LS Trader Weekly Update – Monday 17th October 2011

The reversal from 1 year lows formed during the previous week continued this week and the markets are now approaching key resistance levels, as in fact are many markets including commodities and currencies. The past couple of weeks’ moves have been counter to the long term trend and the long term trends all remain intact, so still down for stocks and commodities but up for the dollar.

Stocks

The trendline that we wrote about last week around 1175 gave way, as did the 1200 level as the strong 2 week rally continues. The S&P 500 has yet though to clear crucial resistance at 1230, which may well be the critical level and decider for what may happen to the markets on the whole over the next few weeks. A break through 1230 would undoubtedly be bullish short term and may lead to a move higher towards 1250. The trend however still remains down and will continue to be so for the foreseeable future. Considerable further strength will be required for a long-term change of trend for stock indexes. The exception to that is the Nasdaq 100, which continues to be the leader and may well test the highs of the year in the coming weeks. Whether those highs can be taken out remains to be seen.

Commodities

Commodities for the most part were higher over the past week but the trend for most remains down. Gold, one of the commodity markets that has remained in a long term uptrend, rose by 2.89% for the week but is still chart-wise in a consolidation pattern and remains below the $1700 level. Silver is following a similar pattern and continues to struggle with the 3300 area. The trend for silver remains down.

One sector that has continued to do well is agricultural commodities and especially the cattle markets, all of which are h igher and are approaching multi-month highs. If these levels can be cleared there could be further decent advances in this sector.

Currencies

The past 2 weeks has very much been about dollar weakness and has seen two strong weeks for the other currencies, which are counter to the long-term trend. The dollar index has fallen to its lowest level in a month and is now approaching a good support area. Considering the strength and extent of the moves seen in such a short period, a bounce for the dollar would not be surprising. Several currencies are heading towards resistance areas so whether we seen a continuation of short-term strength for these markets or whether the moves stall and reverse remains to be seen. With the exception of the Japanese Yen, the long-term trend is down for all major currencies against the dollar.

Interest rate futures

The long-term trends remain up for the interest rate futures sector with the exception of the 3-month Eurodollar. Longer term rates were lower after a decline for the week of 2.06%. The 5 & 10 Year T notes were also lower but both had been lower during the week before a partial recovery by weekend.

Kind Regards

Robert Stewart

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