Trend Following - Week in Review - January 24, 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.
"Riding the Bullish Wave"
This week, markets surged with renewed optimism, highlighted by strong equity gains and a notable -5.86% drop in the Volatility Index (VIX), signalling a shift toward risk-on sentiment. Investors appear to be riding the bullish wave, as asset classes broadly trended upward.
Despite these favourable conditions, the SG Trend Index, as of January 23, 2025, posted -0.21% MTD and YTD, suggesting trend-following strategies are still navigating challenges in capturing sustained momentum during market transitions.
The TTU Trend Barometer, updated on January 23, 2025, read 48%, pointing to a neutral trend environment. This divergence between the bullish asset movements and the SG Trend Index performance highlights the nuanced and transitional nature of this market phase.

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 we conclude the fourth week of January 2025, asset classes have exhibited distinct movements, reflecting evolving market dynamics. This week was marked by a strong recovery in equities and grains, tempered by declines in metals and soft commodities. The Volatility Index (VIX) continued its sharp decline, reinforcing a risk-on sentiment across the board. Here’s a detailed breakdown of asset class performance compared to the previous week:
- Equities: +2.01% (Up from +0.85% last week)
Equity markets continued their upward momentum, fueled by positive corporate earnings and cooling inflation figures. Investor optimism remains strong, as reflected in the consistent gains across major indices like the S&P 500 and Nasdaq, pushing equities to higher levels. - Energy: +0.66% (Down from +1.49% last week)
Energy markets maintained a modest upward trajectory, with crude oil and heating oil consolidating after recent rallies. The slower pace of gains highlights the balancing act between tight supplies and easing seasonal demand. - Metals: -0.44% (Down from +0.85% last week)
The metals sector saw a mild pullback, with industrial metals stabilizing after a strong rally earlier in the month. Gold and silver softened, as risk-on sentiment reduced safe-haven flows, contrasting with last week’s modest gains. - Grains: +2.69% (Up from +1.81% last week)
Grain markets extended their rally, driven by continued concerns over global supply constraints and adverse weather conditions. Corn, soybeans, and wheat showed significant gains, reflecting heightened demand from global markets. - Meats: +0.86% (Up from -1.03% last week)
The meats sector rebounded this week, buoyed by stronger demand and easing concerns over higher feed costs. This recovery contrasts with last week’s decline, signaling improved sentiment in the livestock markets. - Soft Commodities: +1.49% (Up from -0.06% last week)
Soft commodities staged a recovery, with notable rebounds in sugar and coffee prices. Supply chain disruptions and adverse weather conditions in key producing regions continue to support these markets. - Currencies: +1.21% (Up from +0.18% last week)
The U.S. dollar strengthened against major peers, driven by stable monetary policy expectations and fiscal optimism. This week’s gains outpaced last week’s more modest performance, reflecting renewed interest in currency markets. - Volatility Index (VIX Futures): -5.86% (Down from -14.26% last week)
The VIX dropped further this week, nearing historically low levels. This sharp decline reflects reduced market anxiety and heightened risk appetite as equity markets rally. However, these levels of low volatility could signal complacency in the market. - Bonds: 0.00% (Down from +0.80% last week)
Bond markets were largely flat this week, as mixed signals around interest rate expectations offset the strong equity performance. The moderation in yields compa
This week was characterized by a continuation of the risk-on sentiment, with equities and grains leading the charge. Meanwhile, energy markets slowed their pace of gains, and metals experienced a mild correction. The sharp decline in the VIX underscores the market's reduced anxiety, while soft commodities and meats showed signs of recovery. The nuanced movements across asset classes reflect a market finding its footing, with traders remaining vigilant for shifts in sentiment and trend opportunities. 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
Natural Gas: +18.96%
Natural Gas posted a robust gain of +18.96% this week, marking a significant continuation of its recent bullish trend.
Causal Factors:
- Colder Weather Patterns: Severe winter conditions across key demand areas in the Northern Hemisphere have driven up natural gas demand for heating purposes, contributing to the price spike.
- Tightened Supply: Ongoing supply constraints, exacerbated by geopolitical tensions affecting energy exports, have reduced inventory levels, particularly in Europe and the United States.
- Increased LNG Demand: Global demand for liquefied natural gas (LNG), especially in Asia, continues to climb as countries seek to secure energy supplies amidst uncertain geopolitical conditions.
- Market Positioning: The price surge may also reflect technical breakouts, where natural gas prices breached key resistance levels, prompting additional buying momentum.
Trend-Following Perspective:
From a trend-following standpoint, this week’s strong performance reinforces the upward momentum that has been building over recent weeks. Medium- and long-term models likely captured this breakout move, as the bullish trend is well-aligned with systematic strategies. However, given natural gas's historically volatile nature, traders will need to remain vigilant about potential pullbacks or consolidations following such a steep rally.
The attached chart illustrates a decisive break from prior resistance levels, supporting the continuation of the bullish trend. If this momentum sustains, it could signal further opportunities for trend-followers, but risk management remains critical given the market's inherent volatility.

Coffee: +5.57%
Coffee prices climbed 5.57% this week, continuing their strong bullish trajectory and reaching fresh highs.
Causal Factors:
- Adverse Weather in Key Growing Regions: Unfavorable weather conditions, including droughts in South America, particularly Brazil, have tightened coffee supply. The largest coffee-producing regions have faced significant production challenges, leading to reduced output.
- Supply Chain Disruptions: Logistical issues and shipping delays have compounded the supply constraints, further supporting price increases.
- Rising Global Demand: As global consumption of coffee continues to grow post-pandemic, the mismatch between demand and supply has created upward pressure on prices.
- Speculative Activity: Coffee has seen increased speculative interest, with traders positioning for continued upside momentum in a constrained market environment.
Trend-Following Perspective:
From a trend-following perspective, coffee's strong price momentum and breakout to new highs align well with medium- to long-term strategies. Trend-followers who entered positions earlier in the rally have likely benefited significantly from the sustained uptrend. The attached chart reflects a steady climb, confirming the strength of the bullish trend.
For those not yet positioned, this move reinforces the importance of timing and breakout entry strategies. However, given the rapid ascent, traders should monitor for potential overbought conditions or corrections, especially if fundamental factors like weather improve or speculative buying cools.trategies to navigate the turbulent environment effectively.crude oil market.

Sugar: +4.67%
Sugar prices rose by 4.67% this week, showing a notable rebound against the prevailing bearish trend.
Causal Factors:
- Weather Disruptions: Unfavorable weather conditions in key producing regions, particularly in Brazil and India, have raised concerns about potential production shortfalls.
- Renewed Export Demand: Increased demand for sugar exports, especially from emerging markets, has supported prices amid tight global inventories.
- Speculative Buying: Traders may be repositioning after the prolonged bearish trend, leading to short covering and upward momentum.
- Energy Linkage: Higher energy prices, specifically ethanol derived from sugarcane, often bolster sugar prices due to increased production costs.
Trend-Following Perspective:
From a trend-following perspective, this upward movement is counter to the broader bearish trend seen in sugar over the past few months. The attached chart illustrates how sugar’s recent rebound may challenge systematic trend-followers who were positioned short in line with the prior downtrend.
While this move has not yet established a definitive trend reversal, it introduces the potential for short-term whipsaws in trend-following systems. Traders may need to monitor closely for follow-through momentum or a return to the prevailing downtrend. as this move may still face resistance unless it develops into a more sustained trend.

Palladium: +4.28%
Palladium prices rose by 4.28% this week, temporarily breaking higher within an otherwise well-established bearish trend.
Causal Factors:
- Supply Chain Concerns: Recent reports of potential disruptions in palladium mining operations, particularly in Russia (a key global supplier), have contributed to upward pressure on prices.
- Industrial Demand: A modest rebound in industrial demand, especially from the automotive sector for catalytic converters, has provided short-term support to palladium prices.
- Technical Correction: After a prolonged decline, palladium may have experienced a short-term correction driven by bargain buying or covering of short positions.
- Weaker Dollar: A slightly weaker U.S. dollar during the week also supported commodity prices, including palladium.
Trend-Following Perspective:
From a trend-following standpoint, this counter-trend move creates challenges for systematic strategies positioned short in line with palladium's well-developed bearish trend. The attached chart reflects the broader downtrend, with this week’s gains appearing as a retracement rather than a reversal.
While the current rally could continue in the short term, it remains critical for trend-followers to wait for clear indications of a trend shift before adjusting positions. Without sustained follow-through, this move is likely to be viewed as noise rather than a change in direction.

Nikkei: +4.27%
The Nikkei 225 posted a robust gain of 4.27% this week, potentially signalling a breakout from its previous consolidation phase.
Causal Factors:
- Improved Macroeconomic Conditions: Positive data on Japan’s economic recovery, including better-than-expected corporate earnings and consumer spending, boosted investor confidence.
- Central Bank Stability: The Bank of Japan's commitment to maintaining its accommodative monetary policy has supported equity markets by fostering a favourable environment for risk-taking.
- Weaker Yen: A weaker yen has provided an additional tailwind for Japanese export-oriented companies, improving their global competitiveness and profitability.
- Global Equity Momentum: Broader equity market optimism, driven by easing inflation and reduced recession fears, spilled over into Japanese markets, adding to the bullish sentiment.
Trend-Following Perspective:
From a trend-following perspective, this week’s strong move supports the long-term bullish trend in the Nikkei 225. The attached chart shows the index attempting to break out from a consolidation zone that has persisted for several weeks. This potential breakout is a promising signal for systematic strategies aligned with the prevailing uptrend.
For trend-followers, the sustained upward momentum suggests the possibility of further gains, provided the breakout holds. However, traders should remain mindful of potential pullbacks or false breakouts, which could temporarily disrupt the trend.tain its upward trajectory, providing favourable conditions for trend-followers.

What’s Moving Down
VIX Futures: -5.86%
The Volatility Index (VIX) dropped sharply by 5.86% this week, nearing historically low levels of market volatility.
Causal Factors:
- Improved Market Sentiment: Strong equity market performance, fueled by easing inflation and robust corporate earnings, contributed to a significant decline in perceived risk.
- Risk-On Behavior: Investors appear increasingly comfortable with higher-risk assets, reflecting reduced uncertainty about economic and geopolitical factors.
- Reduced Hedging Activity: With equity markets trending upward, there has been a decline in demand for options-based hedging, further lowering the VIX.
- Central Bank Support: Stable monetary policy outlooks, particularly from the U.S. Federal Reserve, have reassured markets, reducing fear-driven volatility spikes.
Trend-Following Perspective:
While the VIX is not a typical instrument for trend-following strategies, its behaviour serves as a vital sentiment gauge for U.S. equities. This significant drop in volatility suggests that equity markets are transitioning into a calmer, more stable environment. However, with VIX futures approaching very low levels, it is worth noting the potential for complacency, which can precede sudden volatility spikes.
For trend-followers, the VIX’s decline supports the bullish equity trend, as reduced market noise and risk aversion are generally favourable conditions for sustained upward movements. Nonetheless, sharp reversals in the VIX could signal changing dynamics, requiring vigilance in managing equity-focused positions.

Lumber: -4.79%
Lumber prices dropped by 4.79% this week, highlighting continued volatility and a lack of clear directional momentum.
Causal Factors:
- Housing Market Weakness: The U.S. housing market remains under pressure, with higher mortgage rates and slowing construction activity reducing demand for lumber.
- Supply Chain Stabilization: Lumber supply chains have normalized following pandemic-driven disruptions, alleviating some of the price pressures seen in previous years.
- Seasonal Demand Fluctuations: Demand for lumber tends to slow in the winter months, contributing to the week’s price decline.
- Speculative Selling: With no clear upward momentum, traders may be unwinding positions, further adding to the bearish sentiment.
Trend-Following Perspective:
For trend-following strategies, lumber remains a challenging market to navigate due to its heightened volatility and lack of sustained trends. As the chart illustrates, recent price movements have been choppy, with no clear long-term direction. This type of environment typically keeps systematic trend-followers on the sidelines, waiting for a definitive breakout or directional signal.
Until a more consistent trend emerges, lumber may continue to frustrate traders looking for clean, sustained price action.ective rallies that could disrupt the bearish momentum.n the upcoming sessions.

Heating Oil: -4.26%
Heating oil prices declined by 4.26% this week, following a recent bullish breakout that shifted short-term sentiment.
Causal Factors:
- Seasonal Demand Shifts: Warmer-than-expected weather forecasts have softened demand for heating oil, contributing to the price pullback.
- Crude Oil Correlation: Broader weakness in crude oil markets weighed on refined products like heating oil, further pressuring prices.
- Inventory Builds: Higher-than-anticipated stockpiles in key regions have alleviated concerns over supply constraints, dampening bullish sentiment.
- Profit-Taking: Traders who recently entered long positions may have been quick to exit, locking in gains after the breakout.
Trend-Following Perspective:
For medium- to long-term trend-followers, this week’s decline likely had limited negative impact, as many were positioned bearishly in line with the prevailing long-term downtrend before the recent rally. This pullback may even support their positions, reinforcing the overarching bearish trend.
However, the move was likely unfavourable for short-term trend-followers who may have entered positions on the bullish breakout. These traders could have been caught off guard by the sudden reversal, highlighting the challenges of navigating shorter-term market fluctuations.
The chart reflects the continued dominance of the longer-term bearish trend, with this week’s decline serving as a reminder of the volatility inherent in heating oil markets.

Crude Oil WTI: -3.61%
Crude Oil WTI experienced a decline of 3.61% this week, echoing the dynamics observed in heating oil markets.
Causal Factors:
- Seasonal Weakness: Warmer weather forecasts have reduced demand for heating fuels, indirectly affecting crude oil.
- Inventory Builds: Larger-than-expected crude stockpile increases in key global markets have pressured prices.
- Macroeconomic Concerns: Continued uncertainty around global economic growth and potential rate hikes have weighed on demand expectations.
- Profit-Taking: Traders exiting long positions after a recent rally have added selling pressure.
Trend-Following Perspective:
For medium- to long-term trend-followers, this decline likely aligns with positions established in the broader bearish trend seen in crude oil over the past year. This week’s pullback may even serve to reinforce confidence in the continuation of the trend.
However, short-term trend-followers who may have entered long positions during the recent bullish breakout could face challenges, as the decline represents a reversal that disrupts momentum-based signals. The chart indicates that while the longer-term downtrend remains intact, the recent rally’s abrupt end highlights the ongoing volatility and sensitivity of crude oil markets to external factors.
This week’s move underscores the importance of maintaining a systematic approach and risk management to navigate such fluctuations effectively.in sidelined for systematic strategies focused on capitalizing on directional moves.

Gasoline RBOB: -3.03%
Gasoline futures experienced a modest decline of 3.03% this week, reflecting similar themes observed in other energy markets.
Causal Factors:
- Seasonal Demand Weakness: A seasonal dip in gasoline demand as winter continues may have contributed to the price decline, alongside reduced consumer driving activity.
- Broader Energy Complex Pressure: Gasoline's performance mirrored the bearish sentiment across the energy complex, including declines in Heating Oil and Crude Oil WTI, as the sector took a breather from recent bullish momentum.
- Economic Factors: Concerns over economic growth and tightening financial conditions may have weighed on sentiment, offsetting supply-side constraints.
Trend-Following Perspective:
For trend-followers, the recent dip in Gasoline RBOB presents mixed signals. The chart indicates a consolidation phase after a prolonged downtrend, leaving traders cautious about taking new positions until a clearer directional signal emerges. Medium- to long-term models may remain on the sidelines or cautiously positioned bearish, while short-term models could face challenges navigating the choppy price action.
This move emphasizes the importance of discipline in adhering to trend-following rules, particularly during transitional market phases.

Conclusion
This week presented a blend of optimism and caution as markets rallied on the back of bullish equity movements and a sharp drop in the Volatility Index (VIX). Equities and grains led the charge, supported by cooling inflation and robust corporate earnings, while energy markets continued to climb at a slower pace. Metals and soft commodities displayed mixed performances, reflecting the delicate balance between supply pressures and shifting investor sentiment.
The ongoing decline in the VIX, signalling reduced market anxiety, highlights the risk-on sentiment, yet also underscores the importance of vigilance against potential complacency. While trend-followers capitalized on strong breakouts in assets like natural gas and coffee, other markets, such as lumber and energy commodities, posed challenges due to reversals and consolidations.
As markets continue to find their footing in this transitional phase, discipline, adaptability, and a systematic approach remain essential for navigating the nuanced landscape. The interplay between bullish momentum, sector-specific volatility, and emerging risks serves as a reminder of the dynamic nature of trend-following strategies in capturing opportunities while mitigating adverse moves.
Next week’s developments will further test whether the market’s newfound optimism can sustain itself or give way to new challenges, keeping traders on high alert for shifts in momentum and sentiment.

List of Resources used in the Week in Review
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