Bitcoin is now testing some strong resistance around its all time highs of $68,000. A break above this would signal a continuation of the strong uptrend. But a retracement could mean a retest around maybe the $53,000s.
In the same scenario as gold, bitcoin might actually see strength the concerns of lower economic output and higher inflation. That's why tomorrow's NFP is so important and why a beat or miss could greatly change the narrative of sentiment. -Frank
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AUD GDP came in last night at the same level as last quarter. After looking further into the data, however, I noticed that their last month's revisions changed to 0.3% suggesting that this month was a decline in growth. Although GDP decline is not great for the currency, inflation is still much lower on a YTD basis as CPI has fallen from 7% to 4.5% in March.
-Frank
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Gold
More analysis on gold reveals that we could be up against a potential pullback on resistance for the metal. Although the EdgeFinder is still marking gold at a +6, price has run up over 5% in this week alone. There is likely going to be some cooling in momentum at some point, and the $2,140-50s seems like a good area to see some profit-taking in the short term. If this occurs, we may see price come down to the low $2,000s again. ADP GDP came in cooler with JOLTS (lower expectations this month) happening soon for the USD. A weaker reading will likely prompt more gold bullishness for the day, and a stronger reading could push gold lower.
-Frank
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Lots of events in the US and Canada this week which ends with the main event of NFP.
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Here is gold's COT sentiment vs the crowd. We can see that retail traders are getting further bearish on the asset while institutions have held these positions elevated for some time.
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GU is now at a +9 on the EdgeFinder which is a strong bullish sign. The reasons for a strong bullish bias on this pair are more so because of dollar weakness. With the Fed chairman's testimony and NFP next week, the dollar could be in for a ride.
Stagflation usually comes from a slowdown in economic output while inflation rises. Output is gauged through GDP and labor numbers. We've already seen GDP lower at 3.2% from 3.3% last month. If NFP comes in lower, this will be show an overall slowdown in economic output in the US.
- Frank
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Gold is now a +10 on the EdgeFinder indicating a strong bullish reading for the metal. Today's score is up by three points due to a recent change in retail sentiment and the labor market. Today's unemployment claims came out higher than last week which is pointing to a worse performance in jobs.
Retail sentiment is now a +1 after crowd sentiment shifted to under 40% long. This means that the majority of investors are short the metal while COT shows something different. Last week's report shows a positive change in net positioning for gold while smart money is also slightly selling dollar.
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BTCUSD Daily Chart
If history tells us anything...
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We can't not talk about gold in this type of situation unfolding in the economy. The EdgeFinder has this metal placed at a +6 which is still unchanged from yesterday. The score may change tomorrow depending on the latest NFP data.
The bullish case for gold would be a lower NFP because gold's price tends to perform better based on weaker economic readings and that the US could be close to experiencing a stagflation scenario. If NFP were to come in hotter than expected, it would be a less bullish moment for the metal. -Frank
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I've been on a bit of a hot streak recently with my positions. However -
All good winning streaks will end, and fortunately so will losing streaks.
When times are really good, it's important to remember this simple reality of trading. I'm NOT leveraging more. I'm NOT getting overconfident, and I'm NOT going to think I'm invincible from here!
I WILL have another drawdown period in the future. It's inevitable, but shouldn't be feared. It could start tomorrow!
Just remember - what will keep you in this long term is risk management, discipline, and having a backtested edge. - Nick
After today's softer ADP NFP report, the indices are still up. Friday's NFP will be a determining factor in market direction. Despite three months of climbing jobs numbers, this month is expected to come in much lower. If we see a sign of cooling labor, it could spell the start of our stagflation concern happening in the US economy. Dollar bulls and indices bulls are hoping for a higher jobs number Friday. Gold and arguably bitcoin bulls are hoping for a softer number.
- Frank
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Remember: All time highs are historically bullish, especially after a ranging period & while retail traders are heavily short the move!
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Gold to 2100?
Gold took off on Friday after PMI and consumer sentiment came in lower. This is another reason why seeing economic slowdown now could be harmful to the dollar. The narrative flipped from “bad news is good news” to “bad news is bad news” when it comes to the USD. This is because we are witnessing stubborn inflation rates and slower economic output - or the potential for stagflation. Fears of stagflation are the fuel to gold’s flame, however, as it rockets straight through the $2,060s target range we had. $2088 may serve as a strong level of resistance for the time being. A pullback would give buyers a chance to scoop up the metal around $2,060 and $2,047 again. -Frank
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AAII Sentiment came in higher this week as the bull-bear margin is is increasing up to 25% from 18%. When the margin increases, it is showing that there are more bulls and less bears in the market from this Wednesday's report. The bull-bear ratio has increased by about 10% in the last three weeks indicating more optimism as we go into March.
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Retail is now short the metal while also being short USDCAD, USDJPY and the indices. Oil continues to remain mixed but is now getting close to majority bought by the crowd. AU and NU are among the highest bought assets right now.
-Frank
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Gold just tested a rising trend line on the 1D timeframe and seems to be breaking higher. On a technical scale, price action actually looks bullish now. On top of this, here are some reasons as to why gold could actually be fundamentally bullish at this time.
The past few weeks, we have seen stubborn inflation levels in CPI, higher PCE, while GDP stalls at 3.2%. I can better visualize this with the kind of data the EdgeFinder is grabbing and weighing in its algorithm. But the threat of lower GDP and higher inflation could lead to stagflation in which the metal thrives.
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Today's Preliminary GDP number came in lower than expected but essentially unchanged on a monthly basis. Right now, we're seeing a stall in growth combined with the latest four quarters of stubborn CPI levels. This could be a concerning sign for risk-favoring investors. If inflation can't move lower while GDP stalls or drops in the future, it could spark stagflation. This sort of situation is a bullish sign for gold, however. And employment figures play a key role in characterizing stagflation, so looking forward to next week, investors would want to see higher NFP to remain bullish on the indices.
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