LS Trader weekly update 3rd February 2013

As we expected in last week’s LS Trader update, the March S&P 500 crossed the 1500 level to make new 5 year highs once again, as market conditions remain bullish. According to the January stock market barometer, which simply states that as goes January, so goes the rest of the year, suggests that stocks will continue to rise in 2013 and hit new all time highs. Going back to 1950, this barometer has an 88.7% accuracy ratio and has only been significantly wrong on 7 occasions. Read from that what you will. What we can say for certain is that currently stocks are bullish and that the long term trends for stock indices are up.

The long term trends currently are up for stocks, mixed for commodities and mostly down for the dollar. The bond markets saw a change of trend to down for the first time in a long time during the past week.

Stocks

Stock indices continue to soar as once again three of the four stock indices that we trade at LS Trader have gone on to make new multi-year highs once again. These three markets are the S&P 500, Nikkei 225 and the Dax. The laggard continues to be the Nasdaq 100, the only index of the four that is still in a long term downtrend according to our proprietary trend indicators at LS Trader.

The Nasdaq 100 is still grappling with resistance at 2765 and is still a way off last year’s highs. This means that should the markets turnover, the Nasdaq will be the first short candidate and likely the one with the largest downside potential. However, for now the focus will be on the leading indices, in particular the S&P 500 and the question as to whether we will see all time highs in 2013. It’s looking increasingly likely at this stage.

From a spread betting perspective, the Nikkei 225 is currently the most profitable of the indices and is currently showing us a profit of just over 2000 spread betting points since we entered long back on the 21st November at 9270.

January ended with the S&P 500 having its best year since 1997, while two other indices that we don’t trade at LS Trader, the Dow and the FTSE, reached their highest levels since 1994 and 1989 respectively. The latter two indices o not historically trend well and are not profitable for trend following systems such as ours, which is the reason why they do not form a part of the LS Trader master portfolio.

Commodities

The metals markets continue to be mixed, with gold currently the weakest. Copper and Palladium continue to lead the way, followed by silver. Palladium reached its highest level since September 11 this past week. Currently all 4 metals are in a long term uptrend, although gold is perilously close to critical support and a change of major trend to down.

Last week we wrote that strength had been returning to the energy sector and we’ve seen more of that this week with Brent Crude climbing to its highest level since April last year. Heating oil and no leaded gas have also continued to rise, especially the latter, which advanced 5.66%, reaching its highest level since July 2008.

Currencies

The dollar has been lower almost across the board, with the main exceptions being against the British Pound and the Japanese Yen. The dollar index has resumed the long term downtrend this week and fell to just a few ticks above critical major support at 7887. Should this level be breached, we can expect continued weakness for the dollar.

The Euro climbed to its highest level since November 2011 and is now closed to completing the target set by the bull flag at $1.3750.

The yen continues it’s sharp decline and we now have just over 1200 spread betting points of profit from this pair since we entered the trade back on the 15th November. The yen’s decline has been extremely profitable for the LS Trader system, as its weakness has also helped the Japanese stock index to soar higher, bringing in substantial profits from that long trade as well.

Interest rate futures

Major support was tested during the past week on the interest rate sector, with both the 30 year T bond and the 10 year T note breaking support. Perhaps significantly, the 30 year bond closed the week below support and the trend is now down. How far this market can fall remains to be seen.

The shorter term markets are just about holding on to the long term uptrend but that could change in the coming weeks.

Good trading

Phil Seaton

LS Trader

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