The past week, which was a shortened trading week due to the New Year’s Day holiday, was another quiet week. This was as expected and is very much the norm for the two-week period around Christmas and New Year. This week ahead should see a significant uptick in trading activity and volume, and several markets are within range of testing key support and resistance levels, so we should see some markets breakout during the first trading week of the year.
As 2016 begins, the long-term trends started the year down for commodities, up for the dollar and mixed for interest rate futures. Stock indexes remain mixed, with two of the global stock indexes we trade currently trading just above critical support.
Seasonally, this is a bullish time of year for stock indexes with the last five trading days of the year and the first two of the New Year forming the traditional Santa Claus rally period.
So far there has been no sign of this historical bullishness, and with just two trading days to go for this bullish period, stocks remain lower than when they entered the so-called Santa rally period.
Therefore, a decent rally will be required on Monday and Tuesday, or the Santa rally will have failed to materialise. The historical chart records show that when this rally does not materialise, the new trading year is often a bear market.
The LS Trader system does not place trades based on seasonal historical tendencies, as it focuses on price action and trend. The system is currently flat the stock markets and has been so for the past couple of weeks. That could change this week though as some key support and resistance levels are close to the market and will likely be tested in the coming days.
The Crude Oil markets, which have been very bearish of late, ended the week lower but are trading in what must be considered quite a narrow range. Consequently, they are trading between key resistance and support from the recent lows. It’s unlikely that this tight range will continue for much longer, so one of these levels will likely be tested in the coming days. These markets remain very much in long-term downtrends and continue to be very profitable for the LS Trader system, which remains short.
Heating Oil, which has been even weaker, has been more profitable still, and we currently have 3581 points profit on this trade since we entered short back on the 12th November at 1.4820 (last close at 1.1239).
Natural Gas continued with strength this week as expected, and the recent downtrend has ended, at least for now. The long-term trend is still very much down and will be for quite some time yet. The current rally is likely a bear market rally and just a pause in the larger downtrend.
As we begin the new trading year, both Gold and Silver remain in long-term downtrends and are just above key multi-year lows.
The dollar displayed a bit of strength this week and moved back above its 50-day moving average. The long-term trend remains up for the index.
The British Pound continues its decline, and this week fell to new lows for the current move and is now at its lowest level since April. The RSI has fallen to a bearish 33.87 and the focus remains lower towards what could potentially be significant support at 1.4544.
The Japanese Yen has rallied against the US dollar and has tested its 200-day moving average this week. The long-term trend still favours the Yen and we could see a bullish breakout this week.
Interest rate futures
Interest rate futures have continued with choppy, rangebound trade. The 30 Year T-Bond finished the week lower and closed right on the 200-day moving average.
The shorter-term interest rate futures markets are weaker still. The 3-month Eurodollar has this week closed below its 200-day moving average for the first time since September 2013, basis the continuous chart.