LS Trader Weekly Update 2nd December 2012

December often presents some good trending markets and plenty of good spread betting opportunities. Seasonally we’re in a strong period of year where risk-on is seen more often than not and we hear about the oft-mentioned Santa Claus rally. December is a strong month for stock indexes, and if we see that strength this year we can expect a weaker dollar and higher commodity prices. Since 1950, December has been the best performing month for the S&P 500.

Stocks

The S&P 500 advanced 0.65% for the week as the uptrend remains in place. This has kept the market above the 200 day moving average and we may yet see a continuation higher and possibly a test of the highs of the year before the trading year comes to a close.

The Nasdaq 100 made a stronger move to the upside, ending ahead by 1.65% for the week but still remains in a long-term downtrend due to the extent of the recent sell-off. The Dax may still be set to hit new highs for the year before the end of the year having gained over 400 points in the last two trading weeks alone. That momentum may be sufficient to carry the index above resistance.

It’s been a third week of advances for the Nikkei and we remain on track for our target at 9700. Further out we may see a continuation higher towards the highs of the year at 10200. As is shown on the weekly chart, there is little from a technical perspective to impede such an advance. From a long-term perspective, this week saw a 62% retracement of the steep decline from the end of March to the lows in June.

Commodities

The commodities markets have seen a bit more action this week than the stock index and forex markets have, in particular Gold. Gold was the subject of a huge sell order of 7800 contracts on Wednesday, allegedly a tactical operation by a U.S. hedge fund with $14 billion under management, aimed at sending the market lower and triggering anticipated stops at $1730, in that hope that those stops would lead to a cascade of further selling, which was what happened.

Gold fell all the way to support before making a recovery late on Wednesday and a further advance back to $1730 on Thursday before the selling resumed on Friday. Key support is for now still holding and the trend remains up but there may well be further swings for gold, and indeed the other metals markets in the week ahead. Silver as usual followed gold’s movements closely, even though there were no such operations in the silver market.

Copper was this week the most bullish of the metals and managed a weekly advance of 3.14%, closely followed by Palladium, which also managed to move ahead by 2.85% in spite of also being subject to some mid-week selling, but later recovering to make new highs for the current move.

Currencies

The forex markets have for the most part been fairly quiet, with many majors ending the week roughly where they began. This is perhaps best indicated by the dollar index, which ended lower by just 0.09% for the week.

The biggest moves as has been the case recently came from the Yen, which having gained some strength mid-week, was then subject to further weakness into the weekend. The USD/JPY continues to present good spread betting opportunities and there is potential for the current trend to continue much further over the coming weeks. The trends are for the most part against the dollar and that may continue in the run up to the end of the year if we see the anticipated risk-on rallies elsewhere.

Interest rate futures

The interest rate futures markets advanced yet again, with the strongest move in terms of weekly percentage gain coming from the 30 year T-bond. The trend remains up across the sector and a change of trend to down seemingly remains a way off and is unlikely to be seen this year unless we see a major event happening over the next 4 weeks.

Good trading

Phil Seaton

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