Trend Following - Week in Review - January 17, 2025

Welcome to "This Week in Trend", where each week, we cover key movements and trends in the futures markets, offering insights on commodities and indices shaping the economy. From price surges to notable declines, we provide an overview of the factors driving these changes. Stay informed about the latest developments and navigate the market with confidence. Join us weekly to explore the dynamic world of futures trading and the trends that matter most.
"The Market Breathes: Equities Rise and Volatility Subsides"
This week, markets appear to have found a moment of calm and clarity. Equities surged, reflecting renewed optimism among investors, while the Volatility Index (VIX) experienced a sharp decline, signalling a shift toward risk-on sentiment. Despite these favourable conditions for trending markets, the SG Trend Index, as of January 16, 2025, posted a modest +0.08% MTD and YTD. This suggests that some trend-following funds may be encountering challenges, likely experiencing whipsaws as markets transition back into a bullish stance.
The TTU Trend Barometer, updated on January 17, 2025, held steady at 66%, continuing to reflect a strong trending environment and providing ample opportunities for systematic trend-followers. However, the disparity between the Barometer’s strength and the SG Trend Index performance underscores the complexity of capturing emerging trends during transitional market phases.

The Top Traders Unplugged (TTU) Trend Barometer is a proprietary tool that measures the percentage of markets with medium to strong trends. Similar to a thermometer, where 0 degrees Celsius equates to freezing, a TTU Trend Barometer reading below 40% indicates a “cold” environment for trend-following, while readings above 55% signal a “hotter,” more favourable trend environment.
Weekly Asset Class Snapshot

Source: Finwiz.com
As the third week of January 2025 concludes, asset classes have exhibited notable movements, reflecting the evolving economic and geopolitical landscape. Compared to last week, several themes have shifted, most prominently the strong equity rally and the significant decline in the Volatility Index (VIX), suggesting renewed optimism and reduced investor anxiety. Here’s an overview of the key sectors and how they compare to last week:
- Equities: +2.80% (Up from -1.18% last week) - Equity markets made a strong recovery, driven by renewed investor optimism fuelled by better-than-expected corporate earnings and a cooling inflation report. Last week's cautious sentiment, reflected in the decline of -1.18%, has now been replaced by bullish momentum, as major indices like the S&P 500 and Dow Jones Industrial Average posted significant gains. This marked a key shift from last week’s heightened concerns over economic growth and interest rate uncertainties.
- Energy: +1.79% (Down from +5.74% last week) -The energy sector maintained its bullish stance but at a slower pace than last week. Oil prices continued their climb, supported by tight supplies and speculation regarding potential policy changes under the new U.S. administration. While the momentum is still strong, the pace of gains has moderated compared to last week's sharp 5.74% rise driven by geopolitical tensions and seasonal demand.
- Metals: -0.44% (Down from +4.27% last week) - Metals experienced a slight pullback this week, with industrial metals like copper stabilizing after strong demand from infrastructure projects. Precious metals like gold faced headwinds from a strengthening equity market, contrasting last week’s robust gains driven by safe-haven investment flows during heightened volatility.
- Grains: +1.81% (Up slightly from +3.42% last week) - Grain markets continued to advance, supported by concerns over global supply constraints and adverse weather conditions in key producing regions. The steady upward trajectory reflects a persistent theme of constrained supply and robust demand from emerging markets.
- Meats: -1.03% (Down from +2.20% last week) - The meats sector saw a reversal this week, experiencing modest declines as tightening supply conditions were offset by concerns over higher feed costs. Last week’s gains, driven by steady consumer demand, have given way to caution amid changing cost dynamics.
- Currencies: +0.18% (Up from -0.61% last week) - The U.S. dollar showed mixed performance this week, slightly recovering against major peers. This reflects cautious optimism regarding fiscal stimulus and monetary policy stability, contrasting last week’s profit-taking activities that softened the dollar.
- Soft Commodities: -0.06% (Improved from -0.46% last week) - Soft commodities remained relatively stable this week, with minor declines in markets like cocoa and coffee due to continued profit-taking. The theme of consolidation persists, though the magnitude of declines has softened compared to last week.
- Volatility Index (VIX Futures): -14.26% (A sharp drop from +14.77% last week) - The most significant thematic shift was the dramatic decline in the VIX, signalling reduced market anxiety and a return to risk-on sentiment. Last week’s sharp rise, reflecting investor concerns over potential equity market corrections, has given way to calmness as equity markets surged and investor optimism returned.
- Bonds: +0.80% (Rebounded from -0.95% last week) - Bonds saw a marginal recovery after last week’s pullback, as mixed market sentiment around interest rate expectations persisted. While bond yields continued to rise, the pace has moderated compared to last week’s declines, reflecting a more balanced investor outlook.
The dominant theme this week was the recovery in equities, accompanied by a sharp decline in volatility. The cautious, risk-off tone that defined last week has given way to renewed optimism, as equities rallied and the VIX futures plummeted by over 14%. Energy markets continued to demonstrate strength, though at a more measured pace, while soft commodities and metals appeared to stabilize, marking a contrast to last week’s more pronounced momentum across commodities.
This week also highlighted a key thematic shift in market sentiment, with uncertainty easing and a clearer path emerging toward risk-on behaviour. Corporate earnings, cooling inflation, and reduced economic anxieties played pivotal roles in fostering this more optimistic outlook.
Overall, the market seems to be finding its footing, with equities breathing new life into trends and volatility receding into the background. The macroeconomic landscape, however, remains dynamic, underscoring the importance of discipline and adaptability for trend-followers navigating these evolving conditions.
Top 10 Bear and Bull Price Moves
Here's a detailed analysis of the key market movers for the week.

What’s Moving Up
Oats: +10.2%
Oats experienced a significant surge of +10.2% this week, marking a notable rebound in price after a prolonged period of bearish trends.
Causal Factors:
- Supply Constraints: Persistent weather disruptions in key growing regions have tightened supplies. Adverse conditions, including heavy snowfall and delayed planting, have exacerbated supply chain bottlenecks.
- Increased Demand: With heightened global focus on food security, demand for staple grains like oats has risen, as consumers and governments stockpile essential commodities.
- Market Positioning: The price spike may also be attributed to short covering by traders who had been positioned bearish amid recent declines, leading to sharp upward momentum.
Trend-Following Perspective: For medium- to long-term trend-following models, the sharp rise in oats prices presents a challenge. Many traders were likely positioned short, aligned with the prevailing downtrend, only to face a whipsaw as prices surged unexpectedly.
This move does not yet signal a clear breakout to the upside, leaving trend-followers in a precarious position. Without a decisive trend shift or follow-through in the coming sessions, this upward spike may prove temporary, demanding careful risk management to avoid further adverse impacts.

Cocoa: +5.7%
Cocoa prices surged by +5.7% this week, continuing their impressive rally and cementing their status as one of the most significant bullish outliers in recent years.
Causal Factors:
- Supply Shortages: Persistent challenges in West Africa, the largest cocoa-producing region, remain a key driver. Adverse weather conditions and disease outbreaks, particularly the cacao swollen-shoot virus, have led to significant production declines.
- Increased Demand: Global demand for cocoa products has remained strong, with key markets such as Europe and North America ramping up imports to meet holiday and seasonal consumption needs.
- Speculative Interest: Cocoa’s extended bullish trend has attracted speculative flows, further amplifying its price movements.
Trend-Following Perspective: For trend-following strategies, the continued surge in cocoa prices offers a prime opportunity to exploit this massive bullish anomaly. However, models trading this outlier must be designed to withstand significant volatility, as the price, while overall bullish, exhibits dramatic intraday and weekly swings.
Flexibility and robust risk management are essential to ride the trend without being shaken out by the sharp retracements that have occasionally punctuated this rally. Traders with “loose pants,” or models that allow for wider stops and greater tolerance for volatility, have likely fared well, capitalizing on this exceptional price movement.nt strategies to navigate the turbulent environment effectively.crude oil market.

Heating Oil: +5.22%
Heating oil prices surged by +5.22% this week, marking a significant bullish move that challenges the prevailing bearish sentiment observed in recent months.
Causal Factors:
- Seasonal Demand: The arrival of colder weather in key markets has driven up demand for heating oil, as consumers and businesses prepare for winter conditions.
- Supply Concerns: Geopolitical tensions and reduced refining capacity in certain regions have constrained supply, adding upward pressure to prices.
- Market Positioning: The recent rise may also reflect speculative positioning and short covering as traders react to changing fundamentals.
Trend-Following Perspective: For medium- to long-term trend-following models, this sharp upward movement is unfavourable, as many traders have likely been positioned short, aligning with the broader bearish trend. The sudden bullish surge represents a potential whipsaw event, forcing these models to reassess their positions.
On the other hand, shorter-term trend-following strategies may interpret this move as a potential breakout signal to the long side. The recent price action, if sustained, could pave the way for a trend reversal, offering new opportunities for traders who adapt quickly to changing market dynamics. However, caution is warranted, as this move may still face resistance unless it develops into a more sustained trend.

Russell 2000: +3.92%
The Russell 2000 index rose by +3.92% this week, providing a much-needed boost and suggesting a potential resumption of the longer-term bullish trend.
Causal Factors:
- Improved Market Sentiment: Investor optimism returned as cooling inflation data and robust corporate earnings reports alleviated concerns about a potential economic slowdown.
- Broader Risk-On Environment: With the Volatility Index (VIX) sharply declining, investors moved back into riskier assets, including small-cap equities, driving the Russell 2000 higher.
- Federal Reserve Policy Clarity: Expectations of a more predictable path for interest rates following recent Fed communications have further supported small-cap stocks, which are typically more sensitive to borrowing costs.
Trend-Following Perspective: For trend-following strategies, this week’s strong upward move is a welcome shift. Recent bearish swings had posed challenges for longer-term models, but this week’s rally suggests the potential for a return to the prevailing bullish trend. Trend-followers with long positions likely benefited from the market’s recovery, while those who were stopped out during the recent volatility may now be looking to re-enter long positions as the trend reasserts itself.
This move provides confidence in the broader upward trajectory of the Russell 2000, though traders will remain vigilant for further confirmations of sustained momentum in the coming sessions.await a decisive breach of the November highs before fully committing to an upward trend.

DJIA: +3.61%
The Dow Jones Industrial Average climbed by +3.61% this week, echoing the broader market recovery and reinforcing a continuation of its longer-term bullish trend.
Causal Factors:
- Earnings Season Optimism: Better-than-expected earnings from key industrial and financial sectors boosted confidence in the resilience of the U.S. economy, driving the index higher.
- Economic Stability: Cooling inflation data and improving macroeconomic conditions have reduced fears of a recession, supporting investor confidence in blue-chip stocks.
- Risk-On Sentiment: As the Volatility Index (VIX) dropped sharply, investors moved into large-cap, dividend-paying stocks, further propelling the DJIA upward.
Trend-Following Perspective: For trend-following models, the DJIA’s strong rally offers confirmation of its long-term bullish trend. After weeks of choppy movements, this consistent gain reinforces confidence in maintaining or initiating long positions. Similar to the Russell 2000, this rally provides a clear signal of renewed strength in equity markets, particularly among the largest and most stable U.S. companies.
The sustained recovery aligns well with systematic trend-following strategies, which thrive on steady, directional market movements. As long as macroeconomic stability persists and earnings remain strong, the DJIA is likely to maintain its upward trajectory, providing favourable conditions for trend-followers.

What’s Moving Down
VIX Futures: -14.26%
VIX futures plummeted by -14.26% this week, marking a sharp decline that reflects a significant easing of market uncertainty and a return to a low-volatility environment.
Causal Factors:
- Stabilizing Equity Markets: The strong rally across major equity indices, such as the Russell 2000 and DJIA, reduced fears of market instability, driving the VIX lower.
- Cooling Inflation Data: Signs of moderating inflation eased concerns about aggressive Federal Reserve policies, calming investor sentiment.
- Risk-On Sentiment: A resurgence of investor confidence in riskier asset classes has diminished the demand for volatility hedges, further pushing the VIX downward.
Trend-Following Perspective: While VIX futures are not typically traded by trend-following models, they serve as a vital gauge of market sentiment. The steep decline signals a return to very low volatility, a condition that often supports equity market trends. For trend-followers, a low VIX environment provides a smoother backdrop for capitalizing on directional market movements, reducing the likelihood of erratic price swings that can trigger premature exits.
This return to calmness reinforces the broader narrative of stabilizing macroeconomic conditions and growing investor confidence, providing a favourable setting for systematic strategies focused on capturing long-term trends.

Sugar: -5.25%
Sugar prices dropped by -5.25% this week, marking a continuation of its bearish trend and providing favorable conditions for trend-following strategies.
Causal Factors:
- Increased Global Production: Key producers, such as Brazil and India, have reported strong harvests, contributing to a global supply glut. Brazil, in particular, has ramped up sugar production due to favourable weather conditions and expanded acreage.
- Weakened Demand: Shifting consumer preferences toward alternative sweeteners and reduced demand from certain export markets have added downward pressure on prices.
- Currency Impact: A strengthening U.S. dollar has made sugar more expensive for importers, reducing international demand and exacerbating the bearish momentum.
Trend-Following Perspective: For trend-following strategies, this significant decline aligns well with the broader bearish trend in sugar prices. Traders who have been positioned short likely benefited from this move, which serves as further confirmation of the prevailing downtrend.
The consistent downward trajectory suggests that sugar remains a favourable market for trend-followers, as the fundamentals continue to point toward an oversupplied market with muted demand. However, caution is warranted in monitoring for any signs of trend exhaustion or corrective rallies that could disrupt the bearish momentum.n the upcoming sessions.

Canola: -3.82%
Canola prices declined by -3.82% this week, reinforcing the ongoing bearish trend and creating favourable conditions for trend-following strategies positioned short.
Causal Factors:
- Improved Global Supply: Higher-than-expected yields from key producing regions, including Canada and Australia, have alleviated previous concerns about supply shortages. Favourable weather during the harvest season has contributed to an oversupply in global markets.
- Weakened Demand for Biofuels: A slight cooling in demand for biofuels, partly due to fluctuations in energy markets, has reduced the need for canola oil as a feedstock. This diminished demand has added pressure to canola prices.
- Export Competition: Increased competition from alternative oilseeds, such as soybeans and palm oil, has shifted demand away from canola, further exacerbating its price decline.
Trend-Following Perspective: The consistent decline in canola prices offers a favourable environment for trend-following strategies aligned with the bearish trend. Traders holding short positions have likely capitalized on this week’s move, which strengthens the broader downward trajectory.
The market’s sustained weakness, driven by both supply-side and demand-side factors, suggests continued opportunities for trend-followers to exploit the bearish momentum. However, as with any sustained trend, vigilance is required to monitor for potential corrections or trend reversals that could emerge from unexpected changes in market fundamentals.

Platinum: -3.12%
Platinum prices declined by -3.12% this week, reflecting a pullback within its broader consolidation pattern.
Causal Factors:
- Weakened Demand: Softer demand from industrial sectors, particularly automotive manufacturers, has weighed on platinum prices. The shift towards electric vehicles, which use less platinum than traditional catalytic converters, continues to impact demand.
- Strengthened U.S. Dollar: A stronger U.S. dollar this week has put downward pressure on dollar-denominated commodities, including platinum, making it less attractive to international buyers.
- Market Sentiment: Investor appetite for precious metals as safe havens has waned amidst the risk-on sentiment dominating equity markets, reducing speculative interest in platinum.
Trend-Following Perspective: Platinum remains in a consolidation pattern, characterized by choppy price action and the absence of a clear directional trend. As such, it is unlikely to be actively traded by trend-following strategies, which typically avoid markets lacking decisive movement.
For traders, this week’s decline is unlikely to trigger any new positions unless the market breaks out of its current range. Until a clear trend emerges, platinum will likely remain sidelined for systematic strategies focused on capitalizing on directional moves.

Lumber: -2.22%
Lumber prices declined by -2.22% this week, continuing its erratic movement within a highly volatile and choppy market.
Causal Factors:
- Housing Market Dynamics: Persistent uncertainty in the U.S. housing market has weighed on lumber prices. While home construction remains steady, high mortgage rates and cautious consumer behaviour continue to suppress demand.
- Supply Adjustments: Lumber mills have been adjusting production levels to balance inventories, leading to inconsistent supply dynamics that contribute to price volatility.
- Seasonal Effects: The winter season typically reduces construction activity in North America, a key driver of lumber demand, adding further downward pressure on prices.
Trend-Following Perspective: The lumber market remains highly choppy and lacks a clear, sustained directional trend, making it unfavourable for trend-following strategies. Systematic traders generally avoid such markets due to the difficulty in capturing meaningful moves without being exposed to frequent whipsaws.
For trend-followers, lumber is currently more of a monitoring candidate, with attention focused on whether a clearer trend emerges. Until that happens, this market is likely to remain outside the scope of actively traded assets.

Conclusion
This week marked a significant shift in market sentiment, with equities breathing new life into trends and volatility retreating sharply. The rally across major indices like the Russell 2000 and DJIA, alongside the plummeting VIX, showcased a renewed risk-on environment as investor confidence was bolstered by cooling inflation, stronger-than-expected corporate earnings, and a more stable economic outlook.
While the TTU Trend Barometer maintained its strong reading of 66%, signalling a favourable environment for trend-followers, the modest performance of the SG Trend Index (+0.08% MTD and YTD) underscores the complexities of navigating transitional market phases. Trend-following funds may be grappling with whipsaws as markets pivot back to a bullish stance, highlighting the challenges of adapting to rapid shifts in momentum.
Across asset classes, energy markets displayed measured strength, grains advanced steadily, and soft commodities stabilized after recent volatility. Meanwhile, bearish trends persisted in sugar and canola, offering favourable conditions for systematic strategies. In contrast, the choppy movements in lumber and platinum reaffirmed their status as challenging markets for trend-followers.
Overall, this week reflects a market finding its footing, with optimism replacing last week's caution. However, the macroeconomic landscape remains dynamic, requiring traders to stay disciplined and responsive to emerging opportunities and risks. As we move forward, maintaining flexibility and adhering to systematic processes will be key to capitalizing on the evolving trends shaping the futures markets.

List of Resources used in the Week in Review
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