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- James
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USDJPY price plotted with retail and COT data is close to inverting. Smart money sentiment has declined while retail is picking up on their long positions. Individual traders are trying to catch a reversal on the dollar yen trade, but institutions are slowly getting out.
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A safe bet on playing the Fed's monetary cycle is by trading the bond market. Since everyone expect yields to come down for the next several quarters, bond prices will rise as a result. TLT is an ETF that tracks the 20 year bond price. Price has now returned to the highs from the beginning of this year.
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Japanese stock index fell about 7% from last month's high as investors load up on the yen causing further dissension in the carry trade. The start of the month is not suggesting anything bullish, but investors still want to look for a reason for higher stock prices around the world.
Cooler jobs data is more of a confirmation for a rate cut from the Fed, and NIKKEI is mostly correlated to the US stock market. Investors also are uncertain as to whether a 25 or 50 point cut is going to cause any relief to the labor market. -Frank
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Gold
Price continues to struggle at the highs even as yields and the dollar fall. I’m writing this just before JOLTS numbers which could be the reason for mixed price action on the day. A higher job openings could be bearish for gold today and may cause optimism in the dollar. The metal could come down to test a supportive trend line on the 1D timeframe around $2,440s if we get bearish news.
-Frank
ISM Manufacturing data came out this morning and did not tell us much. Services is later this week, but the primary event investors are looking at is jobs data. NFP will likely cause lots of volatility while the unemployment rate is anticipated to be lower.
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COT activity last week was quite unique. A rare occurrence of buying happened apart from two assets, oil and copper. This will lead to most COT score readings on the EdgeFinder to be neutral for the week. This does not suggest much of a bias from COT, and may just be neutral positioning for the next week.
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USD is weaker against the other risk-off currencies such as the Swiss Franc and the Yen. The dollar may continue to weaken should we see the Fed come through with the expected rate cut this month. However, September tends to be a bullish month for the pair due to risk-off sentiment in the market.
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SPX500 Daily Chart
Watching the indices this week. If we break support, it's time for me to get out and wait for a better set up.
Let's see...
- Nick
Gold 4H Chart:
Price is sitting just below all time highs, and continues the drift higher. We've seen price consistently bouncing off of the highs, but finding support just below.
It's possible that we could see a breakout, which could lead to fresh demand and new highs.
With rate cuts coming, gold has had a phenomenal year, and seems poised to continue the bull run.
I will be looking to trail my stop loss if we do see a new high form.
- Nick
USOIL 4H Chart:
Price was able to fill the weekend gap quickly. Oftentimes this can lead to continued strength in the direction of the gap close.
Can Oil break resistance here and continue?
- Nick
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Retail is very bullish dollar, mixed indices. Small caps, DAX and NIKKEI are among a several long positions.
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Gold Daily Chart:
Here is my gameplan for gold tomorrow, in regards to the jobs report!
If we see weak NFP data, I will be looking for a breakout through all time highs. Gold in this case would likely breakout on uncertainty that the fed can keep things under control, and the diminished probability of a "soft landing". More rate cuts coming at a faster pace would be very bullish for gold. On any break & retest of structure, I'd be willing to add to my existing long position in this scenario.
If we see a strong NFP report, gold would likely drop on job market stability concerns being offset. In this case, I will stay long on gold unless we break support as shown in the image attached.
All updates & positions will be shared in our VIP signals room.
- Nick
Since July 2022, the yield curve (2 year crossed with the 10 year bond yield) was inverted. Last night, the curve returned to normal which means that the 10 year bond now yields more interest than the 2 year. This is considered normal as longer term notes are supposed to offer more interest than short term rates.
However, every time we have seen this curve invert and return to normal, a recession imminently followed. This happened in 2007, 2000, 1980s and a few other times. When I say imminent, I mean in the sense of months after. It's not an instantaneous reaction, but it has historically alerted a market crash not long after the reversion. -Frank
USD/JPY
UJ drops further this morning on dollar weakness before labor statistics coming out today. The pair does not look very optimistic in the longer term after entering a steep downtrend on the 1D timeframe. This level is an important zone to watch whether it breaks lower to the August lows or breaches above the 149s. Good labor numbers could be bullish for this pair.
-Frank
NASDAQ
Tech stock tumble after NVDA was subpoenaed by the DOJ on an anti trust breach. The market cap giant lost $279 billion on Tuesday making it the biggest drop in value ever recorded on a single stock. NAS100 hits a falling trend line on the 1D timeframe that may end up catching a bounce if we close above it today. Another level of support the index could test is around the 200 DMA near the August lows.
-Frank
Retail is now short DOW despite it being a bullish reading on the EdgeFinder. RUSSELL and NASDAQ are favored to the long side by retail. Gold and the S&P are mixed.
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Although recession fears are growing and investors are cautious of the rate decision, blue chips remain the most favorable of the indices. We had manufacturing PMI data come in just under the expectations but higher than last month's report.
What we have seen the past few weeks are a stagnant market, meaning the index has been trading within a range without really moving anywhere. However, DOW is different from the others as it reached an all time high last week. This may suggest that our best bet could be the companies with the most cash and will offer healthy dividends as interest rates fall.
-Frank
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UJ's positioning looks pretty clear on direction. COT has become dramatically less bullish on the pair while retail is becoming increasingly long the pair. This sort of behavior may foreshadow a longer term down trend.
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