LS Trader Weekly Update – Monday 26th March 2012

The past week has seen stocks continue to stall, following on from the loss of momentum seen the week earlier. Of the 4 stock indexes that we trade at LS Trader, only the Nasdaq ended the week ahead and this week saw the Nasdaq 100 hit a new 11 year high.

Last week we wrote “Contrary to popular opinion, doji are not reversal signals in and of themselves but more an indication that the bullishness has lost a bit of momentum and are often just the markets pausing for breath before continuing higher. That said, they do present a possible warning for the short term.” As mentioned above, these doji have so far translated into some small short term weakness and there are now similar formations on the Nasdaq 100 daily chart.

Stocks

The warnings that we wrote about for stocks and the S&P 500 last week did lead to a down week but not by much. The S&P 500 retreated 0.31% for the week but the spinning top that has formed on the weekly charts could once again be a further potential warning of more weakness ahead in the short term. However, the trends, both long and short term are still up and these factors are more important than the loss of momentum until there is confirmation of a down move, which as yet we do not have. The 1400 level was taken out but the market has been unable to make a weekly close above that leve so far. A weekly close above 1400 would be bullish.

We wrote last week that a correction was due on the Dax and we did see that with a weekly decline of 2.12%. As with the other indexes though the trend is still up and as long as short term support holds (on a closing basis the 7000 level is still holding) then the upside target at 7680 is still in play.

Commodities

Gold ended the week below the 200 day moving average once again but buyers did come back in at $1627 and the market may now continue higher to test the 200 day MA. The trend however remains down.

Continuing its major downtrend is Coffee, which this week completed a 10th consecutive down week. There was a semblance of buying on Friday but the trend is still clearly down.From the energy sector, the only gainer was No Leaded Gas, which pushed through resistance intra day to reach its highest level since July 08. However, there was a bit of profit taking on Friday, which has taken the market down to close right on a support level from prior highs. If the trend is good the prior highs should provide support and lead to a continuation higher, otherwise we may see some short term weakness.

Currencies

The dollar index ended the week lower for a second straight week and may continue further down. 7950 did get taken out in tra day but held on a closing basis. A close below 7950, or more precisely last week’s low at 7932 would be bearish short term and would likely lead to a test of the February low at 7842.

Interest rate futures

We wrote last week “There are many hedge funds that are itching to short interest rate futures so if last week’s lows do get taken out we could see further selling pressure. For now though the long term trends are still up.” The prior week’s lows did hold, albeit only just, but this did lead to a formation of quite a strong reversal on a couple of the markets, a morning doji star formed on both the 5 & 10 year T notes. The morning doji star is quite a strong reversal pattern so short term strength may continue. However, this makes the low of the pattern a very key support point and if support there fails there could be some large moves lower.

Kind Regards

Robert Stewart

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