Weekly Update – 20 January 2019 – LS Trader

Monday is Martin Luther King Jr. Day in the US, so most US markets will be closed. We’re at a fascinating juncture in multiple markets where we could be at or near a turning point ahead of potentially resuming the prevailing long-term trends.

Stocks

Stocks have continued to rally this week. The S&P 500 has rallied to just shy of the 61.8% retracement of the decline from the 21st September all-time high. The RSI is testing bear market resistance at the 60 level, so this could be a critical resistance level for stocks. This rally is still viewed as corrective at this stage but if it continues towards the 78.6% retracement levels that would suggest we could see a complete retracement. For now, the odds favour a turn lower and a test of the recent lows.

Commodities

Palladium rallied to a new all-time high this week but has pulled back from Thursday’s high, where an extremely high bullish sentiment had been printed. It’s possible that we may see more short-term weakness, but the trend remains bullish, and the market is well above support.

The energy markets have continued their corrective rallies and have now retraced 38.2% of the decline from the October high.

The grains markets are starting to show some signs of life, and we could be seeing a massive bottom forming in this sector, with some potential upside breakouts and changes of the long-term trend to up in the offing.

Currencies

The Dollar Index has rallied from the recent low. The RSI never broke the 40 level and therefore remains in the bull range, and the long-term trend is up.

EUR/USD has fallen for seven consecutive trading days and is now moving towards the lower end of the January range. As per previous updates, we’re on the lookout to see if the January effect holds this year with the high or low for the year being printed this month.

Interest rate futures

Interest rate futures markets declined this week and broke support in the process, bringing an end to the recent uptrend. The long-term trend remains up for the sector, but we could see bull market support at 40 on the RSI tested this week.

Good trading

Phil Seaton

LS Trader

Weekly Update – 13 January 2019 – LS Trader

The past week has seen the downtrends come to an end for now in stock indices and the energy markets. However, the long-term trend remains down, and both sectors may revisit their recent lows in the coming weeks. It should be noted that global stocks remain in a bear market, with prices below a downward sloping 200-day moving average.

Stocks

In addition to the Santa Claus rally, which points to a bullish year, we also have a bullish first five trading days of the year being bullish. This indicator has an 83.7% accuracy for predicting full-year gains when the first five trading days of the year are bullish.

However, the long-term trend is down, and global stocks are in a bear market. The sharp rally seen since the low on the 26th December is corrective and has not quite retraced 50% of the prior decline. In spite of that rally, the RSI remains in the bear range and has only managed to reach 53.2 on the S&P 500. The market is also back to a resistance level where prior support from the October low should now act as resistance. The daily candles also show a contraction and a loss of momentum. It’s possible that we may see further strength in the short-term, but the weight of the evidence still points to lower prices, and the December 26th 2018 low being broken.

Commodities

The energy markets continued their recent rally and broke above resistance, bringing the very profitable downtrends to an end. The LS Trader system exited all short positions this week, all of which had been very profitable since entering back in October for RBOB Gas, and early November for Crude, Brent, and Heating Oil. The long-term trend remains down. The rally has so far retraced around 38.2% of the decline since October and may yet turn lower again.

Palladium continues to print new all-time highs and remains bullish. Gold and Silver remain in uptrends but have not yet shown any signs of follow-through since the breakout. The weakest metal by far is Copper, which remains in a long-term downtrend.

Currencies

The dollar has seen further weakness this week. The Dollar Index has fallen to its lowest level since mid-October. For now, the long-term trend remains up, but the market is flirting with its 200-day moving average. The LS Trader system is currently flat all currency markets as there are no directional trends in the immediate term.

Interest rate futures

Interest rate futures have seen some price weakness so far this year, but all markets in the sector remain bullish and in long-term uptrends, holding above support.

A note on the COT (Commitments of Traders report). With the US government currently in shutdown, the COT reports are not being run so we cannot provide any comments on commercial positioning. This does not affect the system as we don’t use the COT data as part of the system, it is merely an interesting tool for spotting extreme or unusual positioning. The last data we have shown commercials still holding a huge net long position in the interest rate futures market. That likely remains the case.

Good trading

Phil Seaton

LS Trader

Weekly Update – 6 January 2019 – LS Trader

2018 ended on a high note for the LS Trader system, and it brought to an end a very profitable trading year. Much of the year saw challenging trading conditions, but volatility exploded in the last quarter to usher in a new trading climate and bring an end to the period of low volatility that had dominated most markets for the past couple of years. Volatile markets are much more profitable to trade, so 2019 looks like it should be another good trading year.

Stocks

The Santa Claus rally, which is where the market usually has a short, respectable rally for the last five trading days of the year, through to the first two in January. This year, that period began on the 21st through to the close on Thursday the 3rd. This year, the market finished up for that period, which is a bullish indicator for stocks for the year ahead.

We also have the first five days of January as the next seasonal indicator, as well as the January Barometer itself. Further additional seasonal data shows that pre-election years in the US are the most bullish for stocks. So, in terms of seasonal tendencies, this year has a decent chance of being bullish for stocks. However, we always view seasonal tendencies as just that, tendencies, and the technical picture still takes precedence. For now, the trend for stocks is down, but resistance is likely to be tested early next week following the sharp corrective rally since the 24th December.

Commodities

From last week: “Silver is following Gold’s lead and has broken out to its highest level since August. A change of trend to up could follow soon.” Silver completed a change of long-term trend this week, reaching its highest level since July. Gold also reached its highest level since June. However, both markets saw weakness on Friday. Palladium, still the strongest of the metals, printed a new all-time high on Friday after a very bullish $40 rally.

Currencies

The January effect in EUR/USD, a seasonal pattern that has been correct 76% of the time. This pattern indicates a strong tendency for EUR/USD to print its high or low for the year during January. In 76% of years, the high or low of the year for this currency has been printed during January.

The past week has seen general dollar weakness, which included some explosive price swings against the Yen. For now, the long-term trend continues to favour the dollar for all the majors except for the Yen and the Kiwi.

Interest rate futures

Interest rate futures rallied to their highest prices in almost a year, but all markets in the sector had an ugly reversal day on Friday. It remains to be seen if there is follow through to the downside next week, but the long-term trend remains up.

Good trading

Phil Seaton

LS Trader