The recent stock index decline took a pause this past week with gains being in all 4 of the major indexes. Commodities have continued their recent declines and the dollar has continued to advance. The long-term trends are still up for stocks and the dollar and down for commodities.
The markets continue to trend very well and in many cases better than they have for the past 2-3 years. This has led to gains for the LS Trader system in many markets and the system is now ahead 53.22%* YTD. If the current trending conditions remain in place we may be on target for another year of triple digit gains.
This Monday is Memorial Day in the U.S. so several markets will be closed.
The S&P 500 pushed higher and may be headed for a test of 1340, which due to change of polarity may now act as resistance as it was previ ously a support level. The long-term trend remains up but the past few weeks have been weak and the 200-day moving average is still a potential downside target. The 200-day SMA currently sits around 1270. Before that though there is support at last week’s lows at 1287.
Similar moves were seen in the other indexes but there is little to do at present as the short term trend is not aligned with the long term trend so until that changes the best place to be in stock indexes is on the sidelines.
Gold rolled into the August contract last week so the new lows for support are now at $1529.3. The long-term trend remains down and there should be resistance around $1600 with support in at the recent lows. A break of either level may lead to a decent move in the direction of the breakout.
Crude ended the week lower by 1.02% and did briefly dip below our $90 target before closing the week at $90.86. As we wrote last week, if $90 does fail to hold then a move to $85 may follow. The trend remains down.
There have been some other very profitable downtrends in commodities, namely Coffee, down 6.34% for the week and Cotton, down 5.6% for the week and Sugar, which was down 4.15% for the week. These are all markets that the majority of spread bettors don’t trade but they do provide excellent trading opportunities and often trend very well either from the long or short side. Orange juice is another less often traded commodity that is also in a steep and profitable downtrend, having declined 11.89% over the past 4 weeks. The LS Trader system has caught all of these moves. This shows the benefit of being diversified across different markets as well as the advantage of trading from the short side.
The dollar index advanced to its highest level since 2010 having t aken out the highs of the year this past week, so the trend is very much up. Similarly, the Euro took out the support lows that we have bee writing about of late and has fallen to new 22 month lows. There is still room for further downside for the Euro.
The dollar also reached its highest level since February 2011 against the Swiss Franc as the uptrend continues to gain steam. The trend now favours the U.S. dollar against nearly all of the majors. If the dollar continues to advance then we will see further pressure on commodities and stocks.
Interest rate futures
Interest rate futures ended the week lower for the week but the long-term trend remains intact. As has been the case for much of the past few weeks there are signs that the uptrend may be coming to an end but so far each time new buying has come in to push the markets higher.
We wrote last week about the hanging man patte rns on the 10 year T note, stating that a lower close would be required to confirm that pattern and we did get that lower close. The market has so far not been able to close above the hanging man pattern so it is still intact so we may see a decline to support once again this week.
The 30 year Bond may decline to support around 14365 which had provided strong resistance previously and should now provide support. If support there is tested and gives way we may see some strong selling return to this market. The trend still remains up across the sector.