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.