LS Trader Weekly Update 18th November 2012

The long-term trends according to the LS Trader proprietary trading rules are now mixed for stocks following continued weakness from the U.S. indices, especially the Nasdaq 100. The trend has continued to shift towards the dollar and commodities are still mixed but currently mostly bearish. The recovery late on Friday for stocks, which recovered some of the recent losses as well as some weakness for the dollar on Friday are about the only things that suggest a possible pause in the move to risk-off and further stock index weakness and dollar strength. The week ahead promises to be interesting and we will see whether the moves late on Friday were just a pause in the larger move or the beginnings of a recovery.

Stocks

We wrote last week that the S&P 500 would likely be heading lower towards 1320 and that still looks to be on as the S&P 500 has added another week of declines to its recent weakness. This week saw the first close below the 200 day moving average since June. There were signs late on Friday that we may see a bit of a dead cat bounce as support was found around 1340. The trend is still up but possibly not for long.

The Nasdaq 100 continued with its very weak performance, and completed a change of long-term trend to down for the first time in quite a while. The Nasdaq is normally the front runner for moves in the U.S. indices and when it is it tends to lead the way. It has been the weakest of U.S. markets during the recent sell-off. Friday did however see quite a strong rejection of lows as a hammer type candle formed on the daily charts. This suggests possibly some more strength on Monday but the trend is now down.

The Dax tested the lows of the prior week as expected and continued lower, reaching a 10-week low in the process. The Dax is still the strongest of the indices and is still very much in a long-term uptrend in spite of short-term weakness.

The Nikkei 225 was by far the best performing index with 2 huge up days, on Thursday and Friday. The trend is still down for the Nikkei but that will change if last week’s bullish price action continues much longer.

Commodities

Gold was unable to clear resistance at $1740 and has drifted lower this week but the trend still remains up. Support will likely be found around the 200 day moving average and the lows of the morning star pattern that formed during the previous week, all around the $1670 level. A break below that level would be considered bearish, but for now the trend is up and a test of $1740 looks more likely. Silver as usual continues to move in a very similar fashion to gold.

Crude has had a mixed week and remains within the range between approximately $84 and $88. The trend is still down. Crude continues to be the weakest of the energy sector, with no leaded gasoline currently the strongest.

Currencies

We have been writing of late about our expectations for an extended move higher for the dollar and that move continues to gain pace as the dollar has advanced almost across the board this week. The long-term trends are now favouring the dollar against most of the majors.

The largest move was seen in the dollar/yen, which soared higher this week on expectation of further weakening from the Bank of Japan. This move easily took out recent resistance as the long-term uptrend resumed. We may now see a continuation towards 8400 further out.

Interest rate futures

The interest rate futures continue to advance, keeping the long-term uptrend intact. The 30-year T-bond may yet continue higher to test all time highs around 15450. The 5 & 10 year T-Notes have also continued higher but the upside appears limited for both of these two markets. The long-term trend is still very much up across the sector.

Good trading

Phil Seaton

P.S. You can sign up for the LS Trader financial spread betting system here

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