LS Trader Weekly Update 2nd July 2012

Friday saw some big moves in the markets following events in Europe and some large reversals followed. Up to that point the dollar had been gaining and stocks for the most part had been in retreat. That all changed on Friday as stocks and commodities short higher and the dollar lower. It remains to be seen as to whether this is any more than a one-day move or the beginning of some new trends. The long-term trends are so far unaffected so the odds favour this being just a short-term move but time will tell.

Long-term trends remain mixed for stocks, mostly down for commodities and up for the dollar and bonds.

Stocks

The S&P 500 headed lower initially to support around 1300 and as could be seen by the lower shadows on the daily candles, there was demand around 1300. Friday saw a huge move higher, which took out the rece nt highs and took the market back to resistance at 1360. Friday’s close at 1356.4 on the September contract is a new high close for the current move and that is potentially bullish. 1360 resistance still needs to be cleared. If it can then we may still see a move potentially up to the highs of the year around 1408.

The Nasdaq 100 moved in similar fashion, this time finding support from just over 2500, but falling just short of the recent highs. The target will now be resistance at 2626 on the September contract.

Commodities

Commodities had a highly bullish day on Friday as the dollar collapsed. Metals and energies had big reversal moves, which for most markets were counter to the long-term trend. Gold looked to be heading for the recent lows until Friday’s reversal and may now have another go at the $1640 resistance level. The long-term trend remains down.

Crude advanced 9.36% on Friday having fallen to new 18 month lows on Thursday. Friday’s rally suggests that the downtrend is over for now and that a break of short-term resistance will follow. The long-term trend is still however very much down.

The grains sector had bullish moves, lead by Wheat, which advanced 10.15% for the week, reaching its highest level since September last year. Soybeans also broke out to new highs since 2008, advancing 3.8% for the week. The prior resistance area around 1400 should now provide support.

Currencies

The dollar had been slowing gaining throughout the week until a big reversal on Friday. The dollar index declined 1.51% on Friday and tested the 50-day moving average. The index will likely test key support at 8140 in the coming week. If support there fails the next support level does not come in until 7900.

The Pound had a bullish week, most of the bull move came on Frid ay. The Pound looks set to test the 200 day moving average again this week and the recent highs and just below $1.58. The long-term trend is still up for the Pound, the only market still in an uptrend against the dollar.

The long-term trend is still down on the Euro but Friday’s reversal suggests a test of the 50-day moving average and the recent highs just below $1.28. Overall the long-term trend still favours the dollar.

Interest rate futures

Interest rate futures ended the week pretty flat but had been considerably higher earlier in the week prior to Friday’s sell-off. The long-term trend is still up across the interest rate futures sector and the markets are still holding above short-term support. The 50-day moving average is still in range and is looking like it may be tested. There is good support in the area of the 50-day MA so if the markets do get as low as that a bounce may be expected.

Good Trading

Phil Seaton

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