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LS Trader Weekly Update – Monday 7th May 2012

May 6th, 2012

The month of May has got off to a weak start for stock indexes, which have all sold-off this week, having failed to make new highs for the year. This has taken all of the indexes that we trade at LS Trader back below their 50-day moving averages.

The dollar reversed the prior week’s moves and ended the week higher against all of the majors with the exception of the Yen. This has led to weakness for most commodities. The long-term trends are still up for stocks, mixed for the dollar and mostly down for commodities.

Stocks

The S&P 500 topped out for the week on Tuesday and spent the rest of the week in decline. It remains to be seen as to whether we have already seen the highs for the year for the stock indexes. The answer to question may be clearer once we see the market’s reaction to a test of what should be quite go od support around 1350. If 1350 support fails and we get a confirmed break out of the current box range, then we can take the height of the range and subtract it from the low of the range to give a target of around 1290. For now the trend is still up.

We wrote last week about the relationship between Apple and the Nasdaq 100, and this week saw Apple make a large decline falling some 6.26% for the week and now looks to be heading for a test of support around $555, a break of which may open the way to further declines. Such a move would have a bearish impact on the Nasdaq 100, which has closed right on support at 2625 on the June contract. If 2625 gives way, the next support is at 2575. For now the trend is still up.

The German Dax did push above 6800 on an intra day basis but was unable to close above that level and subsequently moved lower once again and now looks to be headed for a test of the lows of the current trading around 6500. Just below this is a furth er support level created by the change of polarity from the October highs, so a key support zone is in play for the week ahead. For now the trend is still up but the market’s reaction at this support zone will provide a clue as to near term direction.

Commodities

Gold edged lower by 1.18% and continues the longer-term downtrend. The market almost reached as highs as short-term resistance at $1680 but failed to reach that far and moved back towards the lows of the range. A test of the April lows at $1613 looks likely and if that support level fails then a move to the year’s lows at $1528.6 would become the target.

Crude may a precipitous decline in the last 2 trading days of the week, taking out the support level around $101 that we wrote about a few weeks ago. The trend still remains up and a test of the 200 day moving average looks highly likely this week, with a bounce from there a pos sibility due to the extent of the 2 day move. A change of long-term trend to down is now within range.

Currencies

The dollar advanced against most of the majors and a few key support and resistance levels may be tested this week, none more important than the $1.30 level that we have been writing about for the past few weeks. Many traders will be focused on this level and a break below it, especially on a closing basis could spark a dollar rally and a breakout higher for the dollar index.

The commodity based currencies have been heavily hit this past week as a move back towards the risk-off trade has been evident, hence the move out of the riskier currencies and into the U.S dollar.

Interest rate futures

Many so called experts have been warning against interest rate futures for quite some time and have been giving sell recommendations for ages. The fact remains though that these markets are still very much in a bull market and the trend is firmly up. This was confirmed by the sharp rejection of the lows back in March and the subsequent strong rally seen since which has taken the 10 year T note back to new highs. Trying to pick tops and going against such a strong trend is a dangerous move. Trading with the trend is a far safer option even though prices are at record highs and yields at record lows. One potential fly in the ointment to higher prices is the fact that the 5 year T note is now right at resistance formed by its all time highs, and the weakest of the sector, the 30 year bonds are also approaching a test of all time highs.

Good Trading

Phil Seaton
www.LSTrader.co.uk

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LS Trader Weekly Update – Monday 30th April 2012

April 29th, 2012

The past week has seen stocks continue their short-term recovery and move back above their respective 50-day moving averages. The long-term trend is still very much up for stocks and a continuation towards the highs of the year is now a possibility once again.

The dollar weakened across the board and the dollar index in particular may be heading for a test of key support, a break of which would change the long-term trend for the dollar back to down. Commodities have been mostly bullish, helped by dollar weakness.

Stocks

Stock indexes pushed higher, led by the Nasdaq 100, which benefitted from superb results from Apple. Apple makes up around 20% of the Nasdaq 100, which is one of the reasons that Nasdaq has been leading the stock indexes of late, with Apple seemingly moving ever higher. Apple ended the week higher by 5.24 % having giving back some of the gains following the report on Tuesday that resulted in a large gap higher. Gaps often get filled, but the low of the gap is also a key support area, so should Apple drift back down and close that gap, support can be expected, which would in turn likely support the Nasdaq 100.

The German Dax moved higher for a second week and is currently testing the 6800 resistance level that we wrote about last week. A move above 6800 may open the door for a test of 7000.

Last week we wrote: “a glance at the longer term weekly charts still shows how bullish the markets are and what we have seen so far is a relatively small correction and nothing as yet to become to alarmed about. The S&P 500 still has good support at a couple of support zones around 1350 and 1330. As long as those hold the longer trend will still be very much intact.” The S&P 500 did fall almost to 1350 where support did come in and in a big way, taking the index back o ver 1400 briefly. For those that are familiar with advanced candlestick patterns, the last 3 days of the week have formed a pattern known as the advanced block, which indicates selling coming in at the highs of the past 2 days, and thereby providing resistance. If this resistance can be cleared then a test of the highs of the year may follow.

On a seasonal basis we are coming to the end of April and the end of the best 6 months of the year, and also heading into May, synonymous with the “Sell in May and go away”. However, as we always say, the charts and the price is more important than any seasonal indicator.

Commodities

Gold ended the week higher by 1.34% but continues to look undecided on direction. The short term is pushing gradually higher and may well test short-term resistance around $1680 this week. The long-term trend is however still down and the market still remains below the 200 day moving average.

Once again the big moves came in Soybean Meal and Soybeans, which advanced 4.51% and 3.04% for the week respectively. These have both been excellent trades and are currently the most profitable trades of the year for the LS Trader system. This week’s rollover of Soybean Meal banked a huge 8790 spread betting points profit as it continues to post new all time highs.

Currencies

The dollar index has continued to head lower since failing to clear resistance in the previous week and may now be heading for a test of what is possibly quite a significant support level, a break of which would change the long term trend to down. The British Pound continued to push higher and looks to be heading for our next target around $1.6350. The long-term trend is now up for the Pound. Several other currencies are now pushing towards a change of long-term trend to up against the dolla r and a new spell of dollar weakness could be on the horizon. Much though will depend on stocks and whether they can continue up to and through the recent highs.

Interest rate futures

The long-term trend remains up for interest rate futures, and this week saw the 10 year T note reach a new all time high as yields returned to record lows again. There are some indecision patterns present on the daily charts, which suggest that once again the momentum may be waning, but there is no question that both the long-term and short-term trends are still up.

Good Trading

Phil Seaton

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LS Trader Weekly Update – Monday 23rd April 2012

April 24th, 2012

The past week has seen stocks move slightly higher with the exception of the Nasdaq 100, which is still the only index to remain above the 50 day moving average.

The dollar reversed upon reaching key support and resistance areas and has therefore moved back to within the recent range against most of the majors with only a couple of exceptions. The trend is still therefore mixed for the forex markets as it is also for commodities. The long term trend is still very much up for stock indexes in spite of the recent short term correction.

Stocks

Stocks pushed higher with the exception of the Nasdaq 100, which is still the strongest of the indexes. The Nasdaq was the only one of the indexes that we trade that was still above the 50 day moving average, but that was tested this week and Friday’s low was pretty much dead on the l ine. If the 50 does give way this week there will be a test of support at 2650. Failure there would open the way to potentially a decline to the next support area around 2570.

The strongest of the indexes that we trade at LS Trader was the German Dax, which advanced by 2.5% for the week, forming a nice bullish engulfing pattern on the weekly chart. We may now see the Dax test short term resistance around 6800. The long term trend remains up.

As we wrote last week, a glance at the longer term weekly charts still shows how bullish the markets are and what we have seen so far is a relatively small correction and nothing as yet to become to alarmed about. The S&P 500 still has good support at a couple of support zones around 1350 and 1330. As long as those hold the longer trend will still be very much intact. Whether we run into the usual seasonal weakness as we get into May remains to be seen.

Commodities

Gold ended the week lower by 1.05% but appears undecided on near term direction as evidenced by the series of small real bodies on the daily charts. The market now site roughly mid way between support at 1613 and resistance at 1680. The market still remains below the 200 day moving average and the trend remains down.

Crude moved higher by 0.54% for the week and everything we wrote last week still holds true. To re-cap, we wrote: “There is still evidence of strong buying from just above the $101 level. It is likely that the $100-101 area will continue to provide good support and possibly lead to a move higher to next resistance around $106.”

The biggest daily move of the week once again came from the grains sector, where Soybean meal advanced 3.6% on Friday alone, advancing to its highest all time level and over the $400 per ton level for the first time since August last year.

Currencies

The dollar index failed to break through resistance and moved back to within the recent range. If anything the index looks more likely to test the lower end of the range next. This is largely influenced by the strong support seen for the Euro at exactly $1.30. We have been writing for the past few weeks about the importance of support at $1.30 for the Euro and that was last week’s low to the pip, at which point buyers returned once again. That makes the $1.30 level very critical, not just for the Euro, but for the dollar on the whole.The British Pound did however manage to break out of its range, giving a long term change of trend to up against the dollar.

Interest rate futures

Interest rate futures ended slightly higher but are showing signs that the momentum is waning. A series of small real bodies on the daily charts indicates some indecision and as they are appearing at resistance may indicate that these markets may push a bit lower in the short term. The long term trend is still up.

Good Trading

Phil Seaton

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LS Trader Weekly Update – Monday 16th April 2012

April 16th, 2012

The past week has seen stocks continue to head south, and all but the Nasdaq 100 are now below the 50 day moving average, so the short term trend is down. The long-term trend is still up however for all the stock indexes but further short term weakness may follow this week.

The dollar has remained mixed but may be setting up for a breakout to the upside. To an extent what happens in stocks will impact the dollar as the long term inverse relationship is still intact. The trends for commodities still remain mixed.

Stocks

Stocks declined for another week and as mentioned above, all but the Nasdaq 100 have moved below the 50 day MA. This is an area where we can normally expect some sort of support and the past 4 days action on the S&P 500 has been chopping above and below the average. The 1380 area, which had previously been providing short term support has now switched to resistance due to change of polarity and having recovered the week’s earlier losses the S&P 500 failed at that level and pushed lower. It is quite likely that we will see a test of last week’s lows again this week. However, the long-term trend is still very much up and if viewed from a longer term perspective, the correction seen is very small. A glance at the weekly chart of the Nasdaq 100 puts this very nicely into perspective, as the market had gone almost straight up from the middle of December.

As we have written many times before markets don’t go straight up or straight down and there are always corrections along the way. The question is, how long and how deep will the correction last? That remains to be seen and we’ll have to let the market tell us. On the S&P 500 a good support point is around 1330-1340 and that is an area that has a good chance of being tested. For now, this correction is counter t o the long-term trend so the best place to be is on the sidelines until we get some confirmation one way or the other. April is still seasonally a good month but that does run into seasonal weakness in May.

Commodities

Gold ended the week higher by 1.85% but had been higher until a reversal on Friday. The market still remains below the 200 day moving average and the key $1700 level.

Crude ended the week lower by 0.49% but there is still evidence of strong buying from just above the $101 level. In the past week alone there has been a hammer and a bullish engulfing pattern from the support area so there is clearly strong interest at those levels. It is likely then that the $100-101 area will continue to provide good support and possibly lead to a move higher to next resistance around $106. However, should the support give way it would likely lead to a move lower to around $97, approximatel y where the 200 day MA currently is and the next level of support.

Currencies

The dollar index moved back above the 50 day MA with a very bullish candle pattern on Friday and will likely test short-term resistance this week. A break of this resistance will likely lead to a resumption of the long-term uptrend and a move to at least 8116 and possibly the highs of the year further out. The opposite of the dollar index is the Euro, which once again looks to be declining to test key support around $1.30. A break of $1.30 would likely see a test of the February lows and failure there may open the way for a move further down towards $1.2640. The trend remains down.

Interest rate futures

Interest rate futures have continued to press higher this past week and are continuing their recovery since printing morning star revers al patterns around a month ago. This narrowly kept the long-term trend to up and since then the short term trend is also up. Whether we see a continuation higher to the highs of this year set back in February remains to be seen but that is looking like a good possibility at present.

Kind Regards

Robert Stewart

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LS Trader Weekly Update – Monday 9th April 2012

April 9th, 2012

The past week has seen stocks finally correct somewhat, something that has been on the cards for the past few weeks. However, the long term trend is still very much up across the stock indexes and each of the indexes we trade remain above their 50 day moving averages and still a long way above their 200 day MAs.

The dollar saw an end to its recent short term weakness as it ended the week higher against all the majors with the exception of the Japanese Yen. The long-term trends are still up for stocks but mixed for the dollar and commodities.

Stocks

The S&P 500 failed to make new highs this past week and has subsequently fallen back below the 1400 level. This suggests that in the short term a top has been put in at 1419.6 on the June futures contract, although Friday did see buyers return at the lows of the day at 137 3, taking the index back to close at 1390.2.

As has been the case for much of the recent rally, the Nasdaq 100 is still the strongest and is still holding up better than the other indexes and still remains above support. As long as that remains the case there has not been a huge change in sentiment and the other indexes could recover, but if the Nasdaq joins the breakdown then that may accelerate the down moves.

As we wrote last week, on a seasonal basis April is a good month but as ever price and trend is far more important than any seasonal indicator or tendency. Looking further ahead, the old adage often applied to stocks of “Sell in May and go away” is only a few weeks away and given the extent of the recent up moves for stocks, a reasonable correction is not out of the question.

Commodities

Last week we wrote “Gold ended the week higher by 0.42% but having had a brief look ab ove the 200 day moving average on Tuesday, where it ran into the $1700 level, ended back below the 200 day MA. The long-term trend is still down and conditions bearish as long as $1700 resistance holds.” $1700 did hold and the market remains in a long term downtrend and below the 200 day MA having fallen to new lows since the First week in January.

Crude ended the week higher by 0.28% and formed a doji on the weekly chart, which represents total indecision. In the longer term the trend is still up but the short term is without direction. Support from the psychological $100 level is still in place but if that level is taken out there is little in the way of support until the 200 day moving average, which currently sits around the $97 level.

Coffee did break though the $1.90 level that we wrote about last week but was unable to push higher and the trend is still down.

Currencies

The dollar index held on to the previous week’s lows on a closing basis (although the lows were briefly taken out intra-day on Tuesday) and this formed a platform for a decent push higher as the market remains above the February low and also above the 200 day MA. The long term trend is still up but the market is currently in the middle of the range that spans from the lows at 7842 and the local top at 8116 (June contract).

The British Pound fell just short of giving a confirmed change of trend to up and reversed this week to remain in the box range that has been in place for quite some time. The long term trend therefore remains down and the market is currently sitting almost exactly on the 200 day MA, which may provide some support.

The Euro was unable to clear $1.34 resistance and this failure led to a move down back towards $1.30, a level that will likely be tested this week. A break of $1.30 would likely see a test of the February lows and failure there may op en the way for a move further down towards $1.2640. The trend remains down.

Interest rate futures

The morning star reversal patterns that formed in the interest rate futures sector 3 weeks ago have proven to be a strong reversal, as they often are, and the 5 & 10 year T notes as well as the 30 year Bonds have continued to advance higher and the long term uptrend which narrowly stayed in place looks to be getting back on track. We may yet see a continuation higher towards the highs of the year.

However, as we wrote last week, should the market eventually break the low of the morning star pattern, which is now a key support area, there could be some large moves lower as such a move would not only break that pattern but also change the long term trend to down.

Kind Regards

Robert Stewart

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