We are now entering the turning point in quantitative tightening around the world. A global drop in CPI from 2022 has many banks looking to cut if they haven't done so already. The reason gold has struggled to move is likely due to the dollar waiting longer than the rest to cut.
However, looking forward, it seems that these rates are going to be lower. And this trend will continue for the next few years. Once gold gets confirmation from the Fed that they're cutting regardless of the economic condition, it should be bullish for gold.
This week was a big week for traders anticipating rate cuts.
We saw jobs materially slow (NFP revisions + unemployment rate ticking up were the key here), PCE & PPI are showing signs of inflation cooling, and it's an election year in the US, EU, and UK (as well as others).
However - CPI is coming up, and will really nail in rate cuts, or push them back.
In my view, metals look good currently in either scenario...
If we see a slide in CPI lower, rate cuts will come sooner and a continued selloff in the dollar would be strong for gold.
However, if we see CPI tick up or disobey the rest of the data... concerns about stagflation may flair up again, also good for gold.
The market is smart, and already knows this. I believe that's part of the reason why gold rallied so strong the last few days.
Jobs starting to slide is only good news if inflation goes with it!
- Nick
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The market ripped higher this morning only to give back all of its gains today after touching a new high at $5,523. Investors are not quite sure of what to think of market sentiment after the latest PCE reading which last month's number was revised higher. The presidential debate also caused uncertainty about what the potential outcome of the election could be. It seems that trading an intraday momentum play is the only real strategy working for most traders. If the bears get exhausted from this mid day sell off, the market could still drift higher.
Читать полностью…Unemployment claims remain steady for months suggesting a slowing labor market. Pending home sales came in lower as well, but house prices remain stubborn. No one is selling their homes with high mortgage rates. With house prices high and mortgage rates high, no one wants to buy a house. Sales will likely stay low, and a cooler jobs market could mean even less demand to spend on big purchases such as a house.
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Retail is now mixed indices and gold, while being long other metals, SPX500, Oil and small caps. The only short positions on retail sentiment are GER30 and USDJPY.
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AUDUSD is the strongest Bullish reading on the EdgeFinder at +11. Almost every metric points towards Aussie strength over the dollar. CPI was higher for AUD, so it currently has a positive score on the pair. However, this could change come Thursday.
A major reason AU is seeing more bullish demand could be due to the fact that RBA kept rates unchanged in their last bank meeting. Meanwhile, there are high hopes for a 25 bp cut in the US in September.
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Stopped out on Bitcoin!
Not every trade is a winner.
I will look for a better entry if price begins to find support / breakouts.
- Nick
Lesson learned— Stick to YOUR strategy 🏆
It's not about this 1 trade, its about the next 1000. A great blackjack player doesn't bet anything on their next hand, they have to let their edge play out over many many iterations. Same in trading.
The EdgeFinder was absolutely spot on this week!
Dollar bearishness, metals bullishness, stock bullishness
- Nick
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NASDAQ
Stocks are coming off the new highs this morning in premarket after ADP payrolls came in lower than expected and unemployment claims slightly rose. Private payrolls have been steady since the start of this year, but have declined significantly from last July. Keeping the jobs market cool was part of the Fed’s plan to help battle inflation, and now that it is not really moving in the past 6 months, it could be good news for the stock market. However, we also noticed that stagnant jobs data and inflation are looking correlated. Maybe the jobs market needs to decline further to see a drop in CPI numbers. Powell spoke yesterday stating that they need more confidence in inflation before they begin cutting rates. Home prices remain elevated too. Although CPI is lower since 2022, there are still areas of the market that need to become cheaper in order to make the Fed dovish on rates.
GBP/USD
GU is up today as the indices fall in premarket and the dollar remains elevated. The pound might look stronger than the dollar right now due to falling inflation at the BoE rate target, and their central bank decided to keep interest rates unchanged. Meanwhile, the dollar is experiencing sticky inflation and still expecting a rate cut this year.
Gold
Gold prices can’t make a decision for the same reason as the indices. The whole market has caught a lengthy lull from Fed indecision and uncertainty around an interest rate cut this year. We know at some point, price will break one way or the other, and I think the jobs data will be enough to push us in a direction for next week.
NASDAQ
Since June 20, price has not moved at all. Technicals indicate that price could come back to the trend line on the 1D timeframe. It’s hard to say whether we will see a full reversal or not, but it does seem like prices need to cool down a bit before resuming the uptrend. Powell is set to speak this morning on monetary policy again in Sintra, Portugal. He will likely not tell us anything directional today, but saying nothing will likely add to the uncertainty in the market.
-Frank
July is an historically bullish month for stocks according to our seasonality scanner, so the melt up may not be over quite yet. We're about to enter the second half of the year after a red hot stock market. Growing concerns about interest rates will continue to put pressure on stocks, but it might not be enough to break the market until we see a fundamental shift from the Fed/CPI. Now that we are at this level, it is probably time to start thinking of getting more defensive on our positions going forward. Q3 and 4 could be very turbulent as we approach the presidential election and more FOMCs to come -Frank
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COT data is now updated to display the latest filings from last week. There was now a sell-off in CAD, small caps and EUR. USD saw one of the largest gains last week while SPX and NAS were getting bought again.
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So what can we trade in such a mixed market? We could probably look long term. Think of the odds of high interest rates in the next 5 years. The Fed's forecast is now at a 3.75% interest rate by 2026. Regardless of where the market moves, the expectation is that rates will be lower over time.
The Fed is even expected to cut this year. Rates are going to come down at some point, and the first cut will be the sign of future rate cuts. We can look at the increase of bond prices over time as interest rates fall.
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Gold, 4H chart:
Price bounced! 2300 clearly has some buyers present. With presidential debates happening this evening, markets may be a bit jittery.
We see yields falling sharply today, leading to a nice bounce in commodities and a dip in the USD.
I'm staying long. Will stop out if 2300 breaks.
Updates will be provided in VIP! - Nick