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.
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.
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.
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.