LS Trader Weekly Update – Monday 24th October 2011

Stocks have continued their recent short-term strength while commodities have for the most part continued lower although there are exceptions. The dollar ended the week lower for a third straight week but the moves seen in the currency markets have been far from convincing. Long-term trends remain as before, up for the dollar and down for stocks and commodities.

Stocks

We wrote last week that a break above 1230 on the S&P 500 would be short term bullish and we got that this week and may now see further strength towards the 1250 1260 area. That said, a second close above 1230 would really be required to confirm this breakout as the market could easily pull back to within the recent range and head lower once more, in the direction of the long term trend which is down.

The Nasdaq 100, which has been leading the way of l ate for stocks actually ended the week lower. It still remains the closest to its highs of the year out of all of the indexes and the only one likely to give a change of trend to up in the short term. Generally when stocks are strong the Nasdaq 100 leads the way but with last week’s action being down, the Nasdaq remains below short-term resistance so it is not leading in the short term.

Commodities

Gold tested the $1700 resistance level that we wrote about last week and was unable to clear it. The long-term trend remains up for now as gold remains the only one of the metals still in a long term uptrend following recent weakness. Silver has also continued to struggle with resistance, in this case around 3300 and remains in a long-term downtrend.

Currently, the most important of the metals is copper, which this week moved down to test the recent lows and the crucial 30000 level. Friday did see a decent move for copper, with a bull sash pattern. A bull sash is a very short-term reversal pattern but the trend and momentum is still down for copper. A break below 30000 support may be significant not only for copper but for commodities on the whole, which may follow copper lower on a break down through support.

Currencies

With the exception of the Japanese Yen, the long-term trend is down for all major currencies against the dollar. The dollar index ended a third straight week lower but the trend remains up. The index is currently at a fairly important short-term support level, as we have written about recently at 7650 on the December contract. As before, there are numerous markets that are grappling with resistance levels and some currencies have also been relatively flat over the past week, which may indicate that the recent short-term dollar weakness is coming to an end. Whether t he markets can clear the resistance levels will likely set the tone for the coming weeks in the currency markets.

Interest rate futures

Interest rate futures were higher across the board as the long-term uptrend remains intact. In the short-term interest rate markets have been weak but have found some support from the prior week’s lows. If the support levels are taken out there is considerable room to the downside but some decent moves will be required for a change of long-term trend.

Kind Regards

Robert Stewart

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