LS Trader Weekly Update

The past week has seen increased volatility across many markets, with a commodity sell-off being led by Silver and oil. We have also seen a dead cat bounce in the dollar index which has moved higher for the first time in quite a while and also a move lower in stocks. The long term trend in most markets remains unaffected with the dollar remaining in a bear market and commodities overall still very much in a bull market.

Stocks

The S&P 500 sold off quite steeply during the first 4 days of the week and moved back below the neckline of inverse head and shoulders pattern that we have been writing about recently. Friday's candle pattern is a bull harami on the daily charts. This is not a reversal pattern but indicates instead that the selling is starting to wane, to lose momentum. It is not unusual for inverse head and shoulders patterns for the market to return and test the neckline again before continuing higher. This may lead to a move back above the neckline and a continuation of the longer term pattern higher, especially if we get a close back above 1350 ealry in the coming week.

The Nasdaq 100 remained more bullish than the other US indexes and is holding above support provided by change of polarity from the highs earlier this year and there are further support levels all the way back to 2300.

The Germax Dax also recovered from the selling during the first part of the week, forming a hammer on Thursday's daily bar and then breaking back up above the highs posted back in February. This may yet lead to another test of the local top.

Commodities

Commodities had one of their largets sell-offs in recent years during the past week, with huge moves lower in the metals and energies. This was largely triggered by Silver, which had been unable to clear the $50 level and a sell-off followed across many markets. Commodities however remain in a long term bull market in spite of the recent selling although last week's selling has led to a long term change of trend for several commodity markets to down.

Gold also underwent heavy selling but found some support at $1460 and formed a bull harami pattern on Friday, which indicates that the selling momentum may be waning. The long term trend remains up.

Currencies

The dollar index halted recent declines and did not reach the 2008 lows at 7070, which was the downside target for many. Instead we saw a move higher on Thursday and Friday, which may continue higher to test resistance at 7600.

The Euro failed to reach the $1.50 level and after a change in expectations for future rate hikes for the Euro, a two day sell-off ensued with the Euro ending lower for the week by 3.35%. The long term trend remains up for now but the market looks set to test support this week.

Interest rate futures

Interest rate futures have continued to rise over recent weeks and the short-term strength has continued to push this sector higher to new highs for this year and to a long term change of trend to up.

Kind Regards

Robert Stewart