LS Trader Weekly Update – Monday 6th February 2012

It’s been another week or risk on, which has seen stocks continue in bullish mode and the dollar continue its recent weakness. The trend continues to be up for stocks and is still up overall for the dollar but that may be going to change. Commodities for the most part have continued to benefit from dollar weakness.

Stocks

January ended the month up, which according to the January Barometer means that there is a good chance of stocks ending the year higher. At present things are continuing in a bullish fashion and risk-on remains the primary strategy for traders.

We have been writing about the likely target of 1355 on the S&P 500 March contract and that still looks to be the likely destination. Resistance at 1355 can be expected but if it can be taken out we could see a move to the next target at 1385. We will review from there if and when that target is reached.

The Nasdaq 100 once again continues to lead the way, which as we wrote last week is generally the most bullish set up. The Nasdaq 100 is now approaching 11 year highs. The Dax is also moving higher having recently changed long-term trend to up. Of all the indexes that we trade at LS Trader, the Nikkei is the weakest and still in a long-term downtrend. Whether that changes or not remains to be seen.

Commodities

Crude found support on from the 200 day moving average but still ended the week lower by 1.73%, ending the week once again below the $100 level. If support at $95 fails then a move to $93 will likely follow.

Gold ended the week higher by 0.33% but is showing signs of a possible turn. The weekly bars show a doji, which at resistance can be a prelude to a turn, but the stronger signal comes on the daily charts where there is a lar ge bearish engulfing pattern. This could lead to a move lower. If however, the market can close above the bearish engulfing pattern we may see a move higher towards $1800. For now the trend is still down for Gold. We have similar action on silver, but the reversal pattern on gold looks stronger.

Currencies

The risk-on move has continued, as has dollar weakness. The dollar index though ended the week flat and has so far not fallen to the next support level at 7800. There are a series of lower shadows on the daily candles, which suggest some buying coming in around the lows of last week.

Last week we wrote about the ultimate risk-on currency, the Australian dollar and said that close on its heels was the New Zealand dollar. Both of these currencies continued higher and these are the first 2 markets to give a change of trend to up. The third commodity currency is the Canadian dollar and tha t may be the next to give a change of trend.

The pound has also continued its good run and may be heading for the 200 day moving average, currently around $1.59.

Interest rate futures

Interest rate futures continued to climb higher until Friday, where having made new highs initially, heavy selling followed. The trend is still up across the sector.

Kind Regards

Robert Stewart

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