LS Trader Weekly Update – Monday 23rd April 2012

The past week has seen stocks move slightly higher with the exception of the Nasdaq 100, which is still the only index to remain above the 50 day moving average.

The dollar reversed upon reaching key support and resistance areas and has therefore moved back to within the recent range against most of the majors with only a couple of exceptions. The trend is still therefore mixed for the forex markets as it is also for commodities. The long term trend is still very much up for stock indexes in spite of the recent short term correction.

Stocks

Stocks pushed higher with the exception of the Nasdaq 100, which is still the strongest of the indexes. The Nasdaq was the only one of the indexes that we trade that was still above the 50 day moving average, but that was tested this week and Friday’s low was pretty much dead on the l ine. If the 50 does give way this week there will be a test of support at 2650. Failure there would open the way to potentially a decline to the next support area around 2570.

The strongest of the indexes that we trade at LS Trader was the German Dax, which advanced by 2.5% for the week, forming a nice bullish engulfing pattern on the weekly chart. We may now see the Dax test short term resistance around 6800. The long term trend remains up.

As we wrote last week, a glance at the longer term weekly charts still shows how bullish the markets are and what we have seen so far is a relatively small correction and nothing as yet to become to alarmed about. The S&P 500 still has good support at a couple of support zones around 1350 and 1330. As long as those hold the longer trend will still be very much intact. Whether we run into the usual seasonal weakness as we get into May remains to be seen.

Commodities

Gold ended the week lower by 1.05% but appears undecided on near term direction as evidenced by the series of small real bodies on the daily charts. The market now site roughly mid way between support at 1613 and resistance at 1680. The market still remains below the 200 day moving average and the trend remains down.

Crude moved higher by 0.54% for the week and everything we wrote last week still holds true. To re-cap, we wrote: “There is still evidence of strong buying from just above the $101 level. It is likely that the $100-101 area will continue to provide good support and possibly lead to a move higher to next resistance around $106.”

The biggest daily move of the week once again came from the grains sector, where Soybean meal advanced 3.6% on Friday alone, advancing to its highest all time level and over the $400 per ton level for the first time since August last year.

Currencies

The dollar index failed to break through resistance and moved back to within the recent range. If anything the index looks more likely to test the lower end of the range next. This is largely influenced by the strong support seen for the Euro at exactly $1.30. We have been writing for the past few weeks about the importance of support at $1.30 for the Euro and that was last week’s low to the pip, at which point buyers returned once again. That makes the $1.30 level very critical, not just for the Euro, but for the dollar on the whole.The British Pound did however manage to break out of its range, giving a long term change of trend to up against the dollar.

Interest rate futures

Interest rate futures ended slightly higher but are showing signs that the momentum is waning. A series of small real bodies on the daily charts indicates some indecision and as they are appearing at resistance may indicate that these markets may push a bit lower in the short term. The long term trend is still up.

Good Trading

Phil Seaton

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