LS Trader Weekly Update – 4th November 2012

The U.S. Presidential election is just a couple of days away and it looks as though Obama will remain for a second term, although the fight has become a lot closer over the past couple of weeks than expected. Speculation mounts over what the impact on the markets will be depending on the outcome but as we wrote last week, forget guessing and predictions and let the markets tell you where the markets want to go, simply by following the trends.

Stocks

The S&P 500 has had a mixed week but is still holding above our support target of 1380. If 1380 does get tested and gives way, the next likely target would be the 200 day moving average, which currently sits at 1366. If that were also to fail there is a considerable amount of chart space under that level so we could see a move to 1320 further out. However, for now the trend is still up. Whether we have seen the high for the year in this market is a question that remains to be answered, but it is looking increasingly likely.

The Nasdaq 100 has also had a mixed week as it continues to trade around the 200 day moving average. Support is currently in a zone between the 200 day MA and the 2600 level.

The long-term trendline that we wrote about last week has continued to support the Dax, which is the strongest of all the indices that we trade at LS Trader. Whether there is enough strength in this market to test the highs of the year remains to be seen, especially if the other global indices remain weak.

Commodities

Last week we wrote: “The 200-day MA looks like the likely next downside target around $1670”. Friday saw a huge sell-off in Gold as the market shed $42 for the day, taking the market down to $1675, and just above the 200 day moving average. The trend for now is still up but there is undoubtedly weakness in the short-term. Silver also had a weak day on Friday but as with gold, the long-term trend is still up.

Support at the prior week’s lows are still just about holding for Crude but they may be broken early this week to pave the way for a move lower towards $80.

Other commodity markets have been showing signs of weakness as well, with weakness in all markets in the softs section and potential weakness building up in the grains markets. Very few commodities are on the rise at the moment.

Currencies

We may be seeing the very early stages of strength for the US dollar. The dollar index has reached new 2 month highs and may be set to move higher. The biggest market in the basket of currencies that make up the dollar index is the Euro, and as we have covered recently here the Euro is now at a critical juncture. This critical juncture is support at $1.28, which also marks the intervening low, that if broken, would confirm a double top. A break through this potentially critical support level would confirm the double top and give a new downside target of $1.25 on the December contract.

The Japanese Yen has displayed further weakness over the past week against both the Pound and the dollar. Both markets are at resistance levels which if taken out could open the way for extended moves higher.

Interest rate futures

The interest rate futures markets have ended marginally higher and still all remain in a long-term uptrend.

The 30-year T-bond is still in a range between approximately 150 and 146, a range that has held for the past few weeks. If 150 can be taken out then the uptrend may well resume, but a breach of 146 support, which of late has been well supported, would suggest a further decline towards major support.

Good trading

Phil Seaton

www.LSTrader.co.uk

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