at 726.75. There were also gains for all of the other grains markets in what is currently a bullish sector.

Currencies

The Dollar Index fell for a ninth straight week, falling through long term support at 81 and giving a long term trend change to down.

The British Pound advanced 1.72% for the week and tested the $1.60 area but has so far been unable to clear it. Friday’s close at $1.5963 was the highest close in 6 months.

The Euro also advanced for the week, moving higher by 1.69% and remaining above the $1.30 level for the entire week and that may be a platform to build on. Friday’s close at $1.3274 is right on a resistance area that has so far held the Euro back. A close above $1.3280 may clear the way for a continuation higher towards $1.37 but for now the long term trend is still down.

The dollar fell to new contract lows against both the Japanese Yen and the Swiss Franc and may still head lower.

Interest rate futures

Interest rate futures continue to advance higher from the bullish engulfing pattern formed the previous Wednesday. The 5 & 10 year T notes and the 30 year T bond all made their way up to new contract highs as yields fell to new record lows. The long term trend remains up in each of these 3 markets and this sector remains the best trending sector of all at present.

Kind Regards

Robert Stewart