The LS Trader System has continued with its strong start to the year as for the most part the markets are trending fairly well and this has led to the system reaching new equity highs for the year.
The week has also seen continuing new all time highs for stocks and the dollar has shown a bit of temporary weakness. Commodities have for the most part continued south in line with LS Trader’s expectations and proprietary trend analysis.
The stock markets continue to press higher, reaching either new all time highs as in the case of the Dow, new multi-year highs in the Dax and the Nikkei, and closing in on all time highs on the S&P 500. Since the S&P 500 is the real stock index, the failure to so far reach new all time highs is bearish divergence, but since the lag is small and we may see that index catch up and hit all time highs this week, it may not be significant. Basis the cash S&P 500, the all time high was set at 1576.09 on 11 October 2007. Friday’s close was 1560.7.
The Nikkei this week hit its highest level since September 2008 basis the daily continuation chart and remains the most profitable trade of the year to date for the LS Trader system. Since the trade was entered on 21st November 2012, we have banked 485 points profit from December contract, 2360 from the March rollover and currently have 320 points profit from the June contract for a total of 3165 spread betting points profit, making it a very profitable trade indeed.
Gold and silver continue to drift sideways in a tight range as they have for the past couple of weeks. As we wrote last week, a critical support shelf is within range for both markets and that will be the critical level for both of these markets during the coming weeks. If support does hold then we may see a decent bounce higher, but a break of key support could open the door for a larger decline. The longer term trend remains down.
US Crude has continued with recent counter trend strength and has managed to push back above the 200 day moving average. The longer term trend remains down but resistance may be tested this week.
Orange juice had another bullish week, crossing 140 briefly before pulling back slightly into the close. A continuation towards 144.15, the December 2012 high may still follow. That level is critical resistance so if the market can get beyond that, we may see a decent move higher.
Coffee looks set to resume the long term downtrend and we have initial targets at 130 and may further out see a decline to around 123. Feeder cattle, which is another commodity that the LS Trader System is bearish on, may now continue the profitable downtrend towards major support at 136.16, the 2009 low. If support there can be taken out then we may see a very significant downtrend over the coming months.
This past week saw quarterly currency expiration as the March contracts rolled forward to June. The week also saw dollar strength continue during the first half of the week, but then sold off on Thursday and Friday across the board.
The dollar index climbed to 8342, just 8 pips shy of our 8350 target but then sold off quite sharply during the past 2 trading days of the week. This for now is just counter trend weakness for the dollar and the longer term uptrend is still intact.
The Euro, which is almost an exact mirror image of the dollar index had fallen to its lowest level since December, but then recovered Thursday and Friday. The trend remains up for the Euro.
The British pound fell to its lowest level since June 2010 but then put in a fairly decent recovery in line with late dollar weakness seen elsewhere. The trend is still very much down for the Pound.
Interest rate futures
Interest rate futures have edged higher once more with the shorter term markets still leading the way. The 5 year T notes and 3 month Eurodollars remain in a long term uptrend but the trend is down for both the 10 year and the 30 year bond.