LS Trader Weekly Update – Monday 30th April 2012

The past week has seen stocks continue their short-term recovery and move back above their respective 50-day moving averages. The long-term trend is still very much up for stocks and a continuation towards the highs of the year is now a possibility once again.

The dollar weakened across the board and the dollar index in particular may be heading for a test of key support, a break of which would change the long-term trend for the dollar back to down. Commodities have been mostly bullish, helped by dollar weakness.

Stocks

Stock indexes pushed higher, led by the Nasdaq 100, which benefitted from superb results from Apple. Apple makes up around 20% of the Nasdaq 100, which is one of the reasons that Nasdaq has been leading the stock indexes of late, with Apple seemingly moving ever higher. Apple ended the week higher by 5.24 % having giving back some of the gains following the report on Tuesday that resulted in a large gap higher. Gaps often get filled, but the low of the gap is also a key support area, so should Apple drift back down and close that gap, support can be expected, which would in turn likely support the Nasdaq 100.

The German Dax moved higher for a second week and is currently testing the 6800 resistance level that we wrote about last week. A move above 6800 may open the door for a test of 7000.

Last week we wrote: “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.” The S&P 500 did fall almost to 1350 where support did come in and in a big way, taking the index back o ver 1400 briefly. For those that are familiar with advanced candlestick patterns, the last 3 days of the week have formed a pattern known as the advanced block, which indicates selling coming in at the highs of the past 2 days, and thereby providing resistance. If this resistance can be cleared then a test of the highs of the year may follow.

On a seasonal basis we are coming to the end of April and the end of the best 6 months of the year, and also heading into May, synonymous with the “Sell in May and go away”. However, as we always say, the charts and the price is more important than any seasonal indicator.

Commodities

Gold ended the week higher by 1.34% but continues to look undecided on direction. The short term is pushing gradually higher and may well test short-term resistance around $1680 this week. The long-term trend is however still down and the market still remains below the 200 day moving average.

Once again the big moves came in Soybean Meal and Soybeans, which advanced 4.51% and 3.04% for the week respectively. These have both been excellent trades and are currently the most profitable trades of the year for the LS Trader system. This week’s rollover of Soybean Meal banked a huge 8790 spread betting points profit as it continues to post new all time highs.

Currencies

The dollar index has continued to head lower since failing to clear resistance in the previous week and may now be heading for a test of what is possibly quite a significant support level, a break of which would change the long term trend to down. The British Pound continued to push higher and looks to be heading for our next target around $1.6350. The long-term trend is now up for the Pound. Several other currencies are now pushing towards a change of long-term trend to up against the dolla r and a new spell of dollar weakness could be on the horizon. Much though will depend on stocks and whether they can continue up to and through the recent highs.

Interest rate futures

The long-term trend remains up for interest rate futures, and this week saw the 10 year T note reach a new all time high as yields returned to record lows again. There are some indecision patterns present on the daily charts, which suggest that once again the momentum may be waning, but there is no question that both the long-term and short-term trends are still up.

Good Trading

Phil Seaton

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