LS Trader Weekly Update – Monday 28th June 2011

Stocks managed to rise over the past week albeit in fairly volatile fashion. Early weakness was followed by a mid-week move higher and then weakness to close out the week. Commodities for the most part were lower and the dollar moved higher.

The long term trends are mostly down now for stock indexes, mixed for commodities but still down for the dollar.

Stocks

For the second straight week we have a doji pattern on the weekly S&P 500 chart, which represents indecision. The S&P 500 had moved higher in the week but cam back to close just above the lows of the week. The long term trend remains up for the S&P 500, as it also does for the German Dax, but all the other indexes that we trade at LS Trader are now in a long term downtrend.

As we wrote in last week’s update, the prior week’s lows on the S&P 50 0 September contract may provide some support but if they are taken out then the next target will be the March lows, which currently sit at 1248.5 on the September contract. To the upside there is resistance at 1295.

The Nasdaq 100, Nikkei 225 and Hang Seng all managed gains for the week but the trend remains down and these markets may yet resume the downtrend. 9800 should provide some resistance for the Nikkei, with support around 9300. A break of either of these 2 levels could lead to some movement. Having failed to continue up through 2256, the Nasdaq 100 may target the 2175 support area.

Commodities

We wrote last week about the long term trendline that had been providing support for Gold that was at $1520 as well as further support at 1511 and wrote that a breach of those support levels may lead to a decline towards $1460. Gold did fall through those 2 levels and briefly pierced $150 0 before closing just north of $1500 at $1500.9. Further weakness may be seen this coming week.

Crude ended the week lower by 2.45% but is so far finding support at $90. A break of support here will likely bring further declines to at least $85 with the next support at around $83.50.

There has been general commodity weakness over the past couple of weeks with only a couple of exceptions. Orange Juice has been particularly strong and Sugar has also made a major recovery from the recent steep sell-off. Sugar is still currently in a long term downtrend but that may change soon if short term strength continues sufficiently. Other markets that have seen some renewed strength of late include the agricultural cattle markets. These still remain in a long term downtrend for now.

Currencies

The dollar index pushed higher again in the short term and the focus will still be on the resistance level at 7700. For now the long term trend remains down but this may change over the coming weeks if the dollar continues to rally.

The British Pound in particular is looking weak and may be heading for a test of major support possibly as soon as this week against the US dollar. The pound has also been weak against the Yen. The US dollar has also been gaining strength against the Canadian dollar, which may continue to rise towards parity. The US dollar has not been at parity against the Canadian dollar since March.

Interest rate futures

The long term trend remains bullish across the interest rate futures sector with prices hitting new highs for the year and yields falling to their lowest levels of the year. The longer term 30 year bond is still lagging behind their 2010 highs and it remains to be seen if the longer term market can continue higher to test those highs.

Kind Regards
Robert Stewar

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