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.