Weekly Update – 18 February 2018 – LS Trader

Monday is Presidents’ Day in the US, so it will be a shortened trading week for US markets.

Stocks continued their recovery that began during the previous week. Interest rate futures resumed their downtrend and commodities continue to gain traction to the upside.

Stocks

Stocks continued the bounce that began on the prior Friday and, in the case of US markets crossed back above their 50-day moving average. However, it should be noted that on Friday a doji was printed on the S&P 500, which is an induction bar and indicates that the bounce has lost momentum. That may turn out to be a temporary pause as the market catches its breath from the rally, or it could be a turning point. At present, the long-term trend remains up, and US stocks are heading back towards their all-time highs.

The Dax has been the weakest of the four stock indices we trade at LS Trader and is the only one of the four to complete a change of trend to down. However, the Dax bounced as well and is heading back towards a test of its 200-day MA. It will take significant rally for the Dax to recover to new all-time highs as it is still some 1150 points below those levels. The bias in the Dax has turned to the short side.

Commodities

From last week: “Soybean Meal has seen bullish price action and could complete a bullish trend change this week.” The grains markets have continued to see bullish price action and evidence continues to stack up that a long-term bottom could be in. Soybean Meal exploded to the upside, advancing some 8.58% this week. Soybeans also completed a change of trend to up, but Friday’s breakout was unable to hold above the prior resistance level.

Lumber printed new all-time highs having posted gains for the week of 5.33%. The negative here is that bullish sentiment is at a very high reading. However, we saw a similar reading back in October, and the rally has persisted since.

In spite of large commercial buying, Coffee remains in a long-term downtrend and after a 3.14% decline on Friday appears poised to breakdown to new lows.

Currencies

From last week: “We could see breakouts this week against the dollar for the Japanese Yen and Swiss franc.” Both the Japanese Yen and the Swiss franc broke out as expected, and the dollar remains weak.

The Euro came within pips of a new breakout but reversed at prior resistance. Sentiment remains high, and commercials maintain a near-record net short position. Both of these are negatives for further advance. However, commercials may capitulate if a breakout to the upside is successful, such a move has been seen before in the Euro’s history.

The Dollar Index tested support and bounced but the long-term trend remains down, and we could see new lows again soon.

Interest rate futures

From last week: “The expected bounce did materialise, and although it was a large bounce, it did not damage the longer-term trend, which remains down. We could see this sector resume the downtrend as soon as this week.” Interest rate futures moved lower this week as expected, and the sector resumed the downtrend. Some strength was seen at the end of the week, particularly in the 30 Year T-Bond.

Good trading

Phil Seaton

LS Trader

Weekly Update – 11 February 2018 – LS Trader

Stock market weakness continued this week as volatility continues to expand across multiple markets. Volatility has reached extreme levels in the stock markets, and a new period of higher volatility in stocks appears to have arrived.

However, the extremes seen over the past week or so are likely to decrease somewhat over the coming weeks but remain at elevated levels compared to what has been seen over the past year or so. The period of low volatility, which has been deadly for trends in most markets, appears to be behind us. A new period of large trends is on the horizon in many markets.

Stocks

Stocks continued lower this week and broke support, as we suggested would happen in last week’s update. The weakness seen so far is a correction, and that will remain so until a change of trend is completed. However, price action does have an impulsive look to it, so if weakness persists, change of trend-defining support could be tested and broken.

Bullish sentiment has continued to decline and fell as low as nine this week, which is actually 1 percentage point lower than the low at the time of the US election, from which the massive rally was launched.

On the S&P 500, the price fell below the 200-day moving average on Tuesday and Friday, but on both occasions, a bounce followed shortly afterwards. Tuesday’s low at 2529 was matched almost exactly on Friday with a low at 2530.25. Both times strong buying was evident, as can be seen by the long lower wicks on the daily charts, a sign that the lows are being rejected. For now, the long-term trend remains up but last week’s lows will likely need to hold. If they are broken decisively, a change of long-term trend to down will come within range.

From last week: “A change of long-term trend to down is within range on the Dax and could complete later this week if weakness persists.” The Dax, which has been the weakest of the four stock indexes we trade, did complete the change of trend to down this week. However, as with the S&P 500, the lows were strongly rejected on Friday. Last week’s low will be a key level to watch this week if weakness resumes.

Commodities

Although the focus of many has been on the stock markets, the energy markets have also collapsed and broke support this week as expected. This has brought to an end some highly profitable and long-running trends in the energy markets, at least for now. As with stocks, the long-term trend is still up.

The metals markets have also seen weakness, but not to the same degree as stocks or energies. Silver, which is the weakest of the sector, could resume its long-term trend to down soon. Copper and Palladium both have changes of long-term trend coming into range.

From last week: “Corn is on the verge of a change of trend breakout to up, which could complete this week.” Corn did complete the change of trend to up, but so far without follow through. Soybean Meal has seen bullish price action and could complete a bullish trend change this week.

Currencies

The Euro declined this week as the dollar’s recovery continued. However, the long-term trend is still very much up for the Euro and based on the January effect we’re looking for the January low to hold for the year. The long-term trend for the dollar remains down in spite of recent weakness. We could see breakouts this week against the dollar for the Japanese Yen and Swiss franc.

Interest rate futures

From last week: “The long-term trend remains down across the sector and is likely to continue so for a considerable time, even if we do get the expected short-term bounce.” The expected bounce did materialise, and although it was a large bounce, it did not damage the longer-term trend, which remains down. We could see this sector resume the downtrend as soon as this week.

Good trading

Phil Seaton

LS Trader

Weekly Update – 4 February 2018 – LS Trader

Stock markets reversed aggressively this week following a new high at the open which could not hold. The price action this week certainly represents a change in personality of the market and puts the market into corrective mode. Interest rate futures collapsed, making their lowest print since 2015 (30 Year T-Bond).

Stocks

Stocks opened the week higher but were unable to press further as the weakness that commenced on Monday continued throughout the week, with a significant down day on Friday. The reversal broke short-term support on the S&P 500 and the Dax and had taken the Nasdaq 100 right to support, which will likely be tested and probably broken on Monday.

The reversal printed on the S&P 500 is a key reversal on the weekly chart. However, the long-term trend is still most certainly bullish, and this can only be viewed as a correction in a bull market at this stage. Considerable further weakness will be required for a change of trend. Nonetheless, it has put a large dent in the bull case.

Bullish sentiment, which had been at or near record highs for several weeks, took a battering as the percentage of bulls has dropped from 96 to 39 in only two weeks.

The Nikkei and Dax have both been weaker than US markets. We exited a profitable Nikkei trade during the prior week on a break of support. The Dax also broke support this week and not only did it break short-term, support, it also broke medium-term support. A change of long-term trend to down is within range on the Dax and could complete later this week if weakness persists.

Commodities

The energy markets have seen some weakness this week and support has been tested and stands a good chance of getting broken this week.

The metals markets have also seen weakness as Gold, Silver, Palladium and Copper were all lower.

The grain markets continue to show signs that a long-term bottom is forming, or is already in place. Corn is on the verge of a change of trend breakout to up, which could complete this week.

Currencies

The Euro closed the month significantly higher, so according to the January effect, the low for the year should be in at the January low at 1.1964 (basis March contract). Of course, there is no guarantee this pattern will hold this year, but it does have a very high strike rate.

From last week on the Dollar Index: “A bounce can be expected soon here, but the trend is firmly down”. A small bounce has been seen in the Dollar Index, and resistance could be tested this week.

If the January effect in the Euro holds, and we have seen the low of the year in the Euro, the inverse of the Euro is the Dollar Index. This would suggest that the Dollar Index has put in it’s high of the year (note, the Euro makes up 57% of the index, so this pattern is less reliable). That high currently stands at 92.36 (basis March. contract).

Interest rate futures

Interest rate futures collapsed this week as the hugely profitable downtrend continued. However, it should be noted that sentiment has become extremely bearish, registering in a rare single-digit reading. Sentiment has not been this negative since December 2016, from where a significant rally ensued.

The long-term trend remains down across the sector and is likely to continue so for a considerable time, even if we do get the expected short-term bounce.

Good trading

Phil Seaton

LS Trader

Weekly Update – 28 January 2018 – LS Trader

2018 continues to show signs that it’s going to be a great year for trend following as multiple markets continue to trend well. There are also markets that have yet to break out but are in the process of building favourable setups. The grains markets, in particular, are starting to look very interesting. More on that below.

The long-term trends remain up for stocks, up or turning bullish for most commodities, down for the dollar and down for interest rate futures.

Stocks

Unless we get a crash during the last three trading days of the month, stocks are going to close the month well up. Based on the January barometer, this points to a full year of gains for stocks. Both the S&P 500 and the Nasdaq 100 closed the week out at new all-time highs, both printing a marabozu pattern (closing at the top of the candle with no upper shadow). This shows momentum into the close and is often followed by strength at the opening.

There are bears everywhere calling for a top, just as there have been since November 2016 and all of 2017. Eventually, they will be right, but for now, these markets just keep on truckin’. Trying to pick tops against such strong momentum usually results in bears getting made into rugs! As long as the markets remain above support, and they do, there is no reason to bail out of longs and certainly no need to short.

The Dax broke out to new all-time highs as expected but has so far been unable to push on. The Nikkei had a bit of a pullback and broke short-term support, but remains in a long-term uptrend and may hit new highs again soon.

Commodities

The grain markets overall look as though they may be in the process of putting in a long-term bottom and there is huge rally potential for several markets in the sector. Market sentiment in the sector is low, as is volatility, which continues to awaken. Most importantly perhaps, there is huge commercial buying. The grains markets could enter a huge bull market this year.

The energy markets remain strong with new highs for the current move being printed this week. There is, however, bearish divergence in the Crude markets, so momentum is waning. However, markets remain above support, and the trend is bullish.

Natural Gas completed a change of trend to up for the first time since 2016, and now the entire energy sector is in a long-term uptrend.

Lumber prices made their highest print since 1993 as the bull market continues and closed within a dollar of all-time highs. Expect a new al-time high print this week.

Currencies

The Euro made a new high for the current move on Thursday but that day also saw an indecision bar printed. It’s looking increasingly likely that the Euro has put in its low for January. If that is the case, then the January effect suggests that the low for the Euro may be in for the year. However, sentiment is very high, as is volatility. Commercials again have a record net short position. A pullback would not be surprising, but the market, for now, remains bullish and above support.

The British Pound is now trading above pre-Brexit lows, and except the commercial position, which is only slightly net short for the Pound, a similar case can be made for a correction in the Pound.

Given the above comments, it’s no surprise that the Dollar Index continues to collapse. Sentiment is very bearish, with only 10% bulls. Commercials have gone slightly net long having unwound a large short position. A bounce can be expected soon here, but the trend is firmly down, and buying here is the equivalent of catching a falling knife.

Interest rate futures

Interest rate futures remain weak with all markets in the sector making new lows for the current move. The UK Long Gilt has held up better than US markets in recent weeks, but that too broke support as expected and has resumed its long-term downtrend.

Good trading

Phil Seaton

LS Trader

Weekly Update – 21 January 2018 – LS Trader

The excellent start to 2018 continues as multiple markets continue to trend well. Stocks, in particular, continue to make new highs as the bull market continues. The dollar remains weak, as do interest rate futures, while commodities are mixed.

Stocks

Stocks continue their epic run and have made new all-time highs once again this week. Sentiment remains extremely bullish but slightly lower than it’s recent bullish extremes. Given the advance seen so far this month, it will take a steep correction for the markets not to register a bullish January, which, based on the January barometer, points to a full year of gains for stocks.

The Dax, which has been the weakest of late of the four stock indexes we trade at LS Trader looks poised to breakout to new all-time highs this week. This week the Dax reached levels not seen since early November.

Commodities

The Crude Oil markets made new highs for the current move on Monday but have eased during the week, but remain in strong uptrends. It’s possible that we may see further corrective price action, but for now, the markets remain above support. Commercials now have a record net short position according to COT data.

Gold printed its highest price since September but also eased as the week progressed. Similar price action has been seen in the other metals markets.

Lumber prices made their highest print since 1993 as the bull market continues. Sugar has seen some weakness but should find support from nearby levels, and last week’s low at 13.02 may hold. Commercials are near an all-time net long position. Bullish sentiment has also fallen to low levels, but have yet to decline to single figures, where the market often bottoms out.

Currencies

It’s looking increasingly likely that the Euro has put in its low for January. It will take a move back below 1.1964 to negate that, which is still possible given that we still have eight trading days left this month. If that is the case, then the January effect suggests that the low for the Euro may be in for the year. Time will of course tell, and it is possible that last week’s high at 1.2369 may also mark the high for the month and the year if we get sufficient weakness over the rest of the month. Either way, this is a pattern well worth watching due to its predictive effect for the whole year.

The British Pound has risen to its highest level since Brexit and is now trading above the lows that were seen in the weeks before Brexit.

Interest rate futures

The long-term trend is down for all five interest rate futures markets that we trade at LS Trader. This week saw a bit of a bounce in some of these markets followed by a resumption of weakness and new lows. The long bond fell to its lowest level since March last year.

The 5 Year T-Note is now at it’s lowest level since April 2010 and the 10 Year T-Note since July 2011. The only one of the five that has yet to break down is the UK Long Gilt, and a test of support looks likely this week.

Good trading

Phil Seaton

LS Trader

Weekly Update – 14 January 2018 – LS Trader

The excellent start to the year has continued with multiple markets trending well and more in the pre-breakout phase and likely to breakout soon.

Monday is Martin Luther King Day in the U.S, so U.S markets will have affected trading hours due to the public holiday.

Stocks

The stock market continues to get bullish seasonal indicators confirmed as the Santa Claus rally, which was already completed last week, was joined this week by the next seasonal indicator, which is the first five trading days of January. This indicator, which has an 83.3% accuracy in predicting full-year gains for stocks also completed this past Monday. We now wait for the end of the month for the January barometer, but unless we have a fairly drastic sell-off over the next couple of weeks, that indicator will be bullish as well.

Both the S&P 500 continue to dazzle to the upside, making new all-time highs in the process once again.

The Nikkei continues to advance since the breakout from the ascending triangle (that interpretation ignores the spike on the 9th November). From last week: “This week could see a test of 24020, which was last seen in June 1996.” The Nikkei reached our 24020 target, printing a high of 24025 before easing off somewhat.

The trend for global stocks remains bullish, and in spite of extreme bullish sentiment readings, that view will remain in effect until confirmed by the technicals.

Commodities

The energy markets, particularly Light Crude, which is currently our largest winning open position, continue to impress to the upside. Bullish sentiment on Crude has reached 94%, and COT commercials have reached a record net short position. Brent Crude also continues to rally and this week crossed the $70 level for the first time since late 2014.

Gold advanced 1.36% this week with most of the week’s gains coming on Friday, which was a strong day. The metals remain strong, with Palladium making new all-time highs, as we have been expecting for several weeks.

Currencies

The dollar index made its lowest print since January 2015 this week, a new 3-year low, as the dollar continues to show weakness against multiple major currencies.

The Euro, as expected, reached its highest level against the dollar in 3 years. Interestingly, sentiment is not that bullish, with only a 61% bullish reading. The commitment of traders reports shows that commercials have their largest short position on record against the Euro. Although trends often resolve in the direction of the commercials, we have seen many instances over the years, even in the Euro itself, where the commercials have had to capitulate and unwind their position, resulting in an extended trend. That could happen here.

Interest rate futures

The 30 Year T-Bond completed a change of trend to down this week but has yet to produce any follow-through. This now has the long-term trend down for all five interest rate futures markets that we trade at LS Trader.

Good trading

Phil Seaton

LS Trader

Weekly Update – 7 January 2018 – LS Trader

The year has got off to a flying start with bullish moves being seen in stocks and some decent moves in other markets. Due to many markets spending much of the past 12-15 months in low volatility trading ranges, 2018 is likely to be a year of breakouts, expanding volatility and momentum, and extended trends.

In other words, ideal trading conditions.

Stocks

The stock markets shrugged off a weak close to 2017 and opened the year with a bang and never looked back. The Santa Claus rally, which runs from the 21st December through to the 2nd trading day of the year, in this case, the 3rd January was bullish, and this points to a bullish year in stocks. The next seasonal indicator is the first five trading days of January, which has an 83.3% accuracy in predicting full-year gains for stocks is also off to a good start with a large four-day rally to kick the year off. Unless we get a huge down day on Monday, this indicator will also be bullish.

The biggest negative for stocks, in particular, the US stock indexes, is extreme bullish sentiment. In fact, bullish sentiment on the S&P 500 is at 95% bulls, which is the highest reading I could find. Bullish sentiment at extreme does not mean that a reversal is imminent, but large speculators have their largest long position since March 2013. A pullback to ease the sentiment may be seen in the next week or so, but is not necessary. All the technicals are bullish.

The Nikkei also launched big move to start the year as it broke out from an ascending triangle (that interpretation ignores the spike on the 9th November). This week could see a test of 24020, which was last seen in June 1996.

Commodities

From last week: “Light Crude made its highest rent since June 2015 but is heading into what may prove to be a strong resistance area around the 62.00 level.” Light Crude reached the 62.00 level, printing 62.21 before reversing slightly. Commercials now have a record net short position. The trend remains bullish for energies except for Natural Gas.

Sugar remains a choppy market but could be building up for a big move. Commercials are once again net long, not far from a record net long position. Such a position often results in a large up move. Time will tell.

Currencies

In recent weeks we’ve written about the January effect in EUR/USD and the tendency for this market to make its high or low for the year during January. It’s too early to say which way this will go, or even if the pattern will work this year. The low for 2017 was made on the first trading day of the year, which was the 3rd. This year the first trading day was the 2nd, and the low for the day was 1.2056 basis the March contract. Of course, we could also see a reversal and the high for the year printed this month.

The dollar index, which is a near-perfect inversion of EUR/USD fell to its lowest level since September, and the September low is the next target.

Interest rate futures

Interest rate futures resumed the downtrend this week as both the 5 Year T-Note, and the 3-Month Eurodollar (Sep-18 contract) fell to new lows for the current move. The 10 Year T-Note was also weak and tested the recent low. The 30 Year T-Bond remains the strongest and has yet to breakdown.

The UK Long Gilt remains range bound, trading roughly in the middle of the range that has been in place since March last year.

Good trading

Phil Seaton

LS Trader

Weekly Update – 31 December 2017 – LS Trader

We’d like to wish all our readers a very Happy and Prosperous New Year and a great year in the markets!

2018 is likely to be a very good year for traders as volatility continues to expand. Given that this year has been characterised by long periods of consolidation and low volatility, there’s a strong expectation that 2018 will deliver some monster moves.

Stocks

The Santa Claus rally, which usually brings a respectable rally during the last five trading days of the year and the first two of the New Year started on Thursday 21st December and continues through to the first two trading days of January, which this year will be Tuesday 2nd and Wednesday 3rd. So far, largely due to the wide range day on Friday and lower close in the S&P 500, the markets are currently negative for the period. If this period is not bullish, it points to a down year for stocks in the coming year with a high degree of accuracy.

The price action in US stocks over the past couple of weeks has not been impressive. The Nasdaq 100 has closed lower in 7 of the last eight trading days, not a strong close to the year.

Commodities

The energy markets remain extremely bullish as both Light Crude and Brent Crude continue to rally to new highs for the move. Brent made its highest print since May 2015 and may rally further to 69.63. Light Crude made its highest rent since June 2015 but is heading into what may prove to be a strong resistance area around the 62.00 level.

Metals have also been bullish this week, and this is one asset class that has big potential in 2018. There’s a possible inverted head and shoulders pattern being formed in Gold which, if completed with a neckline break would give a target of 1709.

Currencies

From last week: “The Dollar Index continues to trade within a narrow range, just below its 50-day moving average. This important range spans between support around 92.00 and resistance around 94.70. A break of either level should yield a decent move. For now, the long-term trend remains against the Dollar Index.” The Dollar index did break out of that range to the downside, in the direction of the primary trend, and completed a head and shoulders top pattern that gives a target down to 89.32. However, support can be expected at the September low around the 91.00 area.

We’ve previously discussed the tendency for the Euro to make its high or low for the year in January. EUR/USD did make its low for the year in 2017 on the 3rd January. This past week saw EUR/USD breakout to the upside. If this breakout is the real deal and EUR/USD continues to rise, that would suggest that a low for the year could be in. However, there’s plenty of trading in the month of January and ample time for the market to turn, and it’s also possible that the high for the year may be printed. Of course, as with all seasonal patterns, there’s no guarantee that this pattern will hold, but the past data does indicate a very strong tendency for this pattern.

Interest rate futures

Interest rate futures made a corrective rally this week but remain in long-term downtrends. As has been the case recently, the shorter-term markets remain the weakest. Will 2018 be the year that bonds break their long-term downtrend? It certainly could be if the huge head and shoulders top that is forming completes. Time will tell.

Good trading

Phil Seaton

LS Trader

Weekly Update – 24 December 2017 – LS Trader

We’d like to wish all our readers a very Happy Christmas. We hope you all have a fantastic festive season!

2017 is likely to end with the bull market in global stocks intact and with US stocks either at or near to all-time highs. Multiple markets across all the asset classes look poised to make some decent moves over the coming weeks with key breakouts potentially imminent in multiple currency, commodity, and interest rate futures markets. 2018 is likely to be a very good year for traders as volatility continues to expand.

Stocks

The Santa Claus rally, which usually brings a respectable rally during the last five trading days of the year and the first two of the New Year started on Thursday 21st but has so far seen little action. The bullish period continues through this week and the first two trading days of January.

Commodities

The energy markets continued their recovery from support the prior week, which keeps the long-term uptrend intact. The sole exception is Natural Gas, which printed its lowest level since November 2016.

Precious metals are correcting higher after recent weakness with Gold rallying sufficiently to test its 50 and 200-day moving averages. Silver has made a similar move. Copper has also seen strength and could breakout to new highs this week.

Cotton has made a decisive breakout and has rallied to its highest level since May, whilst London Cocoa and Coffee remain weak.

Currencies

The Dollar Index continues to trade within a narrow range, just below its 50-day moving average. This important range spans between support around 92.00 and resistance around 94.70. A break of either level should yield a decent move. For now, the long-term trend remains against the Dollar Index.

With narrow trading action being seen in the EUR/USD as well, the previously discussed tendency for the Euro to make its high or low for the year in January could result from the next breakout. We’ll have more to say on this in the coming weeks as we look for the same pattern in 2018, but note that EUR/USD did make its low for the year in 2017 on the 3rd January.

Interest rate futures

From last week: “This week, the 10 Year T-Note tested support almost to the tick but found support. We could see support tested again this week.” The 10 Year T-Note tested and broke support as expected, and the RSI broke the 40 level. Also, volatility is expanding within the trending zone. There is room for further weakness, with the next support level coming in around 122.35.

The long bond remains the strongest in the sector and did test short-term resistance this week as we suggested may happen in last week’s update but was unable to break through and a steep 3-day sell-off ensued, taking the long bond below both its 50 and 200-day MAs. As we’ve mentioned in previous weeks, there is a huge head and shoulders top pattern forming which could result in sharply lower prices. The trend for interest rates is now higher, which means prices are set to fall.

Good trading

Phil Seaton

LS Trader

Weekly Update 17 December 2017 – LS Trader

US Stocks have made new all-time highs once again this week as the global bull market remains in effect. There were a few breakouts this week in various commodities markets as volatility continues to awaken. This week is likely to see declining volatility as the week progresses, but watch for the Santa Claus rally in stocks towards the end of the week.

Stocks

New all-time highs were seen in US stocks as expected as the bull markets continue. While many people have been trying to call a top in stocks for most of the past couple of years the fact remains that there has never been a reason to be short. The 200-day moving average has been sloping upwards since March 2016.

As for a measure of strength and momentum, this week’s closing RSI value at 85.48 is the highest in decades. I had to go all the way back to January 1959 to find a higher reading, which is only two years after it expanded to its present 500 stocks! Things aren’t quite so bullish for the S&P 500 at daily chart level as we have some bearish divergence.

The Nasdaq 100 traded in a similar fashion to the S&P 500 and also made new all-time highs. In fact, the current trend in the Nasdaq 100 has been the biggest bull move in history in terms of points, and there is nothing on the chart to suggest that move is over.

International stock indexes lag the US markets, but the Nikkei could be gearing up for a new breakout after Friday’s reversal from fair value. The Dax is currently finding support at the 50-day moving average.

The trend for global stocks remains firmly up, and new highs still seem to be the order of the day. It’s going to take a decent-sized downside break in any of the four stock indexes that we trade at LS Trader to even think about a short trade. The long-term trend is likely to remain up for some months yet. Watch for the Santa Claus rally, which usually brings a respectable rally during the last five trading days of the year and the first two of the New Year. This year that starts on Thursday 21st.

Commodities

Gold came within points of a change of long-term trend to down but then reversed, narrowly keeping the long-term uptrend intact. Silver, which is already in a confirmed long-term downtrend, fell to a slightly new low for the current move before bouncing higher along with Gold.

Cotton made an upside breakout, reaching its highest level since May and completing a change of long-term trend to up. There is plenty of chart space for further strength as the next level of structural resistance does not appear until the 85.00 area.

Brent Crude made the expected breakout and new high but then reversed sharply but held above support.

Currencies

The US dollar has had a mixed week again but appears to be on the verge of at least a couple of breakouts, most likely against the Canadian dollar. The market has tested resistance in October and November but has yet been unable to punch through. That could happen this week. With volatility at low levels, there is potential for an extended move should the breakout prove successful.

The Dollar Index itself is trading within a fairly narrow, but important range, between support around 92.00 and resistance around 94.70. A break of either level should yield a decent move. For now, the long-term trend remains against the Dollar Index.

We’ve written in previous years about the tendency for the Euro to make its high or low for the year in January, and that held true once again in 2017. We’ll have more to say on this in the coming weeks as we look for the same pattern in 2018.

The December currency futures went off the board this week and rolled to March.

Interest rate futures

Interest rate futures remain in a long-term downtrend with the shorter-term markets still the weakest. The three month Eurodollar and 5 Year T-note lead the way to the downside.

This week, the 10 Year T-Note tested support almost to the tick but found support. We could see support tested again this week. The long bond remains the strongest in the sector and may test short-term resistance this week.

Good trading

Phil Seaton

LS Trader