Stocks initially rose to new highs for the current move but then backed off. Stocks remain at a critical juncture as we covered in last week’s update and the prospect for a large move one way or the other seems increasingly likely, especially if the markets break to the downside.
Commodities have been mostly bearish and look to be continuing the long term bear market, and currencies have been mixed. Interesting times and plenty of good trading opportunities lie ahead.
The S&P 500 cash came within 3 points of an all time high but then backed off before finding support just below 1540. The index therefore still remains below the all time intra-day high basis the cash S&P 500 at 1576.09 reached on 11 October 2007. Whether we see new all time highs still remains to be seen. The rejection of the lows on Friday led to the formation of a hammer on the daily charts, which is bullish and also confirms the support area around 1540. However, should that support area be breached we may see a sharp sell off back to the 1477 area of the February low.
Gold ended lower for the week but has recovered since falling below the February low mid-week. This recovery is in the formation of a morning star pattern, which is a bullish reversal pattern, but the trend is still very much down. Resistance for June gold remains in place around $1620 and the market is short term bearish below that level. Silver followed a similar path to gold, but was more bearish, ending the week lower by 3.89%. Silver also fell below the February lows that we have written about for the past few weeks, and unlike gold, closed below them. This may lead to a test of the June lows around 2628. Last week’s lows now become critical support for both of these markets, and should those support levels be broken, we may see an acceleration to the downside.
Most commodities had a bearish week and crude was no exception. The long term trend for crude oil has been down for quite some time and the market was unable to complete a change of trend this week and subsequently had a bearish week as did all markets in the energy sector with the exception of natural gas.
Grains in particular had a bearish week. Regular readers will know that the LS Trader system is bearish on grains and our long term trend analysis calls for lower grains prices in 2013 that should completely erase the bull market from last year. This projection remains on track and we may see further declines in the week ahead.
The dollar has had quite a volatile week and in particular the dollar index has been quite volatile. Thursday saw the index push to a new high for the current move, only for the market to more than erase those gains on Friday and fall to almost a 2 week low. This reversal may now pressure the market further in the short term, but long term the trend remains up. Should the index be able to clear last week’s high in the coming week, we will likely see an immediate resumption of the long term uptrend.
The Euro fell to new lows for the current move but quickly recovered and went on a 3 day rally. The Euro has so far failed to generate sufficient weakness for a change of trend to down, so the long term uptrend remains in place. We may now see the uptrend resume and we may see a continuation higher to around $1.3360.
Interest rate futures
In last week’s update on the 30 year T bond we wrote “This makes Monday’s trading key for this market as a move lower would confirm the resistance level, but a break may lead to a continuation higher over the coming weeks.” Monday was a bullish day for the long term bonds and the week culminated with a decent 3 day rally that has taken the market to its highest level in 16 weeks. The long bond may now continue higher towards the November highs and the 150 area.
The 5 and 10 year notes also had bullish weeks, with the former pushing to new all time highs. The long term trends are mostly up for this sector.