LS Trader Weekly Update

We wrote last week about the inverse relationship between stocks and the dollar and the fact that the ever declining dollar is not benefiting stock indexes at present and this has continued to be the case this week with the dollar index falling to new 16 month lows, but stock indexes still being unable to push higher. In addition, the dollar has also lost its safe haven status that it has held for many years as the past week has seen a move in to safe haven markets such as gold and bonds but has seen further weakness for the dollar.

As before the dollar remains in a long term downtrend, stocks remain mixed and the trend for commodities is still mostly up.

Stocks

The S&P 500 once again failed to take out the highs of the year at 1337.5 (June contract) and now has the possibility of developing into a double top. We wrote last week that failure to take out resistance may lead to a decline to 1300 and the market actually fell to 1298.5 before recovering to 1318. Therefore we now have a short term range between 1298.5 and 1337.5 and a break of either could give rise to a decent move in the direction of the breakout.

Nasdaq 100 ended the week for a second straight week and as before the potential for lower highs remains. The highs at 2357.5 will need to be taken out soon otherwise we will likely see a move lower, possibly down to 2200.

Commodities

Gold advanced again, this time making new all time highs and still looks set for our target of $1500. The only possible spanner in the works is the hanging man pattern on the weekly chart, which is a bearish pattern and in this instance may end up confirming resistance between last week's all time highs and $1500.

Silver also continues its impressive run with a twelfth straight week of gains taking the metal to new 31 year highs. Unlike gold, there are no reversal patterns so far indicating tiredness in this market.

Crude initially posted new highs since 2008 but fell short of our target at the September 2008 highs at $115.09. No leaded gasoline is now the strongest market of the sector and is now at its highest level since July 08.

There has been some weakness in grains over the past week with Soybeans in particular groping for support at just above the 1300 level, as evidenced by a few long lower shadows on the daily charts.

Currencies

The dollar index fell to new 16 month lows during the past week and the downside target is still the 2009 lows at 7417. The Euro ended the week flat having stayed in a fairly tight range over the past week. The upside target at $1.4550 remains in place but so far $1.4500 has held firm.

The Aussie dollar managed another week of gains, albeit relatively small ones but we have a new high close again in this market. The New Zealand dollar has continued its amazing run, with 19 up days from the past 21.

Interest rate futures

Interest rate futures reversed over the past week making a counter trend move as traders looked for the safe haven of gold and bonds. The long term trend however still remains down in this sector.

Kind Regards

Robert Stewart