Weekly Update – 19 January 2020 – LS Trader

US markets are closed on Monday due to the Martin Luther King Jr. holiday.

Stocks

US stocks rallied to new all-time highs on Monday and moved higher throughout the week, making a new all-time high close on Friday.

The Dax also printed a slight new all-time high on Friday. The Nikkei, which lags the other global indexes in terms of proximity to all-time highs, is testing resistance and could complete a breakout to its highest level since 1992.

Commodities

Palladium has made a massive rally since the 23rd December low and has moved more than four standard deviations above fair value. Selling tails indicate supply coming into the market on both Thursday and Friday, and a correction may follow in the coming days.

Currencies

EUR/USD and the Dollar Index look to be on the verge of short-term breakouts. These breakouts would be down in the case of the Euro, and up for the Dollar Index. This is in the direction of the primary long-term trend. It remains to be seen whether the high of the month so far at 1.1293 will be the high for January in terms of the January effect, which we have written about in recent weeks.

Interest rate futures

Interest rate futures have moved mostly sideways for the past seven trading days and are undergoing volatility contraction, suggesting a breakout will follow. The long-term trend remains up for the sector, but as before, upside breakouts, as well as trend-defining support, are within range. Both levels happen to coincide with the right shoulder of a potential head and shoulders top, so the break of the neckline would be a downside breakout and change of trend to down. A break above the right shoulder would be a failure pattern and a resumption of the uptrend.

This sector could break either way over the coming weeks, and the resultant moves could be sizeable.

Weekly Update – 12 January 2020 – LS Trader

Stocks

This week has seen extremely volatile trading in many markets, including stock indices, which had a wild ride on Wednesday. The market moved sharply lower, taking out many sell-stops, before reversing higher and going on to make new highs, which included an all-time high weekly close. However, Friday’s candle is a little bearish on both the S&P 500 and Nasdaq 100, the latter printing a dark cloud cover, but both showing selling tails. A move above Friday’s high would be bullish.

The first five trading days of the year completed this week and based on the close at the end of day five, the market was higher. This indicator has an 81.8% accuracy ratio of predicting full-year gains, with 36 of the last 44 first five days up resulting in up years for stocks.

Commodities

The commodities markets also saw some huge swings. Metals and energies both had massive reversals. Amongst all the chaos, Palladium printed a long-legged doji but made new all-time highs nonetheless.

Currencies

We continue to watch EUR/USD for the January effect as an indicator as what may lie ahead for the year in the currency markets. The January effect shows a high probability of EUR/USD printing its high or low for the year during January. Friday’s low broke short-term support by a single tick, but then rallied, forming a spring. This may result in some short-term strength during the coming week.

Interest rate futures

Interest rate futures also had a volatile week with a significant move on Wednesday which was sharply reversed. The long-term trend remains up for the sector, but as before, upside breakouts, as well as trend-defining support, are within range. This sector could break either way over the coming weeks.

Weekly Update – 4 January 2020 – LS Trader

Stocks

From last week on the S&P 500: “Friday’s candle is potentially short-term bearish, as selling tails are evident above the real body, forming a shooting star. However, the long-term trend is unquestionably up.”

Weakness was seen during the first half of the week before a rally to new all-time highs on Thursday. Friday was a volatile day with a steep sell-off followed by a retracement of about half of the day’s declines. The long-term trend remains up for all four indices that we trade at LS Trader.

This week will see the first five trading days of the year completed, which are an early warning system for the year ahead. This indicator has an 81.8% accuracy ratio of predicting full-year gains, with 36 of the last 44 first five days up resulting in up years for stocks. The first five trading days of the year will be completed after Friday’s close.

Commodities

Big moves have been seen in metals and energies this week. Gold broke out and hit 1556.6 on Friday and looks set to test the 2019 high this week.

The energy markets also rallied. Brent Crude closed higher for the fifth consecutive week, reaching its highest level since November 2018.

Currencies

The Dollar Index has been in a long-term uptrend based on our proprietary indicators, since May 2018, but completed a change of long-term trend to down this week.

This time of year, we focus on the January EUR/USD effect, which has an excellent batting record of predicting the year. The EUR/USD has a strong tendency to print its high or low for the year ahead in the month of January. The January indicator has a 77% success rate, including 2019.

Interest rate futures

From last week: “..it should be noted that the trends are all still up and the markets are above key support, so must be considered to be neutral to bullish until that changes.

This week saw some strength in interest rate futures as support has held once again. Breakouts to the upside, resulting in a resumption of the long-term trend, are within range. Trend defining support is just below the recent lows, and therefore, also in range for a downside breakout and change of trend.

Weekly Update – 29 December 2019 – LS Trader

We wish all our readers a very Happy and Prosperous New Year.

Stocks

Stocks rallied again, with US stocks printing new all-time highs on Friday. Friday’s candle is potentially short-term bearish, as selling tails are evident above the real body, forming a shooting star. However, the long-term trend is unquestionably up.

The Dax and the Nikkei are both weaker than their US counterparts, but both remain in long-term uptrends and just below their recent highs.

Commodities

The commodities markets continue to strengthen overall, with many looking to end the year in the black. Palladium has been the strongest market and is up 58.24% YTD in spite of its recent correction. Next year could be the year that commodities take off, especially if the dollar completes a change of trend to down and weakens.

Currencies

The dollar has seen continued weakness this week, with the Dollar Index falling sharply on Friday. The Index looks set to test the recent low at 96.295, with a possible trend change to down well within range. The Dollar Index has been in a long-term uptrend based on our proprietary indicators, since May 2018.

Interest rate futures

Interest rate futures have been in a long-term uptrend for all of 2019. However, with some additional weakness, that could change in the coming weeks. All markets in the sector are within range of a change of trend to down, with the shorter-term markets being the weakest and most likely to break first. However, it should be noted that the trends are all still up and the markets are above key support, so must be considered to be neutral to bullish until that changes.

Weekly Update – 22 December 2019 – LS Trader

We want to take this opportunity to wish all our readers a very Happy Christmas. The week ahead will be a shortened trading week due to markets being closed on Christmas Day.

Stocks

US stocks posted new all-time highs once again, and the long-term trend is very much up. Volatility remains low, but in the trending zone, and there is no momentum divergence. Even volume, which has been low throughout much of the rally, has picked up over the past two weeks. When markets rally on low volume, it means that there is no supply coming into the market, and that is not bearish.

From last week: “Friday’s candle on the Dax is ugly.” The Dax tested the high of Friday’s candle but was unable to move above it and traded sideways to down for the rest of the week. The trend remains up, and new highs are within range. The Nikkei, which is also weaker than the US indices, did post new highs for the move on Monday but traded lower and closed the week down.

Commodities

There are still signs that the commodity market sector continues to bottom and that 2020 could be a decent year for commodities. While there are still several markets in a long-term downtrend which remain weak, many more are making breakouts or are close to doing so.

Palladium, which has been the strongest commodity of 2019, reversed sharply this week, which included a heavy selling day on Friday.

Currencies

Following the general election success, the British Pound has continued to move lower, proving it was very much a case of buy the rumour sell the fact. The Pound has now returned to the breakout level from the 4th December. The long-term trend remains up.

Interest rate futures

Interest rate futures are trading sideways just above trend-defining support. A change of long-term trend to down is within range.

Weekly Update – 15 December 2019 – LS Trader

Stocks

From last week “The long-term trend remains up, and it looks likely that we will see new all-time highs this week for US stocks, and possibly new highs for the year for the Nikkei 225 and the Dax.”

US stocks broke out to new all-time highs on Thursday and moved higher on Friday. Both days had well above-average volume. Friday’s doji shows indecision.

The Dax and Nikkei both made new highs for the year. Friday’s candle on the Dax is ugly.

Commodities

Will 2020 be a big year for commodities? It’s starting to look increasingly likely. Many commodities appear to be bottoming, and some are already moving higher and are in uptrends. If the dollar breaks down, which also seems possible over the coming 12 months, commodities will benefit.

Strength is evident in multiple commodity markets, including Coffee, Sugar, Palladium and Brent Crude.

Currencies

From last week “This week sees the UK go to the polls on Wednesday, with Boris Johnson expected to win with somewhere between 14 and 50 seat majority. Such an outcome is expected and is likely priced in. However, a more significant margin of victory would probably be more bullish for the Pound and propel further gains.”

Boris won the election as expected, but won by a bigger than expected margin and the Pound gapped higher on the result. However, some weakness followed, and it could be a case of buying the rumour and sell the fact with further correction possible in the short-term. Longer-term the uptrend looks to be established, and the Pound could move substantially higher over the coming years, especially if the dollar weakens overall.

Interest rate futures

Interest rate futures had weakened sufficiently to test trend-defining support, but buyers returned, so far keeping the long-term uptrend intact. A change of trend to down is still within range, however.

Weekly Update – 8 December 2019 – LS Trader

Stocks

From last week “Both markets had down days on Friday with slightly bearish two-day reversal candles that may precede 3-5 days of weakness ahead.” The market corrected sharply on Monday and Tuesday, falling to its lowest level in a month, before resuming strength. The long-term trend remains up, and it looks likely that we will see new all-time highs this week for US stocks, and possibly new highs for the year for the Nikkei 225 and the Dax.

Commodities

Brent Crude reversed sharply from the low on Tuesday, which held just above support and put in a strong rally, rallying to its highest level since mid-September.

Except for Palladium, which posted new all-time highs again this week, the metals have continued to consolidate. Copper made an attempt at breaking out from its multi-month consolidation, but the breakout failed, and the trend remains down.

Currencies

This week sees the UK go to the polls on Wednesday, with Boris Johnson expected to win with somewhere between 14 and 50 seat majority. Such an outcome is expected and is likely priced in. However, a more significant margin of victory would probably be more bullish for the Pound and propel further gains. The long-term trend is up, and commercials remain net-long. At present, there appears only a slim chance that Corbyn will win, but there is a chance. A Corbyn win would likely be devastating for the Pound and trigger a decline towards parity against the dollar.

Interest rate futures

As has been the case for several weeks, interest rate futures continue to consolidate in a long-term uptrend. However, weakness has been sufficient that downside breakouts and a change of long-term trend to down are within range.

Weekly Update – 1 December 2019 – LS Trader

Stocks

US stock indices rallied to new all-time highs. Both markets had down days on Friday with slightly bearish two-day reversal candles that may precede 3-5 days of weakness ahead. Nonetheless, the long-term trend remains up, and the market is well above support.

The Nikkei 225 tested recent highs but was unable to complete the breakout and printed a bearish engulfing pattern on Friday, confirming resistance.

Commodities

The energy markets were sharply lower this week after weakness seen on Thursday was followed by a big down day on Friday. The long-term trends are mixed in the sector.

Currencies

The Dollar Index rallied to its highest level since the 10th October on Friday but reversed with a shooting star candle. The long-term trend remains up for the index but is mixed for the dollar against the majors. The Euro made the inverse move.

It’s time to start looking at the January EUR/USD effect which we have written about for many years. This January effect points to the strong tendency for the EUR/USD to make its high or low for the year ahead in January. Back in January, we said that the high of the month, which then was around 1.1800 would not be exceeded. Unless we get an 800+ pip rally during December, that pattern will have held once again, and we can look for next year’s direction to be set during January 2020.

Interest rate futures

As we have also covered in recent weeks, stocks and interest rates continue to trade near critical levels. For now, the long-term trend is up for both stocks and interest rate futures. However, interest rate futures continue to consolidate, and we have no open position in the sector, whereas we are long stocks.

Weekly Update – 24 November 2019 – LS Trader

This week is Thanksgiving in the US on Thursday and it is, therefore, a shortened trading week as markets are closed on Thursday and have shortened trading hours on Friday. Volume is usually light throughout the week.

Stocks

The stock markets remain in long-term uptrends. The path of least resistance remains higher and US markets remain above support.

The nikkei 225 was the weakest of the indices we trade, and broke through support on Thursday, bringing the uptrend to an end for now. However, a breakout to new highs for the year is within range.

Commodities

The long-term trend for metals remains up, except for Copper which is still in a long-term downtrend. Palladium is within range of new all-time highs. Gold and Silver are holding above medium-term support.

The energy markets were higher this week, with Brent Crude currently the strongest market in the sector.

Currencies

The dollar has advanced against most of the majors this week, and further dollar breakouts are within range during the coming week. The dollar posted its highest close since May this week. The dollar ended the week slightly lower against the Yen, but held above support.

Interest rate futures

Interest rates ended the week slightly higher as stocks saw a bit of weakness. Both stocks and interest rates continue to trade near key levels. For now, the long-term trend is up for both stocks and interest rate futures.

Weekly Update – 17 November 2019 – LS Trader

Stocks

The stock markets rallied to new all-time highs again since breaking the neckline of the massive head and shoulders continuation pattern, which has price projections over 3600.

A bearish wedge/ending diagonal pattern is still evident on both the S&P 500 and the Nasdaq 100, but for now, the bulls are in control and the trend is up. The RSI on the S&P 500 is at its highest level since January 2018 when the market nosedived.

Commodities

The commodities markets remain quiet, and there is not much action in most markets in the sector. Brent Crude is the leader in the energy sector. Gold potentially printed a low for the move this week and still looks poised to move higher and test the September high over the coming months. Whether Tuesday’s low proves to be the corrective low or we see another new low before strength returns remains to be seen. The RSI is just about holding at bull range support.

Currencies

The currency markets remain mixed. USD/JPY is our sole currency trade at present, and support held this week, keeping the uptrend intact. The long-term trends narrowly favour the dollar at present against the majors.

Interest rate futures

The inverse relationship between stocks and bonds remains at a critical juncture and was not decided last week. As before, if stocks continue to rally, then bonds will likely see further weakness. Conversely, a turn higher in bonds (weakness in stocks) could also be seen. This position is likely to be resolved one way or the other during the week ahead.