Weekly Update – 30 December 2018 – LS Trader

We’d like to wish all our readers a very Happy and prosperous New Year.

At this time of the year, we usually write about the Santa Claus rally, which is where the market usually has a short, respectable rally for the last five trading days of the year, through to the first two in January. This year, that period began on the 24th, and currently, the market is up over that period. We won’t know whether that pattern will complete until the close on Thursday the 3rd.

Next week we will cover the outcome of the Santa rally and turn our attention to the January effect in EUR/USD, a seasonal pattern that has been correct 76% of the time.

Stocks

From last week: “The bullish sentiment reading on the S&P 500 has fallen to 7%. This is the lowest level seen since January 2016 and is an indication of how negative the market has become. Sentiment extremes such as these often precede corrective rallies..”. The stock markets did put in a sharp, corrective rally from a sentiment extreme. However, Friday’s candle was an indecision candle, which suggests this short, sharp rally may be running out of steam. The market remains below resistance, and the trend remains down.

Commodities

From last week: “Gold did break out as expected, completing a change of long-term trend to up for the first time this year. The RSI also broke above the 60 level.” Since the breakout, gold has continued to advance and has printed an impressive sequence of higher highs and higher lows since the bottom on the 16th August. The Head and Shoulders bottom on the monthly chart continues to form, and a breakout above the neckline on the monthly chart at 1377.5 could confirm that a new bull market is in place.

Silver is following Gold’s lead and has broken out to its highest level since August. A change of trend to up could follow soon.

London Cocoa, which is not a market that we write about often here could be on the verge of completing a head and shoulders bottom, and a change of long-term trend would be confirmed on a break of the neckline. A breakout could see London Cocoa rally to over 2000, exceeding the 2018 highs.

Currencies

From last week: “The dollar is on the verge of testing critical support against the Aussie, where a breakout to the downside would resume the long-term downtrend for the Aussie.” The Aussie did fall through support but only briefly and so far without follow-through. However, the long-term trend remains down for the Aussie.

Interest rate futures

From last week “we may see support in the Gilt tested and broken this week.” Gilts tested support almost to the tick, but support was found, and the market rallied, ending the week higher. This narrowly keeps the long-term uptrend intact for Gilts.

The US interest rate futures markets all printed new highs for the current move, and the long-term trend remains up.

Good trading

Phil Seaton

LS Trader

Leave a Reply

Your email address will not be published. Required fields are marked *