The brilliant start to the year for the LS Trader system has continued this week, with several markets making significant moves. This has resulted in the system generating excellent profits after only two trading weeks of the year.
Stocks have continued their decline, as their very poor start to the year continues to get worse. The same goes for the energy markets, which, with Crude Oil moving below $30, are now at twelve-year lows. The dollar has gained against most of the majors and remains in a long-term uptrend overall. Interest rate futures have also rallied and may be headed for a test of their 2015 highs.
Stocks have continued sharply lower this week and are now close to testing their August 24th lows. The January Barometer, which states with an 87.7% accuracy ratio that as goes January, so goes the end of the year, cannot be assessed until January ends. However, unless we see a major turnaround over the next two weeks in the stock markets, it’s highly likely that stocks will end the month lower, which points towards a bear market in stocks this year.
However, much more important that any seasonal historical tendency is the current market trend, which is firmly down for all the stock indexes that we trade at LS Trader with the exception of the Nasdaq 100. The Nasdaq 100 has been the strongest index for much of the past year, but even that is calling sharply and is heading for a test of trend-defining support.
The Nikkei, which is the weakest of the four stock indices that we trade at LS Trader, has already fallen below its 24th August low and printed its lowest price since October 2014 this week. The area around last week’s low could represent significant support, which if broken could yield considerable further declines.
The energy bear market has continued this week with Crude Oil moving below $30 per barrel. With the exception of Natural Gas, all the energy markets fell to new multi-year lows this week. Crude Oil made its lowest print since late 2003.
Heating Oil dropped to its lowest level since 2004, but RBOB Gasoline is still above its late 2008 low. That low basis the continuous contract is at 0.8210, still some 2000 points below Friday’s close. The RSI has dropped to 29.47, which is a bearish reading, but far from an extreme level. There is still, therefore, further room for decline.
In spite of an increased level of fear in the markets due to declining stock and energy prices, gold has not seen any significant rally and remains in a long-term downtrend, as do the other metals. Palladium and Copper, in particular, have been weak, both falling to multi-year lows.
It’s been a good week for the dollar with gains being seen against nearly all the majors. The dollar fell against the Yen to its lowest level since August the 24th, and that level could be seen this week. The dollar also had a mixed week against the Euro, and this kept a lid on gains for the dollar index.
The British Pound saw further weakness this and remains on course for our target, the 2010 low at $1.4015. We will reassess lower targets should that level be reached.
Interest rate futures
The interest rate futures made further gains this week as the long-term uptrend continues for the sector. The long-term trend remains down only for the 30 Year T-Bond, which continues to lag the other markets in the sector. However, a change of trend for the long bond could be seen this week. Whether we see the sector rally further towards their 2015 highs remains to be seen.