LS Trader Weekly Update – Monday 18th June 2012

The past week has seen stock indexes continue to move higher following the bounce from the 200-day moving average seen a couple of weeks or so ago. As was the case during the previous week, the stock index advance has been met with dollar weakness. Some strength in the coming week for U.S stock indexes may see the up-trend resume. Overall the trend for the dollar is up, commodities are still down and stock indexes are mixed.

There are some key events in the week ahead which have the potential to make considerable moves in the markets, such as the outcome of the Greek election and the U.S. Federal (FOMC) meeting on Wednesday.

Stocks

The S&P 500 initially advanced to test the 1340 area that we have been writing about recently as key but was unable to clear it. The index then pulled back but recovered to close the week at the week’s high. This suggests that there may well be sufficient momentum to keep the market moving up through the 1340 level. If the 1340 level can be cleared we may see a move potentially up to the highs of the year around 1408.

A move above the 1340 level on the S&P 500 would be a bullish sign and from a technical perspective the uptrend would be back in progress. Such a move would likely see a move higher for the Nasdaq 100. Both the Nasdaq 100 and S&P 500 are still in long-term up-trends. The trend for the Nikkei and Dax is still down.

Commodities

Gold advanced by 2.31% for the week and may yet reach our target of $1675. The long-term trend is still down.

Crude oil has gone mostly sideways over the past week but is still very much in a long-term downtrend. There are some signs that a short term bottom may be forming around 8100 but some consolidation following the prior sharp decline is not all that unsurprising. If 8100 gives way, the next target is still $77.

The overall trend for commodities is still down with Coffee showing continued weakness. The grains markets were also lower almost across the board. Soybean Meal hit new all time highs but was unable to continue higher and moved back into the range but the trend is still bullish long-term.

Currencies

The dollar index fell through the 8220 level again as the dollar lost ground across the board. This past Friday was quarterly currency expiration so we are now trading the September contracts.

The Euro did clear the prior resistance level that we have been writing about recently but was unable to hold above it. This led to a move lower followed by a recover by the end of the week. The market has now closed with a doji right on the level in question so the Euro can certainly go in either d irection in the short-term.

The British pound, which remains in a long-term uptrend against the dollar broke above the change of polarity resistance level that we have written about previously and may now continue higher towards $1.60.

All the other majors moved higher against the dollar but the long-term trend still favors the dollar against all markets except the Pound. The New Zealand dollar in particular had a good week, advancing by 2.68% and the Aussie also got back above parity with the dollar (the September contract closed at 1.0003) and now looks like it will test the 200 day moving average in the coming week. The long-term trend for both is still down but short-term momentum is up.

Interest rate futures

Interest rate futures were sharply lower on Monday and took out support on the 5 year T-note. The 10 year T note just about held on to support and both markets formed a large hammer pattern on the daily charts, indicating that at least for now the lows are being rejected. The long-term trend is still up across the sector.

Good Trading

Phil Seaton

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