LS Trader Weekly Update

The past week has seen the dollar continue recent short-term strength against the long term trend. This has not helped commodities, many of which are lower. Stocks have also been unable to move higher and for the most part have moved slightly lower. For now the long term trends are as before, up for stocks and commodities and down for the dollar.

Stocks

The S&P 500 ended the week flat but had been higher during the middle of the week. We may now see a test of short-term support around 1325.

The Nasdaq 100 ended the week marginally lower, but as with the S&P 500 is heading lower towards short term support. If support around 2364 fails we may see a continuation lower towards 2300 and possibly as low as 2250.

The Germax Dax also ended the week marginally lower but is slightly further above short term support than the Nasdaq 100 and S&P 500. The Dax may also benefit from support from the rising window around the 7280-7290 area. The long term trend remains up for the indexes with the exception of the Nikkei, which remains the weakest of the indexes and the most likely to break down first.

Commodities

Gold continued to push higher from support at $1460 and crossed $1525 briefly on Wednesday before moving lower again with a bearish engulfing pattern. The volatility in this market continued as we then saw a hammer pattern form on Thursday's candle, which is a bullish reversal pattern, especially is the low of the hammer bounced off the long-term trend line, which has been in place since the February lows at $1310. Friday did not see a continuation higher though from the hammer and we may see another test of the trendline this week. The long-term trend remains up.

Crude continues to find support around 9500, and actually ended the week higher, forming a bull harami pattern on the weekly charts. The market looks to be groping for support around 9500 as evidenced by the long lower shadows seen on a few of the recent daily candles. These lower shadows have also bounced of the long-term trendline, which currently sits just above 9500.

No leaded gasoline futures fell 10 percent in only 2 days after the US saw its first rise in gasoline inventories for 11 weeks, as the energy markets remain highly volatile. For now the long term trend remains up across the sector, with the exception of Natural Gas.

Continued weakness has been seen in the grains sector, where most of the markets have continued lower with a handful of the markets in this sector declining sufficiently to give a long term trend change to down.

Currencies

The dollar index continued higher from the prior week and tested the 7600 level that we wrote about last week. In the short term things are looking better for the dollar but there are still a lot of traders that remain short the dollar and much of the recent rally may be down to some of those short trades being unwound. If the index can continue higher above 7600, the next targets will be 7687 and then 7767. The long term trend however is still very much down and further strength will be required before that changes.

Interest rate futures

Interest rate futures ended the week slightly higher, and each of the 4 markets that we trade hit new highs for the year with the exception of the short term 3 month Eurodollar. The long term trend remains up across the sector.

Kind Regards

Robert Stewart