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.
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.
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.