“A Split Tape: Soft Commodities and Equities Lead as the Petroleum Complex Falls Again“
Trend Following Weekly Report
This week split by sector rather than moving as one. Soft Commodities led the board, lifted by sharp gains in cocoa and coffee, while the equity indices firmed for a second week behind a strong Nikkei 225. Against that, the petroleum complex fell again and the metals eased across the board, leaving energy the weakest sector for a second week running. The result was a market pulling in two directions at once, the strongest trends sitting at opposite ends of the board.
Beneath the headline moves, participation narrowed. Just 19 of the 49 markets we track closed higher, down from 26 a week earlier, even as the largest moves grew sharper. Cocoa surged 11.56 percent and coffee 7.01 percent, while crude oil WTI fell 8.99 percent and crude oil Brent 7.74 percent. The opportunity was there, but increasingly through sector selection rather than broad participation, the strength concentrated in a few trends at the extremes.
The TTU Trend Barometer firmed to 45 percent, up from 43 percent and holding in Neutral for a third consecutive week, though its 10-day rate of change reads Falling Weakly. That the barometer rose while fewer markets advanced is a useful reminder that it measures the strength and persistence of trends, not the number of markets closing higher. The SG Trend Index gave back about 0.10 of a point on the year, a far gentler move than the week before, leaving it up 9.53 percent for the year.
For systematic trend followers, the week was less about direction than about which trends were likely to last. The biggest gains, in cocoa and coffee, were counter-trend bounces against multi-month declines, typically the move most likely to fade. The biggest loss, in energy, ran with a downtrend already in place, the more durable signal of the two. The opportunity was directional, but not directionally biased: both the rise in the softs and the fall in the petroleum complex were there to be captured.
TTU Trend Barometer: 45 percent, up from 43 (Falling Weakly)
SG Trend Index: -0.80 percent MTD | 9.53 percent YTD
Top Movers (Up): Cocoa, Nikkei 225, coffee, cotton
Top Movers (Down): Crude oil WTI, VIX, crude oil Brent, soybean oil
Richard Brennan writes on systematic trading, complex adaptive markets, and the philosophical foundations of trend following at atstradingsolutions.com. His books include The Fractals of Finance and Complex Adaptive Markets. The forthcoming Carved by Impossibility completes the trilogy.
Want the theoretical foundation for why trend following works?
The Fractals of Finance: Determinism, Adaptation and the Geometry of Markets bridges complexity science with practical trading implementation. With a foreword by Jerry Parker, original Turtle Trader.
Available now on Amazon in paperback, hardcover, and Kindle.
Want a practical field manual for trading trends and capturing outliers?
The Aussie Turtles Trend Following Guide: A Field Manual for Hunting Outliers adapts the timeless principles of the original Turtle traders into a systematic, rules-based approach for modern markets. Co-authored with Adam Havryliv.
Available now on Amazon in paperback, hardcover, and Kindle.