Trend Following - Week in Review - March 21, 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.

"Energy Rebounds, Volatility Plunges: Trend Signals Lose Steam"

This week, trend-following conditions softened slightly, with the TTU Trend Barometer falling to 32%, down from last week’s 52%. The barometer is slipping into weak trending territory, suggesting that while some trending pockets exist, the broader market lacks uniform directionality. This downtick may temper trend-following momentum, especially after last week's promising shift.

The SG Trend Index reflected this stall, recording -0.52% MTD and -3.55% YTD, a mild recovery compared to last week’s deeper drawdown of -1.30% MTD and -4.31% YTD. While the bleeding has slowed, headwinds persist.

Divergences remain a key theme. Energy markets mounted a strong rebound, with crude oil and heating oil among the week’s top gainers. Meanwhile, precious metals gave up ground, with silver and platinum reversing some of their recent gains. Volatility collapsed, with the VIX plunging 6.57%, suggesting improving risk sentiment or just exhaustion after recent equity jitters.

TTU Trend Barometer: 32% (Last week: 52%)

• 10-day rate of change: Falling Moderately
• Trend conditions: Weak

The drop back below the 50% mark signals some hesitation in the market’s trending behaviour. While not a breakdown, the environment is less conducive to clean trend signals, particularly across non-energy sectors. Trend-followers will need to be selective and nimble as markets continue to oscillate.

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 continue to show divergence across asset classes. Energy rebounded sharply, while volatility collapsed, suggesting a shift in risk sentiment. Soft commodities and grains saw a turnaround, while metals lost momentum after last week's strong rally. Equities managed a modest gain, while bonds and currencies remained relatively stable.

Equities: +0.40% (Previous week: -1.94%)

Equity markets bounced back after last week’s decline, driven by optimism around Federal Reserve policy stability and a continued strong labor market. The S&P 500 and Nasdaq Composite saw gains, but investor sentiment remains fragile amid global growth uncertainties. Risk appetite improved as inflation concerns eased slightly, but positioning remains cautious.

Energy: +1.47% (Previous week: -0.72%)

The energy sector staged a strong rebound, with crude oil and gasoline prices rising on fresh geopolitical risks and stronger-than-expected demand forecasts. Middle East tensions and ongoing supply constraints have added support, while a weaker U.S. dollar provided an additional tailwind. Traders are closely watching OPEC+ output decisions in the coming weeks.

Metals: -0.37% (Previous week: +3.54%)

After last week’s strong rally, metals lost steam, with silver and platinum reversing gains. The decline was driven by a stronger dollar earlier in the week and profit-taking from traders who had capitalized on the recent bull run. Industrial metals such as copper still hold up well, but precious metals saw some weakness as inflation fears eased.

Grains: +0.42% (Previous week: -2.55%)

Grains managed to snap their losing streak, posting a modest recovery this week. Improved demand expectations from China and a slight pullback in global inventories supported prices. However, the market remains vulnerable to seasonal volatility as planting forecasts continue to evolve.

Meats: +0.82% (Previous week: +0.58%)

The meats sector built on last week’s gains, with strong seasonal demand for cattle helping drive prices higher. Export markets have remained relatively firm, though traders are watching feed prices closely as grain market trends fluctuate.

Soft Commodities: +1.52% (Previous week: -2.23%)

Soft commodities rebounded this week after recent declines, with sugar, coffee, and cocoa seeing renewed buying interest. Weather-related disruptions in key growing regions, particularly in Brazil and West Africa, have supported prices. However, longer-term supply trends remain uncertain as global production forecasts continue to shift.

Currencies: -0.21% (Previous week: +0.01%)

The U.S. dollar weakened slightly against major currencies, weighed down by shifting rate expectations and softer macro data. With inflation showing signs of moderation, traders are adjusting rate hike expectations, which has impacted currency market movements.

Volatility Index (VIX Futures): -6.57% (Previous week: +0.58%)

The VIX plunged this week, marking a significant shift in market sentiment. Investors appear more confident after Fed commentary reassured markets, and risk appetite improved across asset classes. However, sharp drops in volatility often precede renewed spikes, so traders will be on alert for potential market catalysts.

Bonds: +0.37% (Previous week: 0.00%)

Bond markets posted slight gains, reflecting a stabilizing interest rate outlook. Yields edged lower as traders adjusted their expectations for future Federal Reserve policy moves, with increasing speculation that rate hikes may be over for now.

Key Takeaways

• Energy rebounded sharply, supported by geopolitical tensions and stronger demand expectations.
• Volatility collapsed, with the VIX posting its largest weekly decline in months.
• Soft commodities and grains recovered, showing resilience after recent selling pressure.
• Metals cooled off, as profit-taking set in after last week’s strong rally.
• Equities stabilized, though investor sentiment remains cautious.

Top 10 Bear and Bull Price Moves

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

What’s Moving Up

Orange Juice: +5.09% – A Retracement Following a Strong and Rapid Downtrend

Causal Factors Behind the Price Increase:

1. Technical Rebound: After experiencing a sharp decline of over 36% in February due to tariff concerns, orange juice futures have seen a technical rebound. This retracement is likely a corrective movement following the rapid and substantial bearish trend. ​
2. Supply Concerns: Despite recent price drops, ongoing issues such as citrus greening disease and past hurricanes have constrained supply from major producers like Florida and Brazil. These supply-side challenges continue to underpin prices, contributing to the recent uptick. ​

Trend-Following Perspective:

• Short-Term Trend Followers: The recent 5.09% price increase may prompt short-term trend followers to consider initiating long positions, anticipating a potential short-term upward correction. However, caution is warranted due to the prevailing longer-term downtrend.​
• Medium-Term Trend Followers: Given the recent sharp decline and the current retracement, medium-term trend followers might remain cautious. They may await confirmation of a sustained reversal before adjusting their positions, recognizing that the recent uptick could be a temporary correction within a broader bearish context.​
• Long-Term Trend Followers: The significant downtrend observed over the past months suggests that long-term trend followers are likely maintaining bearish positions. The recent price increase may be viewed as a minor retracement, insufficient to alter the established long-term downward trend.​

In summary, while the 5.09% price increase in orange juice futures represents a notable retracement, trend-following strategies across various time horizons may interpret this movement differently. Short-term traders might see an opportunity for a quick gain, whereas medium- and long-term traders could remain cautious, viewing the uptick as a temporary correction within a sustained downtrend.

Copper: +4.24% – A Favourable Move for Trend Followers

Causal Factors Behind the Price Increase:

1. Anticipation of U.S. Tariffs: The U.S. government's consideration of a 25% tariff on copper imports has led to increased domestic purchases and stockpiling, driving prices higher. ​
2. Supply Constraints: Chinese smelters are reducing operations due to a shortage of copper concentrate and negative processing fees, tightening global supply. ​
3. Increased Demand: Global infrastructure projects and the push for renewable energy have bolstered copper demand, contributing to price increases. ​

Trend-Following Perspective:

• Short-Term Trend Followers: The recent 4.24% price surge may trigger buy signals, encouraging the initiation of long positions to capitalize on the upward momentum.​
• Medium-Term Trend Followers: The sustained uptrend over recent weeks aligns with medium-term strategies, likely resulting in the maintenance or addition of long positions.​
• Long-Term Trend Followers: The consistent appreciation in copper prices supports long-term bullish positions, reflecting a favourable environment for trend-following strategies.​

In summary, the 4.24% increase in copper prices presents favourable conditions for trend-following strategies across various time horizons, with the current market dynamics supporting sustained bullish positions.

Heating Oil: +3.96% – Unfavorable for Trend Followers Likely Holding Bearish Positions

Causal Factors Behind the Price Increase:

1. Geopolitical Tensions: Escalating conflicts in the Middle East, particularly U.S. airstrikes against Yemen's Houthis, have raised concerns about potential disruptions in oil supply routes, contributing to upward pressure on heating oil prices. ​
2. Supply Constraints: New U.S. sanctions targeting Iranian oil exports and OPEC+'s plans to cut output have heightened expectations of tighter global oil supplies, leading to price increases across the oil complex, including heating oil. ​
3. Seasonal Demand Fluctuations: While heating oil demand typically declines with the end of winter, unexpected cold snaps or delays in seasonal transitions can temporarily boost consumption, influencing price movements. ​

Trend-Following Perspective:

• Short-Term Trend Followers: The recent 3.96% price increase may trigger exit signals for those holding short positions, prompting reassessment of strategies to mitigate potential losses.​
• Medium-Term Trend Followers: This price uptick challenges existing bearish positions, necessitating careful monitoring for signs of a trend reversal or continuation.​
• Long-Term Trend Followers: The current price movement may be viewed as a temporary correction within a broader downward trend, with long-term strategies maintaining bearish positions until more definitive trend changes are observed.​

The 3.96% increase in heating oil prices poses challenges for trend-following strategies, particularly those with bearish positions. Traders across all time horizons should exercise vigilance, reassessing positions and risk management approaches in light of evolving geopolitical and supply dynamics.

Coffee: +3.43% – Favorable for Medium to Long-Term Trend Followers Likely Bullish on This Market

Causal Factors Behind the Price Increase:

1. Adverse Weather Conditions in Key Producing Regions: Brazil, the world's largest coffee producer, is experiencing its worst drought in over seventy years, severely impacting coffee plantations and reducing yields. Similarly, Vietnam, another major producer, is facing heat and drought, exacerbating the global coffee supply issue and pushing prices higher. ​
2. Supply Chain Disruptions: The global coffee trade is facing significant challenges due to soaring prices, leading to reduced purchasing by traders and roasters. This has created a challenging situation for both producers and retailers, with some companies unable to sell a substantial portion of their inventory and others at risk of going out of business. ​
3. Increased Demand and Inflation: Rising global demand for coffee, coupled with inflationary pressures, has contributed to higher prices. In Australia, for instance, coffee prices are expected to rise significantly within six months, potentially reaching $7 for a regular cup. ​

Trend-Following Perspective:

• Short-Term Trend Followers: The recent 3.43% price increase may prompt short-term trend followers to initiate or add to long positions, capitalizing on the immediate bullish momentum.​
• Medium-Term Trend Followers: This price movement aligns with the existing bullish trend, reinforcing medium-term trend followers' confidence in maintaining or expanding their long positions.​
• Long-Term Trend Followers: The sustained upward trajectory in coffee prices, driven by fundamental factors such as adverse weather and supply constraints, supports long-term trend followers in holding bullish positions, anticipating continued price appreciation.​

The 3.43% increase in coffee prices is favourable for medium to long-term trend-following strategies, reinforcing bullish positions amid ongoing supply challenges and robust demand.

Oats: +3.26% – Market Remains in Congestion Phase; Limited Opportunities for Trend Followers

Causal Factors Behind the Price Movement:

1. Supply Dynamics: Recent data indicates that oats are priced at approximately $3.75 per bushel as of March 7, 2025, reflecting recent market movements. ​
2. Demand Considerations: While specific demand-side data is limited, general trends in the agricultural sector suggest stable consumption patterns for oats, contributing to the current price stability.​

Trend-Following Perspective:

• Short-Term Trend Followers: The recent 3.26% price increase may appear attractive; however, the overall congestion phase suggests a lack of clear short-term trends, making it challenging to identify profitable entry points.​
• Medium-Term Trend Followers: The sideways movement in oats prices indicates an absence of medium-term trends, leading to potential indecision or a preference to await more definitive market signals before committing capital.​
• Long-Term Trend Followers: The prolonged congestion phase implies that long-term trend followers are likely to remain on the sidelines, monitoring the market for a breakout or the establishment of a sustained trend before engaging.​

Despite the 3.26% price increase, the oats market's ongoing congestion phase presents limited opportunities for trend-following strategies across all time horizons. Traders are advised to exercise patience and await clearer directional cues before considering positions in this market.

What’s Moving Down

VIX: -6.57% – Decline Reflects Easing Market Anxiety Amid Tariff Developments

Causal Factors Behind the Decline:

1. Easing Tariff Concerns: Recent statements from President Donald Trump have introduced flexibility regarding previously announced tariffs, reducing investor anxiety. The anticipation of potential negotiations has alleviated fears of an immediate trade war, contributing to a decline in the VIX. ​
2. Triple-Witching Options Expiration: The recent triple-witching event, involving the simultaneous expiration of various options contracts, typically heightens volatility. However, the market navigated this event without significant disruptions, leading to a reduction in the VIX. ​
3. Stable Economic Indicators: Despite earlier recession fears, recent economic data, including steady consumer spending and employment figures, have reassured investors, leading to decreased market volatility. ​

Trend-Following Perspective:

• Short-Term Trend Followers: The VIX's 6.57% decline may prompt short-term traders to adjust their positions, reflecting reduced expectations of immediate volatility.​
• Medium-Term Trend Followers: A sustained decrease in the VIX could signal a stabilizing market environment, influencing medium-term strategies to factor in lower volatility forecasts.​
• Long-Term Trend Followers: Long-term investors typically view the VIX as a sentiment indicator rather than a direct trading instrument. The recent decline suggests a normalization of market conditions, potentially reinforcing existing long-term strategies.​

In summary, the VIX's 6.57% decrease reflects a calming of market fears, influenced by easing tariff tensions, a smooth options expiration process, and stable economic indicators. While trend-following strategies may not directly trade the VIX, its movements offer valuable insights into market sentiment and volatility expectations, informing broader investment decisions.

Natural Gas: -3.41% – Decline Amid Milder Weather and Record Production

Causal Factors Behind the Price Decrease:

1. Milder Weather Forecasts: Recent projections indicate warmer-than-expected temperatures for late March and early April, leading to reduced heating demand. This anticipated decrease in consumption has exerted downward pressure on natural gas prices. ​
2. Record High Production Levels: U.S. natural gas output has reached unprecedented levels, with production in the Lower 48 states averaging 105.8 billion cubic feet per day (bcfd) in March. This surge in supply, coupled with stable demand, has contributed to the recent price decline. ​
3. Increased Storage Supplies: The Energy Information Administration reported an unexpected increase in storage inventories, alleviating previous concerns about supply shortages and further weighing on prices. ​

Trend-Following Perspective:

• Short-Term Trend Followers: The recent 3.41% price drop may have triggered exit signals for short-term trend-following strategies that were positioned long, leading to potential losses as the market moved against their expectations.​
• Medium-Term Trend Followers: Traders with a medium-term outlook might have observed the recent decline as a correction within a broader bullish trend. Depending on their risk tolerance and system parameters, they may choose to hold existing long positions or reduce exposure.​
• Long-Term Trend Followers: Long-term strategies often focus on sustained trends over extended periods. The current price decrease, while notable, may not be sufficient to alter their bullish stance unless it develops into a more prolonged downturn.​

The 3.41% decline in natural gas prices is primarily attributed to milder weather forecasts, record production levels, and increased storage supplies. Trend-following strategies across different time horizons may need to reassess their positions in light of these developments, balancing the recent bearish signals against the broader market context.​

Platinum: -3.24% – Drop Within a Congested Market Reflects Ongoing Lack of Direction

Causal Factors Behind the Price Decrease:

1. Industrial Demand Uncertainty: Platinum continues to face sluggish demand from the automotive industry, particularly as electric vehicle adoption grows and reduces reliance on catalytic converters, where platinum has traditionally been used.
2. Global Growth Concerns: Broader macroeconomic uncertainty, including weak data from key manufacturing hubs like Europe and China, has added downward pressure to industrial metals, including platinum.
3. Lack of Fundamental Catalysts: The absence of any strong supply disruptions or demand surges has left the market without a clear driver, leading to a drift lower as speculative interest fades.

Trend-Following Perspective:

• Short-Term Trend Followers: The recent 3.24% decline may register as noise within a larger sideways regime. Short-term trend systems may have attempted small short trades, but overall signal clarity is lacking.
• Medium-Term Trend Followers: With no discernible trend structure, medium-term models are likely avoiding this market altogether. False breakouts and choppy reversals continue to define the trading environment.
• Long-Term Trend Followers: Platinum has remained trapped in a wide congestion band for years. Long-term trend-following systems generally require a breakout above resistance or below support to engage meaningfully. Until such a move occurs, this market remains sidelined in most models.

Platinum’s 3.24% price decline this week is better viewed as a continuation of its longer-term range-bound behaviour rather than the emergence of a new trend. For trend followers, this remains a classic "wait and watch" market—lacking the sustained directional movement that trend strategies require to gain exposure with confidence.

Cotton: -3.00% – Downtrend Continues Amid Weak Global Demand and Higher Stockpiles

Causal Factors Behind the Price Decrease:

1. Weak Global Demand: Cotton consumption forecasts have been revised lower due to slowing textile production in major importing countries, particularly China and India. Soft retail demand for clothing in Western markets has also contributed to weaker demand for raw cotton.
2. Rising Stockpiles: The USDA reported an increase in global cotton ending stocks, particularly in the U.S. and Brazil. Higher inventories add supply-side pressure, contributing to further price declines.
3. Technical Weakness: Cotton has remained in a persistent downtrend, with traders reacting to continued bearish momentum. The recent 3% drop aligns with a broader trend of lower highs and lower lows over the past year.

Trend-Following Perspective:

• Short-Term Trend Followers: The continuation of the downtrend likely kept short-term traders positioned on the short side, with the latest decline reinforcing their bearish bias.
• Medium-Term Trend Followers: The sustained weakness aligns with medium-term trend signals, with recent price action supporting a continuation of existing short positions.
• Long-Term Trend Followers: The long-term trend remains bearish, with cotton trading at multi-year lows. As long as the broader downtrend structure holds, long-term trend-followers are expected to maintain their short exposure.

The 3.00% decline in cotton prices reflects ongoing demand weakness, rising stockpiles, and persistent technical weakness. Trend-following strategies are likely maintaining short positions, with no immediate signs of reversal in the prevailing bearish trend.

Silver: -2.62% – Decline Driven by Profit-Taking and Stronger U.S. Dollar

Causal Factors Behind the Price Decrease:

1. Profit-Taking After Recent Rally: Silver has been in an uptrend, with prices reaching multi-month highs. The recent 2.62% decline appears to be a result of traders taking profits after a strong upward move, rather than a shift in the broader trend.
2. Stronger U.S. Dollar: The U.S. dollar gained strength this week following hawkish comments from Federal Reserve officials, leading to downward pressure on silver prices. A stronger dollar typically reduces the appeal of precious metals as an alternative store of value.
3. Weaker Industrial Demand: Recent economic data out of China has raised concerns about slowing industrial demand, particularly for metals like silver that have significant industrial applications. This has contributed to some selling pressure in the market.

Trend-Following Perspective:

• Short-Term Trend Followers: The pullback may have triggered profit-taking or stop-loss exits for short-term trend followers who had previously ridden the upward move. Some may be awaiting confirmation before re-entering long positions.
• Medium-Term Trend Followers: Despite the recent decline, silver remains in an uptrend over the medium term. Many medium-term trend followers are likely still holding long positions, viewing this move as a temporary correction.
• Long-Term Trend Followers: The long-term trend remains bullish, with silver maintaining a series of higher highs and higher lows. Long-term trend followers are unlikely to adjust their positions unless a more sustained reversal takes place.

The 2.62% decline in silver prices is largely attributed to profit-taking, a stronger U.S. dollar, and concerns over industrial demand. Trend-followers with medium to long-term positions are likely to remain in the trade, while short-term traders may have taken profits or reduced exposure.

Conclusion: Navigating a Market in Transition

This week’s market movements highlight the ongoing push and pull between emerging trends and countervailing forces, leaving trend-followers to navigate a more complex landscape. The TTU Trend Barometer’s drop to 32% underscores the indecisiveness across asset classes, with fewer markets exhibiting sustained directional movement. While trend-followers benefited from continued strength in copper, coffee, and energy, reversals in silver, platinum, and cotton presented fresh challenges.

The sharp decline in volatility, with the VIX dropping 6.57%, suggests that risk appetite is stabilizing. However, traders should remain cautious—sharp volatility declines often precede renewed turbulence. Meanwhile, the strong rebound in energy prices, coupled with geopolitical risks, keeps the sector in focus.

Looking ahead, trend-following success will hinge on adaptability. Markets are oscillating between trending and mean-reverting behaviours, requiring disciplined risk management and a willingness to ride only the strongest trends. The divergence between asset classes remains a key theme, offering opportunities for those positioned on the right side of emerging moves.

As trend signals evolve, traders must stay nimble, recognizing that while this week brought setbacks for some strategies, the ever-changing nature of markets means new opportunities are always on the horizon.

"For trend-followers, patience and discipline remain the key. While some trends fade, the next breakout is always just around the corner."

List of Resources used in the Week in Review

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