LS Trader Weekly Update – Monday 29th August 2011

Volatility has remained high once again over the past week, with some large swings seen in stocks and commodities, especially Gold, which made a new all time high and then a steep sell-off followed. The long-term trends remain down for stocks and the dollar and mixed for commodities.

Stocks

Stocks endured another volatile week and continue to have large swings on an almost daily basis. This was epitomised by Friday’s price action surrounding Ben Bernanke’s speech at Jackson Hole, which initially saw stocks decline 2% but then end the day ahead by 1%.

Amidst all the volatility, which still remains at very high levels, the odds are still that we have seen a major top for stocks back in April but if the S&P can decisively move above 1200 we may see some short-term strength. However, the trend is down without question an d downside targets remain at 1076, 1026 and 1000 on the September contract.

As we wrote last week, with the exception of the Nasdaq 100, all of the indexes that we trade at LS Trader have been unable to clear the 2007 highs and this means that on a long-term basis the indexes are making lower highs and this is a bearish set up.

The German Dax continues to be the weakest of the indexes and we’re still looking at the next support target around 5270.

The VIX ended the week substantially lower by over 10% for the week but had earlier been approaching the recent highs seen 3 weeks ago at 48.

Commodities

The main commodity story of the week is Gold, which made 2 records during the past week. The first was the new all time high posted on Tuesday at $1917.90 on the December contract, which was followed by a huge $200+ decline over 3 sessions, before finding support at $1700 and the n moving higher. The daily charts show the formation of a hammer pattern on Thursday, with the low of the hammer just above $1700 and that level may now provide good support.

October Crude Oil clawed back most of the losses from the prior week but still remains in a downtrend and below the $90 resistance area. The current short-term range spans some $15, from $75 to $90. A break of either level could be good for a decent move in the direction of the breakout.

The grains sector had a strong week with gains seen across the board.

Currencies

The dollar index ended the week lower again but did not quite fall to new 17-week lows. The trend remains firmly down for the dollar index as it does for the dollar against most of the majors. The US dollar continued to advance against the Swiss Franc and the recent long-term downtrend appears to be over for the immediate future.

The dolla r did not fare so well elsewhere and was lower against the majority of the majors, including against the Yen, Euro, New Zealand and Australian dollars.

Interest rate futures

Interest rate futures yields pushed marginally higher this week, sending prices lower. Prices however remain near the highs of the year and the long-term trend remains up across the sector.

Kind Regards

Robert Stewart

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