LS Trader Weekly Update

Stocks moved further to the downside, reaching 4 week lows in the process having failed once again to clear short term resistance. The US Dollar continued its recent rise against most of the major currencies, whilst commodity markets were mixed. The long term trend remains down for stocks.

Stocks

The S&P 500 tested both ends of the recent short term trading range, moving to new 4 week lows in the process and failing to push back up above the 1100 resistance level. By Friday’s close the S&P 500 was lower by 0.54% but had earlier in the day reached a new short term low at 1061.8, which will be the immediate focus for this week. We wrote last week that 1050 was the next likely target and that remains the case in the week ahead.

Possibly the only bullish thing for the S&P 500 at present is that a couple of the daily candles had long lower shadows and this indicates that the lows are being rejected. However, there are no reversal patterns on the daily or weekly charts that suggest an imminent reversal so the odds favour a continuation lower in the direction of the short and long term trends.

Volatility Index (VIX)

The VIX was marginally lower this past week by 2.86%, closing at 25.49. We may see higher prices for the VIX this week if stocks continue to fall and possibly a test of the key 30 level.

Commodities

December Gold finally cleared the $1222 resistance level that we have been writing about of late, ending the week ahead by 1%. We may now see a resumption of the long term uptrend as long as support at $1200 holds.

Crude oil has continued lower from the tower top/evening star pattern that we wrote about 2 weeks ago. Last week saw crude finally break out of the short term trading range and may now be headed lower towards $70. Heating oil, no leaded gas and natural gas all followed crude lower and the trend for the energy sector remains bearish.

Elsewhere there were some decent up-moves in soft commodities with Sugar making new 5 month highs and Coffee Arabica moving up to its highest level in 12 years. There were also decent moves higher in the cattle markets.

Currencies

The Dollar Index was marginally higher by 0.15% for the week but continues to struggle around the 8300 level. The long term trend is still down for the dollar index.

The British Pound continues lower having failed to clear resistance at $1.60, briefly falling through support at $1.55 this week. There was some rejection of lower levels this week and the Pound managed to climb back above $1.55. The long term trend is still up for the Pound but weakness is present in the short term.

The Euro may be resuming the long term downtrend having fallen through short term support this week. It remains to be seen as to whether the highs formed on the 6^th August at $1.3333 prove to be the highs of this move.

The dollar fell to new contract lows against the Swiss franc again but may be bottoming out against the Japanese Yen, which has failed to push further down through support from 15 year lows.

Interest rate futures

Interest rate futures once again pushed up to new contract highs as yields again fell to record lows. The strongest market of this sector continues to be the 30 year T Bonds, which advanced 1.52% for the week. This week brings the expiration of the September contract as the markets roll forward in to December contracts.

Kind Regards

Robert Stewart