Trend Following - Week in Review - March 14, 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.

"Metals Shine, Grains Tumble: A Market in Transition"

This week marked a notable shift in market conditions, with trend-following signals strengthening as the TTU Trend Barometer climbed to 52%, up from last week’s 45%. This suggests a stronger trending environment, offering potential opportunities for systematic traders. However, despite the improvement, the SG Trend Index remains under pressure, recording -1.30% MTD and -4.31% YTD, extending losses from last week’s -0.34% MTD and -3.37% YTD.

The divergence between asset classes continues to define the market landscape. Metals led the charge, with silver, platinum, and copper posting strong gains, while grains and soft commodities faced a sharp sell-off, with canola and orange juice taking the hardest hits. Equities remained under pressure, with major indices, including the Nasdaq 100 and Russell 2000, suffering sizable losses. Meanwhile, volatility edged higher, and bonds remained flat, offering little refuge amid shifting market dynamics.

TTU Trend Barometer: 52% (Last week: 45%)

• 10-day rate of change: Rising moderately
• Trend conditions strengthening: The barometer’s move above 55% suggests an increasingly favourable backdrop for trend-following strategies, a notable improvement from the neutral-to-choppy environment of recent weeks.

This evolving landscape highlights the importance of sticking to systematic processes and managing risk effectively. With markets in flux and directional moves emerging in select sectors, traders must remain vigilant, navigating both breakout opportunities and volatility traps. Will these trends solidify into sustained moves, or is this just another false dawn? The coming weeks will reveal the answer.

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 progress through March, financial markets presented a more divergent picture, with metals staging a strong rebound while grains and soft commodities continued to slide. Equities remained under pressure, extending recent declines, while energy markets showed some stabilization but remained negative. The volatility index saw a muted gain compared to last week’s surge, and bonds remained flat amid shifting macroeconomic narratives.

Equities: -1.94% (Previous week: -1.41%)

Equity markets continued their downward trajectory, posting deeper losses compared to last week. Uncertainty around U.S. economic policy and global growth prospects weighed on sentiment, with the Nasdaq 100, S&P 500, and Russell 2000 among the hardest hit. Investor appetite for risk remains subdued, as markets grapple with macroeconomic pressures and an unclear outlook on Federal Reserve policy.

Energy: -0.72% (Previous week: -0.60%)

The energy sector remained weak, extending losses from last week. Crude oil prices continued to decline, driven by rising U.S. stockpiles and expectations of increased OPEC+ production. Heating oil and gasoline saw marginal weakness, with geopolitical concerns failing to provide sufficient upside momentum.

Metals: +3.54% (Previous week: 0.00%)

A significant shift occurred in the metals market, moving from neutral last week to the top-performing sector this week. Silver, platinum, and copper led the charge, with industrial demand, inflation concerns, and a weaker U.S. dollar providing a tailwind. Gold also saw renewed interest as investors sought safe-haven assets amid broader market uncertainty.

Grains: -2.55% (Previous week: -0.05%)

The grains market saw a sharp deterioration, marking a substantial acceleration in downside momentum compared to last week. Corn, soybean oil, and wheat all faced selling pressure, driven by improved weather conditions, weakening demand, and lower import appetite from China. This marks one of the steepest weekly losses for grains in recent months.

Meats: +0.58% (Previous week: +3.44%)

After last week’s strong rebound, gains in the meats sector moderated significantly. While cattle prices continued to benefit from seasonal demand, the pace of upward movement slowed. The sector remains positive but is showing signs of losing momentum.

Soft Commodities: -2.23% (Previous week: -1.31%)

Soft commodities deepened their slide, registering larger losses than last week. Cocoa, orange juice, and sugar led the decline, weighed down by profit-taking and improved supply expectations in key growing regions. Weather conditions continue to play a major role in price action, with shifting forecasts influencing trader sentiment.

Currencies: +0.01% (Previous week: +1.57%)

The currency market was largely flat this week, a stark contrast to last week’s strong rally in the U.S. dollar. With Fed policy speculation subsiding, currency markets lacked clear direction, leading to minimal movement overall.

Volatility Index (VIX Futures): +0.58% (Previous week: +16.04%)

The volatility index showed only a slight uptick, a major slowdown compared to last week’s surge of over 16%. This suggests that while equities continued to struggle, investor hedging activity was more restrained this week, possibly indicating a temporary stabilization in risk sentiment.

Bonds: 0.00% (Previous week: -0.43%)

Bond markets were flat this week, marking a pause after last week’s slight decline. Yields remained relatively stable, as investors balanced Fed rate expectations against evolving inflation and economic data.

Key Takeaways

• Metals surged, with silver, platinum, and copper posting strong gains.
• Grains and soft commodities suffered heavy losses, marking one of their worst weeks in recent months.
• Equities extended declines, with losses outpacing last week.
• Energy remained weak, though the pace of declines was relatively steady.
• Volatility stabilized, following last week’s sharp rise.

As trend-following conditions continue to improve, momentum in metals is strengthening while agricultural commodities are firmly in decline. The coming weeks will determine whether these trends persist or if another shift in macro sentiment reshapes market dynamics.

Top 10 Bear and Bull Price Moves

Here's a detailed analysis of the key market movers for the week.

What’s Moving Up

Sugar: +4.81%: Driven by short-covering and global supply concerns

Sugar prices experienced a notable increase of 4.81% this week. Despite this uptick, trend-following strategies are likely maintaining bearish positions.​

Causal Factors Behind the Price Increase:

1. Short-Covering Activity: Following a recent sell-off that drove sugar prices to six-week lows, the market witnessed short-covering by traders. This activity often leads to temporary price increases as traders close out short positions. ​
2. Global Supply Concerns: India, one of the world's largest sugar producers, is projected to produce 25.8 million metric tons in the 2024/25 marketing year, a significant 19.1% decrease from the previous year. This marks the first time in eight years that production falls below the consumption level of 29 million tons, raising concerns about global supply shortages. ​
3. Export Hesitancy: Indian mills have contracted to export 600,000 metric tons of sugar but are reluctant to commit to further exports due to rising domestic prices and anticipated higher local demand during the summer months. This hesitancy limits global supply availability, contributing to upward price pressure. ​

Trend-Following Perspective:

Trend-following strategies typically rely on sustained price movements to establish positions. The recent 4.81% price increase in sugar appears to be a corrective bounce within a broader downward trend, influenced by short-covering and supply concerns. Without clear indications of a sustained upward trend, trend-followers are likely to maintain their bearish outlook on sugar, awaiting more definitive signals before adjusting their positions.

Platinum: +4.8%: Rising on strong gold prices and anticipated supply deficits

Platinum experienced a notable increase of 4.8% this week. Despite this uptick, the market remains in a congestion phase, characterized by sideways price movements without a clear directional trend. Consequently, trend-following (TF) strategies are likely refraining from active participation at this time.​

Causal Factors Behind the Price Increase:

1. Strength in Gold Prices: Gold prices have surged to record highs, driven by escalating trade tensions and expectations of monetary policy easing by the Federal Reserve. This rally in gold often positively influences other precious metals, including platinum, due to their correlated market dynamics. ​
2. Anticipated Supply Deficits: Analysts forecast significant and entrenched structural supply deficits in the platinum market for 2025. Factors such as declining mining output and limited new project developments contribute to expectations of reduced supply, which can support higher prices. ​
3. Automotive Industry Dynamics: The rise in hybrid vehicle sales offers a lifeline to platinum demand. Hybrid cars, which use internal combustion engines alongside electric motors, require catalytic converters containing platinum to reduce emissions. This trend helps sustain demand for platinum despite the broader shift toward electric vehicles. ​

Trend-Following Perspective:

Trend-following strategies typically seek sustained directional movements to establish positions. The current congestion phase in the platinum market, marked by sideways trading within a defined range, presents challenges for these strategies. Without a clear breakout or the establishment of a definitive trend, trend-followers are likely to remain on the sidelines, awaiting more conclusive market signals before committing capital.​

In summary, while platinum's 4.8% price increase is influenced by factors such as gold's rally, anticipated supply deficits, and sustained automotive demand, the prevailing congestion phase suggests that trend-following strategies may not find attractive opportunities in this market at present.

Silver: +4.74%: Safe-haven demand and industrial use in solar energy

• Silver experienced a notable increase of 4.74% this week, reinforcing its bullish trend—a development that aligns favourably with trend-following (TF) strategies.​

Causal Factors Behind the Price Increase:

• Safe-Haven Demand Amid Market Volatility: Escalating trade tensions and concerns over a potential recession have led investors to seek refuge in precious metals like silver. Historically, during periods of economic uncertainty and stock market downturns, assets such as silver have outperformed due to their safe-haven appeal. ​
• Industrial Demand, Particularly in Solar Energy: Silver's extensive use in industrial applications, especially in the production of solar panels, has significantly boosted demand. The global push towards renewable energy has heightened silver consumption in the solar sector, contributing to its price appreciation. ​
• Supply Deficits: The silver market has been experiencing supply shortages, with demand outpacing supply for several years. This deficit has been a driving force behind the recent price increases. ​

Trend-Following Perspective:

• The sustained upward momentum in silver prices presents favourable conditions for trend-following strategies:​
• Entry Signals: The consistent price appreciation may trigger buy signals for trend-followers, prompting the initiation of long positions to capitalize on the bullish trend.​
• Risk Management: While the trend is positive, it's essential for traders to implement robust risk management practices, considering potential market volatility and external economic factors that could influence silver prices.​

Silver's 4.74% price increase this week, driven by heightened safe-haven demand, robust industrial consumption, and supply constraints, aligns well with the objectives of trend-following strategies, offering potential opportunities for profit.

Copper: +3.65%: Driven by tariff expectations and supply constraints

• Copper experienced a notable increase of 3.65% this week, reinforcing its bullish trend—a development that aligns favourably with trend-following (TF) strategies.​

Causal Factors Behind the Price Increase:

• Anticipation of U.S. Import Tariffs: President Donald Trump's proposal of a 25% tariff on copper imports has led to accelerated purchasing and stockpiling by U.S. consumers and traders, aiming to mitigate future cost increases. This pre-emptive buying has tightened global supply and driven prices upward.
• Supply Constraints: Disruptions such as a power outage at Chile's Escondida mine, the world's largest copper mine, have raised concerns about supply shortages, contributing to price increases.
• Industrial Demand and Electrification: The ongoing global shift towards renewable energy and electric vehicles has bolstered copper demand, as the metal is essential for electrical infrastructure and components. This structural demand supports higher copper prices.

Trend-Following Perspective:

• The sustained upward momentum in copper prices presents favourable conditions for trend-following strategies:​
• Entry Signals: The consistent price appreciation may trigger buy signals for trend-followers, prompting the initiation of long positions to capitalize on the bullish trend.​
• Risk Management: While the trend is positive, it's essential for traders to implement robust risk management practices, considering potential market volatility and external economic factors that could influence copper prices.​

Copper's 3.65% price increase this week, driven by anticipated tariffs, supply constraints, and robust industrial demand, aligns well with the objectives of trend-following strategies, offering potential opportunities for profit.

Gold: +2.73%: Boosted by central bank demand and inflation fears

Gold prices surged by 2.73% this week, surpassing the $3,000 per ounce milestone for the first time, driven by a confluence of economic and geopolitical factors. ​

Causal Factors Behind the Price Increase:

1. Geopolitical and Economic Uncertainty: Escalating trade tensions, particularly President Trump's recent tariff policies, have heightened fears of inflation and a potential economic slowdown. Investors are turning to gold as a safe-haven asset to hedge against these uncertainties.
2. Central Bank Purchases: Central banks, notably China's, have increased gold acquisitions to diversify reserves and reduce reliance on the U.S. dollar. This strategic move has bolstered global demand for gold.
3. Inflation Concerns and Monetary Policy: Anticipation of further interest rate cuts by the U.S. Federal Reserve has diminished the appeal of government bonds, prompting investors to seek refuge in gold to preserve wealth amidst rising inflation.

Trend-Following Perspective:

The robust upward trajectory of gold prices presents favourable conditions for trend-following strategies:​

• Entry Signals: The sustained price increase likely triggers buy signals for trend-followers, encouraging the initiation or expansion of long positions to capitalize on the bullish momentum.​
• Risk Management: Despite the positive trend, prudent risk management is essential. Traders should remain vigilant of potential market corrections and external factors that could introduce volatility.​

Gold's 2.73% rise this week, propelled by geopolitical tensions, increased central bank purchases, and inflationary pressures, aligns well with trend-following strategies, offering potential for substantial gains.

What’s Moving Down

Canola: -15.28%: Hit hard by Chinese tariffs on Canadian rapeseed oil

• ​Canola prices experienced a significant decline of 15.28% this week, influenced by recent trade developments.​

Causal Factors Behind the Price Decrease:

• Chinese Tariffs on Canadian Canola Products: China announced a 100% tariff on imports of Canadian rapeseed oil and meal, effective from March 20, 2025. This action is part of a broader trade dispute, with China responding to Canada's earlier tariffs on Chinese goods. Canada, being a major canola producer, relies heavily on China as a key export market. The impending tariffs have raised concerns about reduced demand for Canadian canola products, leading to a sharp decline in prices.
• Market Anticipation and Speculative Selling: The announcement of the tariffs prompted market participants to anticipate a surplus of canola in Canada, as exporters may struggle to find alternative markets in the short term. This anticipation led to speculative selling, further driving down prices.

Trend-Following Perspective:

• The pronounced downward movement in canola prices aligns with bearish trends, presenting potential opportunities for trend-following strategies:​
• Entry Signals: Trend-followers likely initiated or added to short positions as the price decline confirmed a strong bearish trend.​
• Risk Management: Despite the favourable trend, prudent risk management remains essential. Factors such as potential policy changes, weather conditions affecting crop yields, or shifts in global demand could introduce volatility, necessitating continuous monitoring and adjustment of positions.​

The 15.28% drop in canola prices this week, primarily driven by China's imposition of tariffs on Canadian canola products, has reinforced bearish trends. Trend-following traders are likely benefiting from this movement but should maintain vigilance due to the dynamic nature of trade relations and agricultural markets.

Orange Juice: -13.12%: Hedge fund liquidations and improving supply outlook

Orange juice futures experienced a significant decline of 13.12% this week, providing favourable conditions for trend-following traders holding short positions.​

Causal Factors Behind the Price Decrease:

1. Hedge Fund Liquidation: Hedge funds have been reducing their positions in orange juice futures, leading to a 46% price drop from December's highs.
2. Anticipation of Improved Supply: Despite recent challenges, expectations of improved supply conditions, such as potential recovery from past weather events and disease impacts, have contributed to the price decline.

Trend-Following Perspective:

The pronounced downward movement in orange juice prices aligns with bearish trends, presenting profitable opportunities for trend-following strategies:​

• Entry Signals: The sustained price decline likely prompted trend-followers to initiate or maintain short positions, capitalizing on the downward momentum.​
• Risk Management: While the current trend is favourable, traders should remain vigilant for potential market reversals due to factors like weather anomalies or changes in disease impact, adjusting their positions accordingly.​

In summary, the 13.12% drop in orange juice prices this week, driven by hedge fund liquidations and expectations of improved supply, has reinforced bearish trends. Trend-following traders are likely benefiting from this movement but should continue to monitor market conditions for any signs of reversal.

Natural Gas: -7.05%: Weak demand due to warmer weather and rising inventories

Natural gas prices saw a significant 7.05% drop this week, posing challenges for trend followers, particularly short-term traders who may have been positioned for a continuation of the recent bullish momentum.

Causal Factors Behind the Decline:

1. Milder Weather Forecasts:
   Warmer-than-expected weather projections for early March have reduced anticipated heating demand, leading to lower natural gas prices.
2. Increased Production Levels:
   After a period of lower output, natural gas production has rebounded, creating an oversupplied market that has contributed to price weakness.
3. Higher Storage Levels:
   Despite reduced drilling activity, storage levels remain 5% above the seasonal average, further pressuring prices downward.

Trend-Following Perspective:

• Short-Term Trend Followers: Many short-term TF models likely identified a bullish setup in recent weeks, only to be caught off guard by this sharp reversal. This move likely triggered risk-management exits.
• Long-Term Trend Followers: Those operating on longer time horizons are more likely to have been sitting on the sidelines or cautiously leaning bullish, but without strong confirmation of trend sustainability.

This week’s price drop disrupted the early signs of a bullish breakout, leaving trend followers either sidelined or reassessing their positioning. The short-term reversal highlights the challenges of navigating volatile and mean-reverting markets like natural gas.

Cocoa: -4.87%: Volatility remains extreme as speculative unwinding intensifies

Cocoa prices experienced another sharp decline this week, falling 4.87%. The market remains highly volatile following its historic run-up, creating both opportunities and challenges for trend followers.

Causal Factors Behind the Decline:

1. Speculative Unwinding:
   After months of parabolic price action, profit-taking has intensified, leading to sharp reversals. Many traders who rode the wave higher are now locking in gains.
2. Weather and Supply Adjustments:
   Recent reports indicate slightly improved weather conditions in West Africa, reducing immediate fears of supply shortages. However, longer-term structural supply constraints remain a concern.
3. Liquidity and Market Structure:
   The extreme price run-up led to wider spreads and lower liquidity, exacerbating volatility. Sudden moves in either direction have become more common, making it difficult for long-term trend strategies to hold positions.

Trend-Following Perspective:

• Short-Term Trend Followers: Given the market’s momentum characteristics, short-term TFs may have captured this bearish move and are likely profiting from the increased volatility.
• Long-Term Trend Followers: Many long-term TFs are either getting stopped out after a prolonged bullish trend or are opting to stay on the sidelines until the market stabilizes. The extreme whipsaws in price action make it a challenging environment for holding long-term positions.

The cocoa market remains one of the most volatile commodity spaces in recent history. While short-term trend strategies may still find opportunities, long-term trend followers are likely reassessing risk exposure due to the increased instability.

Soybean Oil: -4.08%: Weak biodiesel demand and higher supply expectations

Soybean oil saw a significant decline this week, falling 4.08%. This move aligns with the broader weakness in agricultural commodities, reinforcing bearish sentiment in the sector.

Causal Factors Behind the Decline:

1. Supply Pressures:
   • Increased production forecasts from major soybean-producing regions, particularly Brazil and Argentina, have eased concerns about supply constraints.
   • Recent USDA reports indicated ample global stockpiles, adding to bearish momentum.
2. Weak Demand for Biofuels:
   • Soybean oil is a key feedstock for biodiesel production. However, declining crude oil prices and policy uncertainty around biofuel mandates have reduced demand expectations.
3. Strong U.S. Dollar & Macro Factors:
   • A strengthening U.S. dollar has pressured commodity prices across the board, making U.S. agricultural exports less competitive in the global market.

Trend-Following Perspective:

• Trend Followers Likely Short: Given the sustained downward trend in soybean oil, trend-following systems are likely short and benefiting from the continued weakness.
• Bearish Trend Intact: While soybean oil has experienced occasional countertrend rallies, the overall direction remains negative, providing further conviction for systematic traders maintaining short positions.

The bearish move in soybean oil is consistent with the broader agricultural commodity weakness. Trend-following strategies are likely positioned short and profiting from the ongoing decline, with little indication of a reversal at this stage.

Conclusion: Markets in Transition - A Favourable Backdrop for Trend Followers

This week’s market action reinforced a growing divergence across asset classes, with metals soaring, agricultural commodities struggling, and equities continuing to unwind. The sharp sectoral contrasts highlight the shifting macro landscape—one where uncertainty reigns and volatility remains elevated. Such an environment creates both challenges and opportunities for systematic traders, with trend-following strategies poised to capitalize on emerging trends.

The TTU Trend Barometer’s rise to 52% signals improving conditions for trend-followers, marking a transition from the choppiness of prior weeks into an increasingly directional market. This shift is especially evident in precious and industrial metals, where silver, gold, and copper are reinforcing their bullish trajectories, while grains and soft commodities continue their sharp downward movements, benefiting short positions.

The key takeaway? Divergence and uncertainty are exactly what trend-followers thrive on. As markets continue to recalibrate in response to economic, geopolitical, and policy developments, 2025 is shaping up to be a year rich with trend-following potential. The dispersion across asset classes suggests that strong trends will persist, providing systematic traders with opportunities to ride both momentum and reversals in the months ahead.

As always, the key to success remains discipline and robust risk management—ensuring that traders stay positioned to capture the upside while mitigating adverse market shifts. Whether this marks the start of sustained trends, or another transitional phase remains to be seen. One thing is clear:

“Volatility and divergence are back, and trend-followers are ready.”

List of Resources used in the Week in Review

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