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.