LS Trader Weekly Update

Stocks markets saw a large turnaround as the S&P 500 found strong support and helped push stocks higher. Commodity markets also rallied with a few markets making multi year highs as the US dollar fell. This will be a shortened trading week as US markets are closed Monday for the Labor Day holiday.

Stocks

The S&P 500 found strong support from a triple failure to break through 1040 and the market rallied from there all the way back up to the 1100 level, closing at 1103. This still leaves the market a fraction below the 200 day moving average, currently sitting at 1107. On a seasonal basis September is the weakest month of the year and there have often been substantial declines following the Labour Day holiday. That said, there is no doubting that there has been considerable short term strength with the S&P 500 gaining 3.74% for the week. Substantial resistance is still in place at 1129 and the market will still be considered to be in bearish territory as long as it remains below that level.

Volatility Index (VIX)

The VIX fell to its lowest level in 18 weeks as stocks rallied. Friday’s close at 21.31 marked a decline for the week of 12.84% and the lowest close since the 3^rd May.

Commodities

December Gold advanced 1.07% for a fifth straight week of gains, closing above $1250 at $1251. We may yet see a continuation higher towards all time highs at $1270 but heavy resistance can be expected at that level.

Silver also advanced, adding another 4.59% and looks set to test the 2000 level soon, having so far fallen just short at 1998.5. The metals sector is looking bullish again and advances have also been seen for Palladium and Copper.

Crude oil ended the week lower but as with other energy markets rallied from the lows early in the week. The long term trend remains down but in the very short term the lower levels are being rejected. It remains to be seen as to whether these markets have sufficient momentum to push higher through resistance.

Soft commodities continue to move higher with a new 12 year high close for Coffee and a 15 year front month high for Cotton. Sugar also regained the 20 level, closing at 20.6.

Currencies

The Dollar Index was lower again, closing down 1.02% by Friday’s close. The dollar also put in a new low close against the Japanese Yen and the Swiss franc and is at 15 year lows and 7 month lows respectively.

The British pound edged lower against the US dollar for a fourth straight week and $1.60 is looking more and more like a significant top for now. Support has come in just above $1.53 and it remains to be seen whether the market can push lower through that support. The long term trend remains up.

The Euro continues to find support from the $1.26 area and is in a range at present between $1.26 and $1.29. A break of either level may give rise to some decent movement in the direction of the breakout. The long term trend remains down for the Euro.

Interest rate futures

Interest rate futures failed to make new highs and as with the previous week, the weekly candles are showing a rejection of higher levels and the uptrend in these markets may be coming to an end. The long term trend is still up and must still be considered bullish but we will likely see a test of support soon
Kind Regards

Robert Stewart