Weekly Update – 23 February 2020 – LS Trader

Stocks

Stocks rallied to new all-time highs on Thursday, before closing the day lower and lower again on Friday. From a technical perspective, the long-term trends are unquestionably up. However, momentum divergence is evident, and there is also some volatility compression.

Added to this, we are possibly at or near to a sentiment extreme. This is evident by the cover of The Economist this week, which has a picture of stampeding robotic bulls for tech stocks. Therefore, we are possibly near the end of the trend and will likely see support tested this week. However, blow-off rallies are often seen at the end of such moves, so a sharp short-term rally can also not be ruled out. As ever, price action is king, and we wait to see what unfolds.

Commodities

From last week: “Gold continues to hold above support around 1550 and remains in a long-term uptrend, with further strength looking likely. A test of 1600 may be seen this week.” Gold exploded from the open and closed higher each day this week, making a new high for the year

Also from last week: “Palladium could be forming a continuation flag pattern, which, if completed, would suggest significant further upside. Volatility peaked on the day of the high and has since been under sharp compression implying that there is plenty of room for additional rally.” Palladium exploded out of the flag and hit a new all-time high at 2751.90. Silver continues to lag but may breakout this week.

Currencies

The dollar showed additional strength this week until Friday. A shooting star pattern printed on the weekly Dollar Index chart, with weakness also evident on Friday’s candle. Naturally, the Euro printed almost the perfect inverse, with a bullish engulfing pattern on Friday.

Interest rate futures

Interest rate futures have also seen continued strength, with rallied back to new highs for the current move being seen in the 3 Month Eurodollar, 10 Year Notes and 30 Year Bonds. The 5 Year Notes may breakout this week.

Weekly Update – 16 February 2020 – LS Trader

Monday is Presidents’ Day in the US, so US markets will be closed.

Stocks

US Stocks opened the week lower but quickly recovered to make new all-time highs.

The Dax completed its breakout and made new all-time highs. The Nikkei continues to lag and is still struggling with resistance around the 24,000 level.

Commodities

Gold continues to hold above support around 1550 and remains in a long-term uptrend, with further strength looking likely. A test of 1600 may be seen this week.

Palladium could be forming a continuation flag pattern, which, if completed, would suggest significant further upside. Volatility peaked on the day of the high and has since been under sharp compression implying that there is plenty of room for additional rally.

Currencies

The dollar has continued to gain ground against most of the majors this week. The Dollar Index has made a new high for the current move and is now at its highest level since January 2017.

Conversely, the Euro continues its decline and is now at its lowest level since September 2002. The next level of support is at 1.0820. Beyond that and parity starts to beckon.

Interest rate futures

The long-term trend remains up for interest rate futures. The 3-bar morning star reversal pattern printed during the prior week continues to provide support and maybe the platform for a launch back to new highs.

Weekly Update – 9 February 2020 – LS Trader

Stocks

Stocks rallied throughout the week until the new all-time high was posted on Friday, and the market closed down for the day, printing a dark cloud cover on the daily chart for the Nasdaq 100. The S&P 500 was a bit weaker on Friday, completing a bearish engulfing pattern. Both patterns suggest weakness for 3-5 days next week, but the long-term trend is firmly up.

The Dax and Nikkei continue to lag and have yet to complete breakouts.

Commodities

Gold fell sharply on Monday and Tuesday and tested support on Wednesday before rallying for the rest of the week, remaining in a long-term uptrend.

The energy markets remain weak overall, with new lows for the current move being posted, as well as some corrective strength during the second half of the week. The long-term trend is down for the sector except for Brent Crude, which may test trend-defining support this week.

Currencies

It’s been a decent week for the Dollar after gains were seen against the majors. EUR/USD violated the January low at 1.1030 this week, meaning that if the January effect is to hold again this year, 1.1293 will not be exceeded and the trend will, therefore, remain down.

The Aussie also fell to a new low for the current move. GBP/USD broke to the downside from a symmetrical triangle pattern and may continue slightly lower. However, the long-term trend is still up for the Pound.

Interest rate futures

Interest rate futures made new highs for the move on Monday but then fell for a few days before reversing from Thursday’s lows. Friday completed a 3-day morning star bullish reversal, keeping the long-term trend up.

Weekly Update – 2 February 2020 – LS Trader

Stocks

From last week: “US stocks rallied to new all-time highs again this week but did see some weakness as the week progressed, which culminated in a bearish engulfing pattern on both the S&P 500 and Nasdaq 100 on Friday. That could lead to additional weakness in the coming days. For now, the markets are above support, and the trend is up.”

The markets gapped lower on Monday, breaking short-term support. They ended the week and the month with a big down day on Friday. The long-term trend remains up, but not the short-term. Friday’s low tested the 50-day SMA.

We now have data in for the January Barometer, which states that as goes January, so goes the year. Historically, this indicator has an 85.5% accuracy ratio since 1950. If this barometer is correct, with January being a down month, so will the year be a down year. However, the long-term trend for global stocks is still up, and if one goes further back before 1950, the overall record is less impressive. Sticking with the trend is more objective.

Commodities

From last week on Palladium: “Prices closed lower on both Thursday and Friday, so although the trend is unquestionably up, the risk of a correction remains and is increasingly probable. Volatility has risen to a level not seen since July 2019.” Palladium did correct as expected, and did so sufficiently to violate support. The exit was our most profitable trade of the year to date.

Currencies

EUR/USD moved lower early in the week but recovered on Thursday and had a strong day on Friday. We now have the January high in at 1.1276 and the low in at 1.1030. Let’s see if the January effect holds for this currency this year.

Interest rate futures

Interest rate futures continued their recent rally, and may now go on to test their August highs. The long-term trend is up for the sector.

Weekly Update – 26 January 2020 – LS Trader

Stocks

US stocks rallied to new all-time highs again this week but did see some weakness as the week progressed, which culminated in a bearish engulfing pattern on both the S&P 500 and Nasdaq 100 on Friday. That could lead to additional weakness in the coming days. For now, the markets are above support, and the trend is up.

Commodities

Palladium shrugged off the attempts to sell the market from the prior week. The heavy selling and low end closes gave the market every opportunity to sell-off, but it did not and rallied again to new all-time highs. Prices closed lower on both Thursday and Friday, so although the trend is unquestionably up, the risk of a correction remains and is increasingly probable. Volatility has risen to a level not seen since July 2019,

Currencies

EUR/USD broke to the downside this week as expected. This increases the chances that the high for January, and the year for the Euro is in at 1.1276 bases the March contract if the January effect is going to hold this year.

Interest rate futures

From last week: “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.”

Interest rate futures made the breakout to the upside, meaning that the right shoulder of the head and shoulders top has been broken, so the head and shoulders is a failed pattern. It is also an upside breakout from a multi-month rectangle.

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.