LS Trader Weekly Update – Monday 18th July 2011

Volatility has continued to be the order of the day across most market sectors as indecision remains rife amongst traders and investors. The long-term trends remain mixed and sustained trends are lacking in most markets, although there are a few exceptions.

Stocks

The indecision has remained present in stocks but overall indexes are lower over the past week. The long term trend still remains up for the S&P 500 and the Germax Dax but the trend in the other major indexes are down.

The S&P 500 ended the week considerably lower than it began, but had also been lower during the week. Long lower shadows on the daily charts show lower prices being rejected and for now the long term trend remains up. Support remains in place around the 1290 to 1300 area and we may see a move higher towards 1340 if support holds but a bre ak of that support area will likely point to lower prices.

Commodities

Crude once again was unable to clear the $100 level and resistance from the $100 level and the prior week’s bearish engulfing pattern kept a lid on gains for Crude although this will likely change should crude be able to regain and close above $100.

Last week on gold we wrote: “We may now see a test of $1560 resistance, a level that will likely determine near-time price action for the yellow metal. Much may depend on the US dollar, but a break above $1560 may lead to another go at all time highs.” Gold did indeed test and clear $1560 resistance before going on to make new all time highs. Silver also followed gold’s lead higher, breaking out of the recent consolidation to the upside.

Big mover of the week was Cotton, which shed 12.66% for the week and closed below the 100 level for the first time since early Jan uary. The decent for Cotton has been as rapid as the rise and cotton has now fallen for the past 6 weeks consecutively. This may lead to some sideways action and consolidation before the downtrend resumes. The next major support point comes in around 80, although a second consecutive close below 100 would be ideal for that scenario.

Currencies

The dollar index ended the week higher having bounced off short-term support around 7440. For the most part the index has been moving sideways and is currently in a short-term range between approximately 7450 and 7650. The wider range spans form 7330 to 7700.

The Euro broke out of the triangle formation that we wrote about last week to the downside and having fallen to it’s lowest level in several weeks and falling through good support mounted a decent recovery and took that market back to within the range. We may yet see a decline towards $1.32 an d the declines of early last week gave a clear image of just how fast these markets can fall. The Euro still looks as though it may be forming a large topping pattern with a series of lower highs and lower lows, which is bearish.

The Pound also made a breakout to the downside but mirrored the Euro’s movements and climbed higher by the end of the week.

Interest rate futures

We wrote last week about the dangers of prematurely considering that a trend has changed before getting confirmation of a change of trend and said that even though many are bearish on this sector, prices can still move higher. We saw that again this week with interest rate futures markets moving higher again and resuming the uptrend. As has been the case for some considerable time, the shorter-term markets such as the 5 year and 10 year notes remain stronger that the longer term 30 year bond. The sector as whole remain s in a long term uptrend.

Kind Regards

Robert Stewart

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