LS Trader

LS Trader Weekly Update

admin — Mon, 30 Aug 2010 02:13:45 +0000

Stocks continued to drift lower for the week but recovered somewhat on Friday but the trends remain down. Commodity and currency markets remain largely undecided on future direction as the general theme of volatility continues across many markets.

Stocks

Last week we wrote that the S&P 500 may fall further and test the 1050 target and that happened this week with a continuation lower to 1037.8, which were new 7 week lows. The market twice bounced off this level so there is good support here in the short term. That said, the short and long term trends are still down in this market as indeed they are for all stock indexes with the exception of the German Dax.

The Nasdaq 100 ended the week down by 1.98% but recovered from new 7 week lows having been considerably lower earlier in the week. The long term trend remains down. The Dow 30 fell 3 times through the psychological 10000 level but recovered on Friday. The trend is down in this market also and we may see further strength in the short term before a likely move lower to test 10000 again.

Volatility Index (VIX)

The VIX declined and ended the week lower by 4.08% at 24.45. Earlier we had seen the market move up towards the key 30 level as we had indicated may happen but fall short at 28.92. Once again future moves will be very much dependant on what happens in the stock markets and particularly the S&P 500 over the coming days.

Commodities

December Gold continued the uptrend this week, advancing higher by 0.74% for the week, reaching its highest level since the 1^st July. On Tuesday the market had a wave of major selling, taking the market back down to $1211.7, where buyers came back in. This level should provide good support should the market begin to show signs of weakness and there is also support at $1200. For now the trend remains up.

Silver had a very strong week in spite of some selling on Friday and ended the week ahead by 5.73% and we may now see a resumption of the long term uptrend.

October Crude oil began the week sharply lower, falling to $70.76 before recovering and going on to advance 1.83%. Heating oil and no leaded gas also followed this move but the trends remain down. There is good support for Crude around the $70 level and this will continue to be the target for bears.

Currencies

The Dollar Index was marginally lower by 0.23% for the week but continues to struggle around the 8300 level as we also wrote last week. This week saw a move up to 8363, which is dead on a resistance level and the dollar was unable to push up through that level. Long term the trend is down for the dollar index.

The British Pound continued marginally lower, falling by 0.12%. The pound had earlier been down as low as $1.5369 on Tuesday before recovering to close at $1.5512. This is back at the prior support/resistance area at $1.55 and the market is clearly undecided on future direction and could go either way. Long term the trend is still up.

The dollar fell once again to new contract lows against the Swiss franc, falling 0.59% for the week. As we wrote last week there are signs that the dollar may be bottoming out against the Yen but we also saw new contract and 15 year lows in this market before a recovery later in the week. The dollar was still lower by 0.44% for the week again. The trend is still against the dollar in both of these markets.

Interest rate futures

Interest rate futures ended marginally lower having been considerably higher earlier in the week. Yields once again fell to record lows in these markets, pushing prices up to new highs on Wednesday before moving lower to end down on Friday. These markets remain above support but there are signs that the trends may be weakening. We’ve been long this sector since early May, riding the trends higher and banked good profits from the September contract on Friday when we rolled forward in to December

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 23 Aug 2010 08:26:47 +0000

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

LS Trader Weekly Update

admin — Mon, 16 Aug 2010 04:24:57 +0000

Stocks made a breakout to the downside, in the direction of the long term trend and the US Dollar rose against the major currencies, reversing the recent trend. The long term trend remains down for the dollar against most of the majors and also remains down for stocks.

Stocks

Having once again failed to break through major resistance at 1129, the S&P 500 moved down through the bottom of a rising wedge pattern, moved back below the 200 day moving average and also fell through support at 1100. The S&P 500 ended the week at 1076.1 for a weekly decline of 3.88% and looks to be headed lower still, with 1050 as the next likely target. Of late, Monday’s have been up days for stocks so it will be interesting to see if that pattern continues, if not then a test of support at 1050 may come early in the week and further out we may see a go at 1000.

In spite of good numbers coming out of the German economy, showing that the German economy had its best quarter since 1990, the German Dax, which is the only stock index still in a long term uptrend, moved lower in line with the other stock indexes. There is some support for the Dax around the 6060 area and that level may well be tested this week.

Volatility Index (VIX)

The VIX shot higher during the past week and ended the week higher by 20.7%, closing at 26.24, forming a bullish engulfing pattern on the weekly chart. The recent levels of complacency indicated by the prior low readings on the VIX may be coming to an end and the week ahead may be an important one. The bullish engulfing pattern suggests higher prices ahead for the VIX and likely lower prices for stocks.

Commodities

December Gold eked out a small gain of 0.93%, ending the week once again above the $1200 level but failing to clear resistance at $1222, which looks fairly considerable at present. Friday saw a doji pattern, which although it is not a reversal pattern does suggest some indecision about at the resistance level and we may see a pullback from here before another move higher. If $1222 can be taken out and the market is able to close above it then we may see a move higher to at least $1250 and possibly another go at all time highs later in the year.

Last week we wrote about the tower top/evening star pattern on Crude oil, which pointed to lower prices this week and we certainly got that as Crude fell through the $80 level and dropped 6.66% for the week. We may now see a continuation lower towards $74 on the October contract. Other markets in the energy sector were also weak and with the long term trend still being down across the board, lower prices may follow.

Currencies

The Dollar Index bounced higher from support, breaking a sequence of nine straight down weeks and ending the week ahead by 3.16%. The dollar gained against the major currency pairs for the week, bucking the recent trend.

The British Pound failed to clear resistance at $1.60 and moved lower, as did the Euro, which may have put in a significant top at $1.3333 on the 6^th August and may now resume the long term downtrend.

The dollar recovered from new contract lows against both the Japanese Yen and the Swiss Franc and may test short term resistance this coming week.

Interest rate futures

Interest rate futures were higher across the board as yields fell to record lows and new contract highs were seen. For a change, the longer end of the markets, the 30 year Bonds were the best performer of the week, advancing by 1.91%.

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 09 Aug 2010 06:50:18 +0000

The past week has seen US stocks continue to move higher but still remain within the overall lateral trading range. Last week’s US jobs figure sent the markets tumbling at the US open on Friday but then show a strong recovery. We may see a breakout for stocks this coming week.

Stocks

The S&P 500 gained 1.93% for the week but was still unable to clear strong resistance at 1129 in spite of several attempts at doing so. The current formation between 1129 and the 1100 area suggests that a break of either may give rise to a decent move in the direction of the breakout. The long term trend remains down.

The German Dax remains the strongest of the stock indexes that we trade and the only one that remains in a long term uptrend. During the past week the Dax moved up to its highest level since September 2008, showing the strength of the European market above the US markets, which remain considerably below their highs of this year and ever further behind their highs of September 08.

Volatility Index (VIX)

The VIX remains relatively quiet, ending the week down and actually reaching its lowest level since the 3^rd May. Friday’s close at 21.74 is the lowest close for 15 weeks, showing the continued complacency with current stock levels in spite of the negative data that continues to be reported.

Commodities

December Gold rose back above the $1200 level, closing at $1205.3 for a weekly gain of 1.81%. As we have been writing recently, Gold continues to hold well above the 200 day moving average and the long term trend is up with support around $1160 currently looking solid.

Crude however did not fare so well and we have some bearish patterns forming at the $83 resistance area. The past 4 bars have formed a tower top/evening star pattern which points to lower prices short term and suggest that $83 may be the top for now. Conversely, the September contract still closed above $80 support, which having acted as resistance for so long should now provide some measure of support. In view of this it’s probably best to stay out of this market for now and see what develops. Long term the trend is down as it is for the whole of the energy sector.

The grains markets continue to be strong albeit with some large moves and some limit days. September Wheat ended the week up by 9.86% but had previously been as high as 841, before closing at 726.75. There were also gains for all of the other grains markets in what is currently a bullish sector.

Currencies

The Dollar Index fell for a ninth straight week, falling through long term support at 81 and giving a long term trend change to down.

The British Pound advanced 1.72% for the week and tested the $1.60 area but has so far been unable to clear it. Friday’s close at $1.5963 was the highest close in 6 months.

The Euro also advanced for the week, moving higher by 1.69% and remaining above the $1.30 level for the entire week and that may be a platform to build on. Friday’s close at $1.3274 is right on a resistance area that has so far held the Euro back. A close above $1.3280 may clear the way for a continuation higher towards $1.37 but for now the long term trend is still down.

The dollar fell to new contract lows against both the Japanese Yen and the Swiss Franc and may still head lower.

Interest rate futures

Interest rate futures continue to advance higher from the bullish engulfing pattern formed the previous Wednesday. The 5 & 10 year T notes and the 30 year T bond all made their way up to new contract highs as yields fell to new record lows. The long term trend remains up in each of these 3 markets and this sector remains the best trending sector of all at present.

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 02 Aug 2010 05:20:37 +0000

The past week saw the stock markets continue in the mixed fashion that we have seen of late and the markets remain undecided on future direction. We have also seen commodities begin to pick up, with some markets making decent moves to the upside and have seen continued weakness for the US Dollar.

Stocks

The 1100 area and the 200 day moving average continue to act like magnets for the S&P 500 (September contract) which traded within a range of less than 35 points for the whole week. The weekly chart shows a doji pattern, which is indicative of indecision. Friday’s close was just below the 1100 level on the September contract at 1098.3. Clearly this market can go in either direction at the moment, especially in the short term, but the long term trend remains down.

The Dow 30 actually tested the resistance area at 10535, set on the 21^st June but was unable to clear it. The fact that the Dow tested this level shows that this market is stronger than the S&P 500, which did not get close to testing the resistance level set on the same day in June at 1129.

The Nasdaq 100 also tested 1900 but also failed at that level, ending the week down by 0.61%.

Volatility Index (VIX)

The VIX was relatively quiet, ending the week up by just 0.13% and closing at 23.5 having earlier in the week tested the support at 23 that we wrote about last week. This level is still a support area for this market.

Commodities

Commodities on the whole had a good week, but Gold was one of the markets that were down for the week, falling 0.65% before closing at $1183.9 (December contract). We had earlier in the week seen a decline to $1159.3 but the market recovered from there and looks a bit more bullish short term having held above the 200 day moving average.

Crude ended the week flat and continues to trade within a sideways range that spans from $71.50 to $80. A break of either should give rise to some movement.

The grains sector had a strong week with big the biggest advance of 10.94% for Wheat. There were also gains for the Soybeans markets, Corn, Oats and Rough Rice. And there were also gains for Sugar and Coffee, which both look to be resuming the longer term uptrend.

Currencies

The Dollar Index fell for an eighth straight week as money continues to move out of the dollar and looks to be set for a test of longer term support around 81. For now the long term trend remains up for the dollar index.

Last week we wrote that the British Pound looked set to break through long term resistance at $1.55 and did so, pushing up to its highest level since February at $1.5693. The prior resistance area at $1.55 now has a change of polarity and should act as support for the market.

The Euro finally cleared the $1.30 level but has not been convincing in doing so. The Euro gained 1.04% against the dollar for the week and closed at $1.3054 having been as highs as $1.3106 on Thursday. There is some resistance around the $1.30 level and the long term trend is down.

Interest rate futures

Interest rate futures continued the long term uptrend having initially continued lower from the previous week. A bullish engulfing pattern formed on Wednesday in both the 5 & 10 year T notes and the markets continued higher from there. Both these markets proceeded to make new contract highs and the 30 year bond is not far behind. The long term trend remains up in each of these 3 markets.

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 26 Jul 2010 05:53:32 +0000

The past week saw the stock markets move lower early in the week and then recover on Tuesday. The week ahead promises to be interesting as the stock markets are now sitting at a key short term level and could move either way over the next few days.

Stocks

The S&P 500 began the week lower but found support at 1050 before working its way back up to 1100, closing at 1100.6. There have been a few failures to clear this level of late with resistance currently coming from the psychological 1100 level as well as from the 200 day moving average (currently sitting at 1103). In the short term the markets could go either way with short term support at 1050 and strong resistance at 1129.

The strongest of the US markets this week was the Nasdaq 100 which added 3.98% for the week whilst the Dow 30 added 3.25% having earlier pierced 10000 but finding support there.

Volatility Index (VIX)

Another down week for the VIX as complacency remains the order of the day for stock traders. The VIX was lower by 10.59% and closed at its lowest weekly close for 12 weeks at 23.47. There is good support for this market around 23, so we may see the VIX move higher this week.

Commodities

August Gold continues to drift sideways in the short term and we now have a range forming between $1175 support and $1220 resistance. The long term trend is still up but short term direction will be clearer once we have a breakout from this range. For now the best place is to be on the sidelines.

September Crude oil advanced 3.40% for the week but has still been unable to clear the $80 level, with resistance at contract highs of $80.82. A break above $80.82 may lead to some short covering and a decent push higher but until that resistance level is cleared a move back towards the bottom of the range at $71.50 remains equally on the cards. The long term trend is still down for Crude.

Currencies

Although only by a fraction of 1%, the Dollar Index fell for a seventh straight week but seems to be finding support from the 8225 area. Long term the trend is still up but if support at 8225 fails then a move lower to test 8000 may follow.

The Euro failed to make any impact on the $1.30 level, although it did briefly run as high as $1.3029 before pulling back towards some short term support around $1.27. Friday’s close at $1.292 suggests another test of $1.30 this week but new failure will likely see at least $1.27 to the downside. The long term trend is still down for the Euro.

The British Pound was lower during the early part of the week, bottoming out mid week around the $1.51 area. Friday’s close at $1.5419 is just below major resistance in the $1.55 area and the long term trend remains down until that level is crossed. It is looking increasingly likely that the Pound may break though that resistance level soon but for now resistance is still intact.

Interest rate futures

Interest rate futures had a week of relatively small losses by Friday’s close, the 5 & 10 year notes and the 30 year T Bond all made new contract highs during the week before giving up their gains. The trend is clearly still up but much will depend on the stock markets this week as interest rate futures generally have an inverse relationship with stock indexes.

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 19 Jul 2010 06:50:53 +0000

The past week saw the recent stock market rally run out of steam and reverse sharply on Friday, which may be a sign of things to come. We have also seen continued weakness in the US dollar, so the inverse correlation between stocks and the dollar continues to abate. The relationship between stocks, commodities and the dollar has been very high of late, meaning that most markets have been moving together with a higher degree of correlation than is the historical norm and if this relationship continues to subside, trading conditions will become a lot more favourable.

Stocks

The S&P 500 ran out of steam at 1100, which is also where the 200 day moving average is sitting. The combination of resistance from both of these areas appeared too much for the market and this led to a heavy sell off on Friday and what may prove to be a continuation of the long term downtrend. The counter trend rally that we had previously seen still looks like it was a bear market rally and odds favour lower prices from here especially if 1100 resistance holds.

We continue to see lower highs and lower lows in this market and this suggests a new low coming in this market in the not too distant future. The other stock markets will likely take follow.

Volatility Index (VIX)

The VIX ended the week higher by 5.08% having moved steadily higher for 4 straight days. The VIX had been higher on Friday, reaching a high for the week at 28.16 before closing at 26.25. This is still a relatively low level for the VIX and weakness in stocks will see the VIX move higher.

Commodities

August Gold continued to struggle, in spite of weakness for the US Dollar. The $1220 level has so far proved too much for Gold and we have seen a couple of tests of $1185 support during the past couple of weeks and will see this level tested again this week. Failure here will open the door to $1170 and possibly lower levels than that. Long term the trend is still up but a move back above $1220 will be needed soon or further selling is likely.

Crude Oil continues within the recent sideways trading range that has formed between around $71.50 and $81 (September contract). We view it as best to stay out of this market whilst it stays within this trading range and let the bulls and bears fight it out for future direction. A beak of either one of the 2 aforementioned levels may give rise to a move and at present that break favours being a downside break, in the direction of the prevailing long term trend.

Currencies

A sixth straight week of declines for the Dollar index took out support at 8340 that we have been writing about for the past few weeks. Failure to hold that support level gives anew downside target of 8050, but long term the trend is still up. At present we have no reversal signals in this market to suggest that the selling is over so we may see a continuation lower yet before some support is found. Much will depend on what happens with the Euro.

The Euro itself had a strong week, gaining 2.35% in what is still a counter trend move. This move briefly tested the $1.30 level but stalled at $1.3006. The short term trend remains up but long term trend is still down.

The British Pound continued to advance but may have run out of steam at major resistance around the $1.55 level. Friday’s dark cloud cover pattern tends to confirm that key resistance level so we may see some weakness form here and the long term trend remains down. If however the market can get back up above $1.55, a level not seen since February then we may have a change of long term trend to up and the potential for a larger move higher.

Interest rate futures

Interest rate futures had a very good week with the 5 & 10 year notes both making new 52 week highs and the 30 year T Bond not far from doing so. Having drifted lower for much of the previous 2 weeks we had a bullish engulfing pattern form on Tuesday and Wednesday confirming short term support and the markets have been strong since. The long term trend remains up in this sector and these markets continue to look bullish and that will remain the case until support is taken out.

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 12 Jul 2010 06:05:31 +0000

The past week saw the stock markets rally sharply from support during a light volume holiday week in the US. It will be interesting to see the market’s reaction this week as traders return to action and volume is likely to pick up substantially.

Stocks

The S&P 500 rallied from psychological support from the 1000 level and gained 5.74% for the week in what must be considered a bear market rally. Our indicators show that the long term trend is down and we are in bear market territory with the market forming lower highs and lower lows. The odds favour lower prices longer term and last week’s rally was likely overdone, although it may yet continue in the short term. If we get a continuation higher we can look to strong resistance at the prior highs around 1130. Otherwise look for another test of the 1000 level, which if broken may lead to a steep decline.

Volatility Index (VIX)

The VIX was sharply lower for the week as stocks rallied. The VIX fell back below what many consider the critical 30 level and ended the week lower by 17.07%, closing at 24.98. The VIX may sharply reverse this move if stocks start moving south again. Volatility is still relatively cheap at these levels.

Commodities

August Gold continued with short term weakness early in the week before posting a new 5 week low on Wednesday at $1185. From there the market moved back above $1200 before ending the week at $1209.8. The market formed a bull harami pattern on the weekly chart and looks set to test resistance at $1215 and if that level is cleared then we may see further strength. The long term trend is still up.

Crude oil had a strong week and rose in line with stocks. The September contract advanced 5.55% before closing at $76.63, roughly in the middle of the recent trading range between $69.50 and $80. Those 2 levels remain the levels to watch for now and we’ll be staying out of this market during this sideways action.

Currencies

The Dollar index had a fifth straight down week but looks to be finding some support around the 8400 level. We had written previously that we were looking for a move lower to 8340 but so far the selling ran out of steam at 8385. The action of the past few days has been within a fairly tight range so we may be building up for a larger move soon. Long term the trend remains up.

We wrote last week that the short term trend was showing bullish signs and that we were looking for a move higher to $1.27 but that the long term trend was still down. The market did reach $1.27 resistance with a high for the week at $1.2725 before closing right on the resistance level. The daily bar formed on Friday was a dark cloud cover, which is bearish, so as this has formed at a resistance level and the long term trend is down we may see some weakness. The more important weekly chart shows indecision also at the current level.

We have similar action and patterns on the British Pound, confirming resistance at $1.52, but the market has still been able to close above the $1.50 level. For now this market is continuing sideways and the long term trend is down.

Interest rate futures

Interest rate futures were lower for the week, moving inversely to the stock indexes. The long term trend is still up in this sector and the pause in the uptrend that we wrote about last week has led to short term weakness. The markets however still remain above what would be considered quite strong support so the rally may yet resume.

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 05 Jul 2010 06:43:48 +0000

The past week has seen the stock markets the stock markets break down through support and give a long term trend change to down. We have also seen selling in several commodity markets and a continuation of short term US dollar weakness. Long term the trends are now up for the US dollar, up for commodities (but only just) and down for stocks. This Monday is a holiday in the US for Independence Day.

Stocks

Last week we wrote “There are now 2 levels to watch on the S&P 500, and these are 1129.20 to the upside and 1034.8 to the downside, the second of these levels, which is major support, is the more significant.” The S&P 500 fell through this major support level and reached its lowest level since early October last year. The long term trend is down and although there is always the possibility of a bounce higher after sustained selling, the odds favour lower prices in the longer term. The large head and shoulders pattern suggests a possible move lower to 860.

From last week on the Dax “The odds favour lower prices in the short term here and the psychological 6000 level may be tested early this week.” The 6000 level was tested and no support was found and this lead to a decline of 3.92% for the week down to a close of 5841.5. The Dax has been the strongest index of late and the long term trend is still up in this market, but this will likely change before much longer, especially in US weakness continues.

Volatility Index (VIX)

The VIX moved higher for the week gaining 5.57% but the week was mixed overall. The ViX was sharply higher early in the week and also early on Friday before dropping off later in the day, likely due to light trading ahead of the US holiday on Monday.

Commodities

August Gold reversed sharply, having failed to push higher to new highs and briefly took out support at $1200 before closing at $1207.7 for a net loss for the week of 3.86%. We will likely see another go at $1200 this week with strong support now at $1196. If this level fails then $1170 minimum will be expected to the downside. Long term the trend is up but weakness is present in the short term.

Last week we wrote on Crude: “Expect another test of $80 this week but another failure will likely lead back to $75.” August Crude was higher on Monday but stalled just below $80 and fell back to $75 as expected. The selling continued from there and we got a close at $72.14 and a decline for the week of 8.52%. We may get a test of support around $68.50 soon.

Currencies

The Dollar index continues to head south for now although this may change if the stocks markets continue to weaken. Support around 8550 failed and we may now see a continuation lower to around 8340. If stocks do continue to sell off then the dollar will likely be the beneficiary as money heads back to safer assets.

Last week we wrote that we may see a test of $1.25 on the Euro and that if that level is cleared then a move higher towards $1.27. The Euro did test and clear $1.25 and closed at $1.2557 for a gain for the week of 1.32%. The short term trend is now showing bullish signs but the long term trend is still down.

The British Pound managed a sixth straight week of advances, gaining another 1.04% for the week. There are some signs that a base may be forming around $1.50 and the market seems able to continually close above that level. The long term trend is still down but the short term trend is up and bulls will be targeting the next resistance level at $1.55.

Interest rate futures

Interest rate futures continue to move higher and both the short and long term trends remain up. The biggest gainer for the week in this sector was the 30 year T bond, which added 1.45% for the week and was considerably higher earlier in the week. The 5 & 10 year notes were also higher but stayed within a small range from Wednesday onwards as these markets appear to be pausing at these levels.

Kind Regards

Robert Stewart

LS Trader Weekly Update

admin — Mon, 28 Jun 2010 07:45:45 +0000

The past week has seen the stock markets end their recent strength and move lower virtually across the board. We also saw a continuation of recent dollar weakness so the inverse relationship between stocks and the dollar is fading at the moment but if stocks continue to decline we may see money moving back in to the dollar.

Stocks

Last week we wrote “The S&P 500 cleared and closed above the 1100 level, reaching new highs for the week of 1117.1 and may now continue higher, although the price action of the past 3 days suggest some tiredness in this market.” On Monday the S&P 500 pushed higher initially but then sold off and was down for 4 straight days, with only a small up day on Friday, likely due to short covering ahead of the weekend preventing 5 consecutive down days. The S&P 500 ended the week down by 3.2%. There are now 2 levels to watch, and these are 1129.20 to the upside and 1034.8 to the downside, the second of these levels, which is major support, is the more significant.

The German Dax posted new highs for the year on Monday but then sold off quite sharply, with a bearish engulfing pattern on the weekly charts confirming resistance at contract highs. The odds favour lower prices in the short term here and the psychological 6000 level may be tested early this week.

Volatility Index (VIX)

The VIX moved ahead for the week as stocks fell, gaining 19.92%. The VIX touched the 30 level, which has been reasonably significant this year twice, both on Thursday and Friday but closed just below that at 28.53. The weekly chart now has a bullish engulfing pattern so we may be headed for higher levels on the VIX especially if stocks continue to weaken.

Commodities

August Gold posted new all time highs again this week at $1266.5 but then sold off before eventually finding support at $1225. Friday’s close at $1256.2 suggests a test of all time highs again soon and a close above all time highs may lead to a good continuation higher. The trend remains up as long as $1200 support holds.

Last week we wrote: “We may now get a test of $80 soon but failure to clear that level may open the door to new selling and a move back towards the bottom of the recent range.” The August contract moved up towards $80 on Monday but failed just 6 cents short and fell back to the OPEC level of $75 before moving higher again and closing at $78.86. Expect another test of $80 this week but another failure will likely lead back to $75.

Coffee had another strong week, advancing another 4.19% and is now up over 24% for the past month. Coffee was in fact considerably higher on Thursday but pulled back somewhat and then closed flat for the day on Friday.

Currencies

The northern doji that we mentioned may have been the top on the Dollar index on the 7^th June did turn out to be that way for now as the index fell through support and registered a third straight down week. We then saw a minor recovery before further weakness and the index closed in the support area around 8550. If this support area fails then we may see a continuation lower to around 8340.

Last week we wrote that if $1.24 is cleared on the Euro again that we may see further short covering and a continuation higher towards the $1.27 area. $1.24 was cleared early in the week but the market closed just below that level at $1.2393. We may see a test of $1.25 this week and if that level is cleared then a move higher towards $1.27.

The British Pound continues to move higher, reaching it’s highest level in 7 weeks, moving slightly further than the $1.5050 level that we targeted last week, but perhaps significantly closing above $1.50 at $1.5038. The long tern trend remains down but higher prices in the short term look likely and bulls will be targeting the next resistance level at $1.55.

Several markets gained for the week against the dollar, in particular the Japanese Yen, which looks set for a test of resistance this coming week.

Interest rate futures

Interest rate futures advanced for the week with both the 5 & 10 year notes reaching new contract highs, which were also new highs for the year. The 30 year bond fell just short of contract highs but we may see them tested this coming week. The long term trends overall remain up for this sector.

Kind Regards

Robert Stewart