LS Trader Weekly Update 16th July 2012

It’s been a mixed week in many markets this past week with the S&P 500 ending the week flat and the currency markets also being mixed. The big moves have once again come from the grains sector where a bull market is in progress and some markets have reached new all time highs. Corn was the biggest mover, advancing by 6.51% for the week.

The long-term trends are still mixed for stocks and commodities but continue to favour the U.S. dollar.

Stocks

The S&P 500 ended the week flat but had been as low as 1320 before mounting a recovery. Friday saw a bullish engulfing pattern form on the daily charts and the weekly charts show a hammer type pattern. This suggests that the lows are being rejected and that last week’s lows at 1320 may now provide support. The trend is still up.

The Nasdaq 100 ended the week lower by 1.23% but once again found support just north of 2500, which continues to be a critical support level. In similar fashion to the S&P 500, the lows were rejected on Thursday, followed by bullish price action on Friday, which took the Nasdaq back above the 50-day moving average. The trend remains up.

Commodities

Gold ended the week ahead by 0.83% but had been considerably lower during the week before some nice bullish price action on Friday where the futures gapped higher at the open and closed above the previous 4 days’ closing prices. As before support remains at $1547 and the long-term trend remains down, but the shorter term action is effectively a sideways move with no clear trend.

Although in the U.K. we’ve had the wettest summer on record so far, in the U.S. they are suffering with heat waves and droughts. This has caused havoc with some of the U.S. crops and has led to a bull market in grains, a bull market that the LS Trader system has caught nicely. One of the great things about trend following is that you don’t need to stay up on or follow the news, as all events are eventually reflected in the price. The price moves in this sector over the past few weeks have been very aggressively bullish. This past week saw both Soybeans and Soybean Meal reach new all time highs and saw Corn limit up during the week.

Currencies

The dollar index did test the 8400 level as we suggested might happen last week but was unable to clear it, closing marginally down for the week. Similarly, the trend overall has been mixed.

The dollar had been advancing almost across the board until Friday, which saw some decent moves for most of the majors against the dollar. The Euro fell once again to new 2 year lows and remains on course for our longer-term downside target at $1.18, which is a level that has held firm since 2005. If the Euro does fall as far as $1.18 it will be a key level to watch for the markets reaction.

The Australian dollar bounced nicely off the 200-day moving average and saw some continuation higher on Friday but the long-term trend is still down. We may see a test of the recent highs at $1.0261 this week.

Overall the long-term trend still favours the dollar against all the majors with the exception of the British Pound.

Interest rate futures

Interest rate futures remain in a strong uptrend and the sector advanced across the board this past week with prices once again approaching new highs as yields fell once again towards record lows. There are signs once again of a lack of conviction in taking these markets higher, reflected by the small real bodies and doji shown on the daily charts. There still appears to be limited upside but that could have been said for much of the past few months but the sector has continued to rise.
Good Trading

Phil Seaton

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