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.

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