LS Trader Weekly Update – Monday 5th September 2011

This coming week is a shortened trading week due to the US Labor Day holiday and US markets will therefore be closed. This holiday is often followed by some strength for stock indexes early in the week but that often runs out of steam relatively quickly.

Stocks

We wrote last week that if the S&P 500 could clear 1200 that we may see some further short term strength, and we did. It was however relatively short lived and the S&P 500 came up short of the 1250 level which many may have been looking for it to reach as a minimum. On Thursday we saw a bearish engulfing pattern and continuation lower again on Friday. The weekly charts show a large shooting star patter, which is bearish.

September is the historically the weakest month of the year for stock indexes on a seasonal basis but the month can often start on strong footing after the Labor Day US holiday, which is this Monday. Weakness often gets underway towards the latter part of this coming week and into the following week.

We also wrote last week about the German Dax and it’s continued weakness and further weakness was seen during the past week, which included Friday’s 3.19% decline on the September contract. We continue to target the next support level around 5270.

Commodities

Following the huge volatility and large decline for Gold seen during the previous week, normal service resumed this week and Gold ended the week ahead by 4.43% and we may well see another go at all time highs in the coming weeks, currently at $1917.90 on the December contract, not all that far from Friday’s $1876.9 close. As we wrote last week, the hammer pattern formed on the 25th august should provide good support.

The current short-term range on Crude still spa ns some $15, from $75 to $90 as resistance at $90 just about held this week and Crude moved lower again from Thursday’s highs at $89.90. A break of either level could be good for a decent move in the direction of the breakout. For now the trend remains down.

Currencies

The dollar index gained 1.31% for the week as the index continues to find support from the recent lows around 7350. The index may yet push higher towards the next resistance levels around 7560 but the trend remains down.

The British Pound declined for a second straight week and now looks set to test support from both the recent lows and a long rising trendline on the weekly charts.

Interest rate futures

Interest rate futures rose for the week as yields declined once again. The 10 year note is now close to it’s recent all time high and strong resistance can be expected at current levels. The sector as a whole continues to remain near the highs of the year and the long-term trend remains up across the sector. How much further room there is to the upside remains to be seen.

Kind Regards

Robert Stewart

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