LS Trader Weekly Update – Monday 11th June 2012

The past week has seen stock indexes recover some of their recent losses with a bounce from the 200-day moving average. As ever we have seen the inverse of the stock indexes move with declines for the dollar. The long term trends are still mostly intact however, and are still up for the dollar, down for commodities and mixed for stock indexes.This week is triple witching on Friday so stock index futures roll out of June into the September contracts. Forex futures also roll on Friday.

Stocks

The S&P 500 fell to new lows for the current move dipped below the 200 day moving average but then bounced higher and has formed a bullish engulfing pattern on the weekly charts. The long-term trend is still therefore up but only just. A break below last week’s lows would change the trend to down. As for the shorter term, the market is s till below resistance from the change of polarity where prior support becomes resistance so needs to push above the 1340-1345 area that we have been writing about the past few weeks in order to be considered bullish.

The Nasdaq 100 is still the strongest of the major indexes and remains above change of polarity support. It also held above the 200 day moving average and also formed a bullish engulfing pattern on the weekly charts. As with the S&P 500, the Nasdaq also finds itself near change of polarity resistance and that resistance area will need to be taken out if this rally is going to continue.

Commodities

The gold rally stalled before reaching $1675 and the reversal took the yellow metal back below the $1600 level that should have acted as support if the market was strong. This suggests that there may be further weakness ahead and that we may yet see another test of the year’s l ows.

The long-term trend for Silver is still up but only just. However, silver continues to find very good support between 2620 and 2700 as evidence by the series of hammers on the weekly charts where the lows are being rejected. Similar price action can be traced back all the way to October so it is clear that this is a key support zone. As long as this support holds then the up trend is still in place and the outlook remains bullish. A break of that support zone may though open the way to considerable downside. One negative for silver though is failure to clear 3000 and the fact that prior resistance did not act as support around 2900. As with gold, this is not normally indicative of a solid market. If either of these markets were solid in the short-term both of those levels should have held.

Crude oil managed a small advance this week, ending the week higher by 1.05% but the trend is still very much down. The past week was in fact the first up week in 6 but it was far from convincing. The longer-term target remains around $77 to the downside.

Currencies

The dollar index fell to just below our 8220 support level before moving higher and recovering some of the week’s losses. The trend is still up and the market has closed back above 8220, ending the week at 8256. Last week’s lows will now be the new support area and the trend remains up as long as those levels hold.

The British Pound just about held on to the long-term uptrend but the shorter-term trend is still down. The prior support level acted as resistance around $1.56 and pushed the Pound lower from there. The range is now between last week’s highs and the lows of the current move. A break of either level could be good for a decent move in the direction of the breakout.

The Euro had similar price action to the Pound and also stalled at a prior change of polarity and has moved low er since. The long-term downtrend is still intact and the targets remain at 12100 and further out as low as 11800.

Interest rate futures

Interest rate futures ended the week lower across the board for the longer-term markets. The weekly charts show dark cloud cover patterns on the 30-year T-bond and the 5 & 10 year T notes. These are bearish reversal patterns and suggest further short-term weakness ahead. However, the long-term trends are still up for the sector and the markets are holding above support. As long as this remains the case, interest rate futures should be considered bullish.t

Good Trading

Phil Seaton

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