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

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