Get started

CPI

UPDATED DETAIL OF RALLY CONCEPT BTCAll in all it's not looking good for the bulls, but there is a case to be made for a stronger rally. It’s a tough upside down one but there’s a valid thesis. Basically BoE buying bonds now, pivoting… currency wars…energy crisis…. feds MAY pivot for the wrong reasons, bad reasons, namely because of systemic risk. In this case FEDS would be effectively short term capitulating on inflation and there could be a flight from a rapidly inflating dollar into equities, of which deflationary assets like Bitcoin could get crowded and blow off. It’s a marginal scenario but it’s in the cards as we see nations risking default, currencies like GBP and EURO collapsing, and an environment of negative real interest rates. It would ultimately be a disaster over all, but it could lead to a powerful relatively short lived push for Bitcoin. Plunge protection rescued the global financial markets from a complete meltdown on Wednesday with margin calls and liquidation notices sent out on of UK’s long dated bond backed pension funds representing about 2/3 value of UK’s 1.5 TN Sterling Investment funds ….. Markets were possibly something like moments away from a 2008 scenario. (see below for CNBC coverage) With inflation running rampant in developed nations and the bond markets getting routed: - IF CPI Oct 13 shows US is finally cooling (NOT suggested by core PCE numbers today, labor market tightening rather than loosening and overall strong economic data points in the US) - AND Feds decide to take a wiat and see with 50 bps to give other economies a chance to breathe in order to avoid system risks, THEN we could see something like a short lived rally that could extend to end of year. www.cnbc.com Some quick and easy fun to follow refernces: youtu.be youtu.be
by Linneaus
1
Gold: Inflation Hedge or Not Really?COMEX: Gold Futures ( COMEX:GC1! ) Last Tuesday, September 13th, the Bureau of Labor Statistics reported that U.S. Consumer Price Index rose 0.1% in August to an annual rate of 8.3%. Both were higher than market expectations of -0.1% and 8.1%, respectively. One tenth of one percent didn’t seem much, but it refuted the mainstream notion that inflation has already peaked, and the Fed would tone down its tightening policy. The Dow dropped 1200 points on the news. Other US stock market indexes declined 3-4%. On September 15th, gold price fell sharply. COMEX gold futures (GC) plunged below $1670/oz. It closed down $40, or more than -2%, to its lowest level since April 2020. Gold price runs like a roller coaster this year. It surged to $2070/oz after the Russia-Ukraine conflict in February. Since then, it nose-dived as the Fed began raising interest rates. By September 15th, gold price has shaved off 19.3% from its 52-week high. We have long held a belief that gold is a good hedge against inflation. Now that US inflation runs at a 40-year high, we would have expected gold price to rise and help investors preserve their purchasing power. But why is gold price falling? In today’s story, we will explore the potential repricing of gold as a financial asset and a precious metal, in a new investment paradigm marked with rising interest rates and high inflation. (For previous writings on the “Great Wall Street Repricing” series, please follow the links at the end of this report.) What Caused the Gold Sell-off? Recent price slump is a direct result of investors liquidating their gold positions. As of September 13th, the world’s largest gold ETF fund SPDR Gold Shares saw its open interest falling by 80 tons to 962.88 tons, the lowest level since March. Last week, CFTC Commitment of Traders Report shows total open interest (OI) of COMEX gold futures as 463,674. This represents a 27% drop from March 8th OI of 638,502. The declines in gold open interest suggest that investors are taking money out of gold. This contradicts conventional wisdom that gold is a safe-haven asset. Historically, gold has been used as currency (gold coins), storage of value (gold bars), and luxury jewelry (gold necklaces). Today, I would focus on two attributes: gold as a financial asset (paper gold), and gold as a precious metal commodity (physical gold). Paper Gold Gold ETFs, Gold Futures and Gold Options are financial instruments with gold serving as the underlying commodity. Paper gold does not generate income. Furthermore, if the issuer holds gold as collateral, the monthly storage and insurance costs will be passed on to investors. Therefore, paper gold could be a negative yielding financial asset. In good times, any yield-generating asset would have more appeal than gold. Stock value is based on a company's future earnings. Bond holders receive periodic coupon payments. Commercial real estate produces rent income. Cash could earn interest while being invested in time deposit or money market fund. In times of war, natural disaster, economic crisis, and political upheaval, many assets could be destroyed. A building could be wrecked, a business ransacked, and a banking system shut down. In the early days of the Russia-Ukraine conflict, panic investors fled to gold, pushing its price sharply above $2000. Gold also serves as a hedge against inflation. When high inflation eats up real return, fixed income asset will underperform. Countries like Argentina, Turkey and Venezuela have experienced hyperinflation of triple-digits, rendering local currency worthless. However, things are very different this time. While inflation is at decades-high, US dollar index, a measure of US dollar against a basket of foreign currencies, is at 109, its 20-year high. Inflation has not resulted in a depreciation of US dollar. Although the stock market has pulled back significantly, it is still well above its pre-Covid level. US employment is strong, and the economy has not yet entered a recession. If investors are still debating when and if recession will be here, they are in no rush to buy gold now. Lately, investors are underweighting equity and bond. Hot money is flowing out of riskier foreign markets. However, investors may park money in cash for now. Earning 3% in money market plus the potential of dollar appreciation seem like a better choice than gold. Physical Gold As a precious metal commodity, gold is priced in US dollars in global market. In general, commodity prices have an inverse relationship with the value of US dollar. In the past three months, US Dollar Index rose 4.64%, while GSCI Index lost 18.66%. If you compare dollar index with gold futures directly, the 3-month returns are +4.6% and -8.2%, respectively. Therefore, while viewing gold as a commodity, one should not be surprised to see its price falls as US dollar gains in value. What’s behind the inverse relationship between US dollar and commodity? • Foreign buyers need to convert local currency into US dollar to buy commodities • When their currency depreciates against the dollar, it would cost more local currency to get the same unit of US dollar • Commodities become more expensive for them, which results in lower demand Whether gold is used as a storage of value, or luxury jewelry, it is sensitive to price. Strong dollar raises the cost of gold purchases. This put downward pressure on gold price. As the Fed continues to raise interest rates, foreign currencies would likely depreciate further against the dollar, which would continue to push gold price down. Any Investment Opportunity with Gold? As gold price falls to a two-year low, is this a good time to buy gold? Not necessarily. Gold is not yet a “safe haven” instrument preferred by investors, as we have not yet entered global economic crisis. As a commodity, gold faces downward price pressures as long as the Fed continues to raise rates. Recall our Event-driven strategy focusing on global crisis and strangle options trade targeting binary outcomes? Each Fed rate-setting meeting is a big event that could impact the global financial markets. For the upcoming September 20-21 meeting, I would define the likely outcomes as: 1) Exceed Expectations (Fed raises at least 100 bps); and 2) Meet Expectations (Fed raises 75 bps or less) Aggressive rate hike would strengthen the dollar, as it becomes a higher yielding currency. A strong dollar leads commodity prices to fall, which includes gold price. If you consider 100 bps to be the most likely outcome, a Put Option on COMEX Gold Futures (GC) is a good way to express your view. What if the Fed raises 75 bps? Just like the rate hike in July, avoiding an otherwise more aggressive rate hikes would be perceived as good news by the market participants. Gold price would rise as a result, in my opinion. A Call Option on COMEX Gold Futures is more appropriate in this case. Personally, I view a rate hike of 75bps vs. 100bps as equally possible in the upcoming FOMC meeting this week. If you hold the same view, you could consider a strangle strategy to buy a call and a put simultaneously. Buying options cost money. I would consider out-of-the-money strikes to lower cost. I would also pick a contract month 60-90 days ahead. For example, selecting the December contract, the strategy could apply to the November and December rate hikes in addition to the September Fed meeting. Financial market is extremely volatile this year. Getting an information edge increases your odds of success in managing risk. I suggest leveraging real-time market data for a better gauge of market situation. Tradingview users already have access to delayed data. A Pro user could upgrade to real-time CME market data for only $4 a month, a huge discount at the time of high inflation. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
COMEX:GC1!Short
by JimHuangChicago
11
$SPX downhill without brakesFear inside Wall Street The CNN Business Fear & Greed Index, which measures seven gauges of market sentiment, is once again showing signs of Fear on Tuesday as the broader market plunged. The VIX, a volatility index that is one of the seven components of the Fear & Greed Index, shot up nearly 8%. The Fear & Greed index was in Fear mode a week ago as well but it had recently moved back into Neutral territory following a 4-day winning streak for stocks. That streak is coming to a spectacular end thanks to the hotter than hoped for consumer price index report, as investors worry that the Federal Reserve is going to raise rates even more aggressively next week to fight persistent inflationary trends. Wall Street's mood has largely tracked the rapidly changing expectations regarding inflation and rate hikes. Just a month ago, before Fed chair Jerome Powell gave a speech that suggested more big rate increases were coming, the Fear & Greed Index was indicating levels of Greed, a sign of complacency.
SP:SPX
by icheeetah
A last chance for the Euro ?Under the US dollar pressure, EURUSD has been making lower lows and lower highs recently. However, RSI on the monthly chart is oversold for the 3rd time in this century. MACD is showing bullish divergence on multiple timeframes, and the EURUSD on H4 has just achieved a higher high this time with 5 impulse waves: the ABC correction is clear on the chart, wave C is nearly around 0.76 to 0.8 fib retracement. With today's good news on euro CPI and core CPI (higher than expected for both), we can give this currency a chance to retest the end of impulse wave 5, or even to make a higher high. Stoploss can go below the impulse wave 2 for some people, or below the lowest low (the beginning of the impulse wave). Note that on a long term perspective, USD is still stronger than EURO, we will just give eurusd a chance after the new high we saw lately. Goodluck everyone, Joe.
Long
by joe-abdallah
Today is a Reversal/Reversion/Rally Day. Ready for it?My cycle patterns suggest today is a Reversion/Reversal/Rally day. I know it may seem strange to think that the US market may rally today after the CPI/PPI inflation data and the pending Fed rate increase - but it is what the cycle patterns say it is. Remember, these patterns originate from a date 3+ years ago and just tell me what to expect from price on certain days. I read them like words making up a sentence. Multiple bullish cycle patterns suggest a broadly bullish price trend. Multiple bearish cycle patterns suggest a broadly bearish price trend. Today is a Reversal/Reversion/Rally day. If we see a big rally in the SPY today - I will be content that my cycle patterns are really nailing these daily market cycles/setups. I mean - where else can you know what is likely to happen weeks or months in advance of price actually DOING IT? Follow my research.
AMEX:SPYLong
by BradMatheny
6
Perfect Storm Short on GoldPerfect storm for a 345 pip drop for Gold. Fundamentally: CPI was released. Traders felt it was negative for Gold and sold it. Technically: An Ascending Triangle which began on September 7th. This was a range between 1691.83 to 1729.52. The trend line was respected apart from two false breakouts. The resistance was also respected other than a false breakout at the top-which could be considered an Upthrust because of its consequential effect. These two happening together created a perfect situation to short. The primary move happened within the first minute of CPI being released. I wish I had followed my gut and traded instead of being away from the computer for this event.
FX:XAUUSD
by Shanktown
What Yesterday's CPI Means for the Fed and StocksA hotter than expected CPI print tanked stocks yesterday, wiping out this week's rally and then some. The markets were hoping that CPI, which is the Fed's favorite inflation gauge, would show that inflation is plateauing and that their policies are working. Under these assumptions it would be reasonable to think that after September's rate hike, they would take a more dovish position. However with red hot inflation beating expectations, this is clearly not the case, and some think the Fed will double down on their stance, hiking rates to 100 bps when 50 bps was more likely just a few days prior. The S&P 500 responded accordingly, smashing through the 4000's, and reestablishing the 3000's, finally finding support at our level at 3928. It is likely the markets will equilibrate as we digest CPI, so expect the S&P to remain bounded by 3909 and 4009 for now. We will need to wait for more data to come out this week (retail sales on Thursday and University of Michigan sentiment on Friday) to get a clearer picture of the state of the economy, and how the markets will react further.
FX:SPX500Short
by quantguy
[09/14] Beast Trading _ Today's Bitcoin Analysis Beast Trading _ Today's Bitcoin Analysis Before the CPI announcement yesterday, Bitcoin continued to renew its high point, showing a strong rise. However, the CPI announcement was above and the source Cpi was twice as high as expected, resulting in a strong fall Coincidentally, after rebounding to the edge of the downward trend line from 69k, that's exactly where the very big drop started. In an instant, it fell more than $1,000, and NASDAQ also began to fall strongly, eventually, NASDAQ fell more than 6%, and Bitcoin fell nearly 13% as it reached 19.8k. In terms of transaction volume, it occurred stronger than when it rose steadily, reaching the top line of triangular convergence that was formed before, and is supported in the section. It's showing a little short-term rebound, but it's resisting in the Fibonacci 0.236 position of the decline, and I don't think we should predict the direction hastily. The support line hanging below is likely to be supported on each line of the triangular convergence upper line and the lower line, and if this section is broken, it will be 18.5k and then 17.6k. Bitcoin's one-day candle 533 Stocastic came down strongly, bending its head from the top, but it hasn't come down half yet. The same goes for NASDAQ Stocastic 533. (Stocastics is an auxiliary indicator such as RSI. If the index value is at the top, it is likely to fall, and if the index value is at the bottom, it can be interpreted as overselling (highly likely to rise) I think we need to check the closing of the main salary. If last week's beekeeping peak appears, I think we should keep in mind the 17.6k low point renewal.
by BeastTrading_Sehyun
2
US03MY increases more, Markets surprised at CPI data !?😲CPI the Core inflation, which is the focus of most traders, rose 0.6 percent in August, a larger increase than in July. Although the US inflation decreased in August; But it was still higher than economists had expected, signaling that the US Federal Reserve will remain aggressive in raising interest rates. Also Eight days before the new Federal Reserve interest rate meeting, the 3-month bond yield has increased by 0.75% in the transactions so far. After announcing the inflation data, the yields of government bonds with different maturities increased by +6%. The point being that the 3month is highly correlated to the federal funds rate, It seems ,the Federal Funds Rate continues to rise , likely at a more modest pace and maybe with less regularity. ------------------------------- Bond Yields: The yield on a government bond is the interest rate that the government borrows at. Government bonds, because they are safe, therefore tend to have a lower yield because investors are not demanding a high rate of interest for lending to the government. Bond yield is the return an investor realizes on an investment in a bond. A bond can be purchased for more than its face value, at a premium, or less than its face value, at a discount . The current yield is the bond's coupon rate divided by its market price. Price and yield are inversely related and as the price of a bond goes up, its yield goes down. ------------------------------- This Economic informations update is provided for informational purposes only . ✌️ Good luck with your trading and investing and remember: Trade smart…OR JUST DON’T TRADE! -------------------------------------------------------------------------------------------------------------------- 👉This analysis is my personal opinion ,not a financial advice ,so do your own research. 💚 if you're fan of my analyses please follow me , drop a comment 🗯 and Boost me 🚀🚀
FRED:FEDFUNDS
by PRO_SMART_Trader
13