Weekly Update – 9 December 2018 – LS Trader

Volatility has been the order of the day over the past week with huge moves and swings seen in many markets. This week has seen a change of long-term trend for interest rate futures, which are now in a long-term uptrend. Gold could also be on the verge of a change of trend to up over the next week or so. Seasonally, we’re in a strong time of year for stock indices and Gold.

Stocks

Stock indices have seen colossal volatility this week as the rally stalled once again almost exactly at the 61.8% retracement level of the September to November decline. The long-term trend remains down for global stock indices, and we could see new lows for the current move completed this week.

This Friday is quarterly stock index futures expiration, so the December contract will roll forward to March.

Commodities

The metals markets continue to show signs that they may have bottomed and are heading for a change of long-term trend to up. Palladium, the only one of the metals currently in a long-term uptrend, continues to lead the way, having printed new all-time highs this week. Gold could be on the verge of an upside breakout and change of trend as early as this week.

Volatility has been high in the energies this week with a series of indecision bars, known as high wave doji. These patterns print when the market has a long upper and a long lower shadow and closes the day reasonably near to where the day opened. It represents total indecision on the part of market participants. If markets break above last week’s highs that will suggest that the downtrend is over for now, but as long as markets remain below those resistance levels, the downtrend remains intact.

The exception to this is Natural Gas, which remains in a long-term uptrend. It’s possible that the market is printing a half-mast pennant, which would project to north of the 6.000 level if completed, depending on where the actual breakout level is.

Currencies

This week saw GBP/USD break to a new low for the current move, printing its lowest level since June 2017. Much of that is to do with Brexit uncertainty ahead of the Parliamentary vote on Tuesday. Volatility remains low, but we can expect to see that pick up this week.

The Dollar Index has seen some weakness this week, as has the dollar against the Euro. The long-term trend continues to favour the dollar against all the majors except for NZD/USD.

This Friday is quarterly currency futures expiration, so the December contract will roll forward to March.

Interest rate futures

From last week: “commercials hold a huge net long position, based on COT data, which means they continue to position for lower, not higher, interest rates (interest rate futures move inversely to rates). For now, the long-term trend remains down, but upside breakouts and changes of trend for a few markets in the sector are within range.” Interest rate futures finally rallied sufficiently to complete a change of trend to up for all markets in the sector except for the long bond. The long-term trend is now up for interest rate futures.

Good trading

Phil Seaton

LS Trader

Weekly Update – 2 December 2018 – LS Trader

Stock indices have continued their recent corrective rally, but all remain in long-term downtrends. Commodities remain weak overall, while the dollar uptrend remains intact. Interest rate futures remain in a long-term downtrend but continue to gain strength, with a possible change of trend to up on the horizon.

Stocks

From last week: “This is a bullish time of year seasonally, but the current technical picture takes precedent, especially the primary trend.” Stocks continued their corrective rally this week, and the Nasdaq 100 broke resistance late on Friday night. December is a strong month seasonally for stocks, but the long-term trend is still clearly down.

Commodities

The energy markets continue to get destroyed, but there are signs that the aggressive downtrend may be about to take a pause, as momentum is slowing, there is bullish divergence between price and RSI, and volatility has remained at elevated levels. However, the long-term trend remains down for all markets in the sector except for Natural Gas.

Currencies

The uptrend for the dollar remains intact. The Dollar Index may rally to test recent highs this week. There are also possible breakouts for the dollar against a handful of majors, which includes GBP/USD. GBP/USD closed on Friday just above a critical support level. The long-term trend is down, and the RSI is in the bear range, where it has been for the past several months. Interestingly, volatility in GBP/USD is at a low level, something that is likely to change over the coming week or so.

Interest rate futures

Interest rate futures continue to show signs that they have bottomed. As we have written several times over the past few months, commercials hold a huge net long position, based on COT data, which means they continue to position for lower, not higher, interest rates (interest rate futures move inversely to rates). For now, the long-term trend remains down, but upside breakouts and changes of trend for a few markets in the sector are within range.

Good trading

Phil Seaton

LS Trader