LS Trader Weekly Update 20th August 2012

Stocks have continued to press higher with S&P 500 futures clearing the April high to hit a new high for the year. The Nasdaq 100 has moved to within touching distance of its April high and may break through this week. The dollar remains mixed with the dollar index advancing by just 0.04% this week. The index formed a doji on the weekly chart, which indicates indecision. Commodities also remain mixed.

Stocks

As mentioned above, the S&P 500 did hit new highs for the year on the September futures contract, with the Nasdaq 100 only just behind and threatening to do the same this week.

The biggest advance of the week from the stock indexes came from the Nikkei 225, which advanced 3.25%, to reach a 15-week high. However, the long-term trend is still down for this index and further strength will be required before that changes.

The Dax advanced for a sixth straight week, adding another 1.21% weekly gain to the run. The long-term trend for the Dax is still down but that looks set to change soon and may do so this week.

Commodities

Grains markets have been mixed but have on balance been lower. Wheat ended the week lower by 1.21% but had been much lower earlier. Wheat has since formed a hammer pattern on the weekly charts, which suggests the selling earlier this week may have been overdone and that the bull market may yet resume. Rough Rice ended the week lower by 3.29% but as with Wheat had been considerably lower mid-week before recovering about half of the week’s losses.

Gold is still in a long-term downtrend and ended this week down by 0.21%. As we wrote last week, a break above $1650 may lead to a test of the 200-day moving average and a possible continuation towards the $1700 level.

The energy markets continue to press higher with moves that are still counter to the long-term trend. Continued strength may lead to a change of trend for some of the sector in the not too distant future.

Coffee continued the long-term down trend, declining by 3.63% this week and continues to head for our target around the 15300 level on the December contract.

Currencies

The dollar index ended the week virtually flat and is still clearly undecided on future direction. Support is still in place around 8200 and the long-term trend is still up. The dollar is in fact a mixed bag at present against most of the majors. However, the dollar is rising against the Yen having finally pushed up through resistance at the 200 day moving average. There is potentially plenty of upside in this move if resistance around 8050 can be cleared.

The Canadian dollar still leads the way and continues to push the US dollar down towards our target at the April lows.

The Euro is still being held down by the 50-day moving average and the long-term trend is still very much down and we still expect to see further weakness to take the Euro back down towards the recent 2 year lows.

Interest rate futures

Interest rate futures are beginning to look a bit ugly in the short-term but are still very much in a long-term uptrend. The long-term bull market is still in place and further confirmation will be required to the downside before the trend will change to down. However, many traders have been waiting for this sector to head sharply lower so if longer-term support does get taken out in the next few weeks we could see the downside move gather momentum.

Good trading

Phil Seaton

www.LSTrader.co.uk

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