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Gold, S&P, DXY, bonds: What is driving them during the pandemic?This is a cross-asset analysis of the following instruments: XAUUSD (Gold), S&P500, U.S. Dollar Index (DXY), the U.S. 10Y Note and M1 Money Supply. The initial idea was in our attempts to determine basically what is driving Gold's price during this period of pandemic. This multi-dimensional work reaches some interesting conclusions. First we start with the week starting February 24th, 2020. The stock markets plunge due to growing fears of COVID spreading outside of China (E.U. starting to get hit hard). S&P, Gold and DXY decline rapidly while the 10Y (bonds) rise. The second phase we look at, and the most important in our opinion, is the period from March 3rd to March 15th, 2020. That is when the Federal Reserve announced Trillion Dollar rescue packages in order to stimulate the economy from falling demand under the lock-downs. The interest rates were lowered by 0.50% (March 3rd) and 1.00% (March 15th). Overall the rates fell from 1.75% to 0.25% in 10 days. This is seen by the parabolic rise on M1 Money Supply. The result was very beneficial for the stock market (S&P500) obviously but also for Gold, which was seen as a measure to counter inflation cause by the Fed's actions. See how S&P500 and Gold have started to move in parallel motion, meaning that investors saw Gold as a form of stock asset and not the safe haven it normally is during crises. On the contrary, the USD (DXY) mostly and the 10Y (bonds) were the safe haven from March 9th to March 20th when stocks (S&P) and Gold collapsed. Since then the markets consolidated for a few weeks and after around May 12th-18th we see a big decoupling of S&P500 and Gold (rising) against DXY and U.S. 10Y (falling). This divergence obviously shows that as long as rates stay the same, those four will continue to move into opposite directions. And it is also obvious which assets the markets deems risky (stocks, Gold) and which not (DXY, bonds). Under the umbrella of stimulus (M1) and despite the rising pandemic cases all around the globe, investors continue to feel confident to invest in riskier assets. What we see since Wednesday, is the fear factor hitting the markets again and DXY, 10Y turning higher, while S&P and Gold fall. So to come back to our original intention for this analysis, we encourage Gold traders to be very careful and treat Gold during this pandemic and as long as stimulus lasts as a stock and not an asset that moves in opposite direction from the stock market (at least mostly). The gap between the four asset classes has grown very big as seen on the chart and another shock will cause that to close. ** If you like our free content follow our profile to get more daily ideas. ** Comments and likes are greatly appreciated.
FX_IDC:XAUUSD
by InvestingScope
GOLD: Swing Trade Analysis with Volume ProfileToday, I would like to do a swing trading analysis using just Volume Profile and Price Action. What got my attention this time was Gold. Its price has been rising and it hasn’t been this high for 7-8 years! As the price is moving upwards there are zones where the Volume Profile shows heavy volumes. Those are most likely areas, where buyers were adding to their long positions. They are around 1755.00 and 1726.00. Two factors which drive the price up from volume-based supports Those heavy volume zones should work as Supports. Why? Because the buyers who were building up their positions in those zones won’t want the price to drop below those zones. That would mean their positions would be in red numbers! So, when the price reaches those volume zones, then the buyers will want to defend those zones. They will start aggressive buying in order to drive the price upwards again. There is also a second factor at play. When there is a pullback, then the sellers behind this pullback will want to quit their short trades before they reach the heavy volume zones. Holding to those positions could mean a potential fight with the buyers! They wouldn’t want that! Sellers getting rid of short positions means they will need to buy (to get rid of shorts). This is the second factor which could help drive the price upwards from those two heavy volume zones. So, the two factors to drive the price upwards from volume-based supports are: First factor: buyers defending long positions. Second factor: sellers getting rid of their short positions. Both factors help the price turn upwards at the volume based support zones like these. Trade execution What do we do now? Now we simply wait. When there is a pullback and the price makes it back to those zones, then they should work as supports. Then it could be a nice opportunity for a swing long trade from both of those supports. Gold specifics Gold is a bit specific trading instrument because it often works as a safe heaven instrument. This means that when there is some global uncertainty (economical crisis, coronavirus, war, disaster,…) then its price usually rises. On the other hand when it is over its price drops. So, if there is some really important global news then you should watch Gold and trade it carefully. Especially when it is moving around its all-time highs like now. I hope you guys liked today’s analysis. Let me know what you think in the comments! -Dale
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TVC:GOLD
by Trader_Dale
7
The One Forex Pair to watch to Predict Stock Market Moves!My readers and my followers know about the first chart I look at every morning to predict stock market movements. The bond markets. Specifically, the 10 year yield (TNX). Remember, bond price and yields are negatively correlated: when bond prices move up, the yields drop lower and vice versa. A lot the the money managing community rely on the asset allocation model. Where you shift from one asset to another in order to re-balance the portfolio. When stocks are expensive, you sell and buy bonds. When bonds are too expensive, you sell and buy stocks. However, with the current market environment, the CFA's and infamous value investors (Buffett) are having a hard time evaluating these assets. I have been arguing that all that stuff is out the window now. This is a central banks driven market. Central banks have created environment to keep assets propped. Whether they fail or succeed will remain to be seen. During the 2008 Great Financial Crisis (GFC) the terms risk off an risk on were used to determine money flows. A risk off environment was one where money left stocks and into safety assets, particularly bonds. While a risk on environment was one where money left safety assets and ran to stocks. It was guided by fear, an emotion we are too familiar with in this market condition. It really has been fear which has kept markets subdued the past week on stories of Covid second waves, China and India, China and the US, riots and protests etc. The 10 year yield can be used to determine the fear gauge similar to the Volatility Index commonly known as the VIX. But what about the Forex market? Many do not understand the scope of trading and volume in the Forex (currency) markets. Yes, the bond/ debt markets are the largest in the world, but in volume per day statistics, the Forex market is on its own. An estimated $6.6 TRILLION in trading occurs per day on the Forex markets, a number that has greatly increased when I began trading Forex about six years ago (was just over $3 Trillion). The real action occurs on the Forex markets, and for someone who is keen on geopolitics and the macro environment, the Forex market is the place to be. While stocks are taking the headlines currently, in the future, we will see the largest moves in the Forex market given all the craziness in the world. So how can we use the Forex markets to gauge money flows particularly into stocks? Well the obvious currencies have always been the safe haven currencies: the US Dollar, the Japanese Yen, the Swiss Franc (although I would say not as much as the other two mentioned), and I would personally throw in Gold. Even though many consider Gold as a commodity, in the classical economics thought, Gold is considered a currency and when you see Gold break out into new all time highs against other Fiat, just like we have seen with pretty much every currency besides the US Dollar, it gives us a sign that the currency will be getting devalued/inflated. In a previous post I spoke about the Dollar and the Yen trades. The Dollar is the world reserve currency and some say the best out of the fiat currencies. The Dollar being the reserve currency allows the US to print as much as they want without needing to worry about the debt. This is due to the reserve currency status as it gives the US artificial demand for the Dollar always. Something the French called Exorbitant Privilege. The US can print as much Dollars as they want and the only way they would see hyperinflation is if we see a fall in US Dollar DEMAND. Hence why the Fed pretty much help bail out nations recently by opening US Dollar swap lines with them so they could use the Dollars for fiscal and monetary reasons rather than printing their own fiat currency which would lead to hyperinflation. As mentioned previously, I have written about this pattern on the US Dollar Index (DXY). It is showing a reversal pattern which is called the head and shoulders pattern. We have had a multiple downtrend with many lower highs and lower lows, and we began to exhaust, creating no more new lower lows, which indicated the trend was about to reverse. The number one lesson to remember about markets and market structure is that they do NOT move in straight lines nor do they move in one direction forever. They move creating swings, almost like waves hitting the beach and then receding before repeating. My job is to find these waves and predict when the tide is about to turn. The DXY had a nice break above the head and shoulders neckline, and from here, we want to see whether Dollar strength will continue. We have seen buyers step in as resistance now turned support with a large wick indicating a floor. On the daily chart I must stress there is a large resistance zone at the 98.40 zone. That would be a good target if the neckline here holds. Again, a move into the Dollar could be suggesting some fear and money perhaps running into the Dollar for safety. Believe it or not, but the Japanese Yen is actually seen as the dominant safe haven currency. A lot of fund managers say they would rather hold Yen than Dollars for a rainy day. With all the Bank of Japan has done with negative rates and QE infinity, many still wonder why the Yen remains quite strong. This has to do with balance of payments. With the Yen being weaker when those policies were instigated, it increased purchases of Japanese Yen exports. More nations demanded Japanese Yen in order to buy Japanese products. This increased the Demand for the Yen, and because Japan became a creditor nation with a large current account surplus, it creates upward pressure for the currency. Japan has historically been seen as a safe haven due to two things. First of all, the government is pretty stable which means the nations is relatively stable. Secondly, Japanese citizens are the highest savers among Western allied nations. This means that the debt is backed by savers...something you cannot say for the US nor many western nations. For Forex traders, the Yen pairs are our go to for risk and fear in markets, a well as major sell offs in equities. The Yen pairs have a high positive correlation with stocks meaning when stocks move down, the Yen pairs do as well. Indicating a move into safety. If you look at individual Yen pairs during recent price action, you can see the large falls and then the large rises in them which perfectly mimic the stock markets. Currently, the Yen Futures chart does not look like a set up I would trade, but there is a chance it may break and close above this resistance it is currently testing. This could be indicating a move lower in stocks. Now that we covered the 3 ways to predict stock market moves: 10 year yield, the DXY and the Yen, I want to talk about the one Forex pair which has the highest negative correlation to stocks. Nobody really knows why, but the price action is telling. I am talking about the EURAUD. Yes! Believe it or not but the EURAUD is a great way to predict stock market movements on the long term charts AND the intraday short term charts. Price action is indicating a possible stock market fall. Just looking at EURAUD, we have had a very extended downtrend. Many lower highs and lower lows all the way from the 1.94 zone. There was a big support/flip zone at 1.66 (flip zone just a term for a zone which has BOTH been support and resistance in the past) where we were expecting a bounce or a reversal from. We cut through it. And then hit another major support zone at the 1.60 level. So far we have bounced form it but do remain below 1.66. This pattern excites me because we could be seeing a reversal here. Either we move up and break above 1.66, creating a cup and handle reversal pattern, OR we may break down and retest 1.60 and could possibly create a double bottom reversal pattern. The other case if a break down of 1.60 and a continuation of the downtrend lower. So what does this mean for stock markets? Well since this has a high negative correlation (about 93%). When EURAUD is moving higher, stock markets are moving lower, and when stock markets are moving higher, EURAUD is moving lower. What I have outlined has indicated a higher chance of this pair reversing indicating stock markets falling. The only bullish case for stock markets will be if EURAUD breaks below 1.60. Just for comparison, look at the daily charts of both EURAUD and the SPX500 together. So now you will have another tool to use to track money flows. The bond market, the US Dollar and the Japanese Yen are quite common and you hear the mainstream financial media talking about when they try to look for fear sentiment in the markets. EURAUD may be a secret tool, but not anymore. It has been very reliable calling moves recently and it is something you should add to your tool box.
by Uncharted-FX
Trading the Sell-off on Gold 📈Gold hit a major long-term resistance which I wrote about a month ago. Despite all the uncertainty around the world (which should actually help gold to strengthen) there was a nice reaction to this resistance and a sharp sell-off. What happened around 1665 Let’s now zoom in a bit and let’s have a look at what actually happened around the major long-term resistance (1665). I will explain on a 30 Minute chart. First, the price went upwards and hit the resistance. Then there was a rotation around the resistance and then an aggressive sell-off started yesterday. If you look into the volume distribution (picture below) within this whole area you can see that there were heavy volumes accumulated in this rotation. There were two significant volume zones. I marked the stronger one in the picture below. What happened here was most likely this: Buyers were pushing price upwards, then when the price hit the long-term resistance around 1665 sellers started actively accumulating selling positions (that’s the heavy volume areas we see below). After a couple of days the sellers entered their selling positions and then they started aggressive selling to start the sell-off which occurred yesterday. Resistance around 1636 Now when you know the bigger context I would like to talk about a resistance which formed just yesterday around 1636. There are several things I like about this resistance and I will cover them one by one: First, there was a tight rotation with quite heavy volumes accumulated around 1636. Then strong sell-off started from there. This indicates that sellers were adding to their selling positions there and from this place they started their aggressive sell-off. When the price hits this area again those sellers are likely to become active again and to push the price downwards again. Another thing I like about this 1636 area is that the heavy volume cluster (from the picture above) was also at this level. This means that around 1636 the sellers from the last couple of days accumulated most of their selling positions there. The third thing is that this 1636 area worked as a support in the past. The price bounced twice off this level. When the price went through this support yesterday, it then became a resistance. So, we have three nice confluences that all confirm this resistance. How to trade this? There are two ways you could consider trading this. First, as an intraday trade where you would enter the trade with a tight Stop Loss and then quit it relatively soon. Or if you haven’t managed to get into a long-term short trade around the 1665, then this might be your second chance to enter such position from a pretty good level. This way you wouldn’t be chasing the market but you would wait until it comes back to you – back to a price where it actually makes sense to press the SELL button. I hope you guys liked this article. Let me know what you think in the comments below! Happy trading! -Dale
TVC:GOLD
by Trader_Dale
1
SILVER Adam & Eve Pattern|200 MA Support|Resistance Zone Evening Traders! Today’s technical breakdown will be on SILVER on the weekly timeframe, forming a probable bottom that needs to close above structural resistance. Points to consider, - Adam and Eve pattern playing out - Clear resistance zone to break - 200 MA current support - RSI in a falling wedge - Stochastics neutral Silver’s trend is forming a probable Adam and Eve formation that is yet to be confirmed. It needs to close above its stanched resistance zone that has had many fake outs. The 200 MA is currently holding Silver as support, has been rejecting price since 2016, bulls are attempting to defend this level. The RSI is in a falling wedge formation that is yet to break; it will dictate this next impulse move on Silver. Stochastics on the other hand is quite neutral; momentum is stored in either direction with the immediate projection looking bearish. Overall, in my opinion, Silver needs to have a candle body close above structural resistance as this will avoid a fake out. It will also greatly increase the probability of the bottoming formation playing out. What are your thoughts? Please leave a like and comment, And remember If winning trades give you a buzz, you’re conditioning your mind to drool in anticipation of its next fix. And when it doesn’t happen, it’ll upset your expectations. If thrill naturally arises (which it will), feel it as it is, but then don’t cling to it
TVC:SILVER
by AzizKhanZamani
VIRUS FEARS|ELECTIONS|FED CUTS 0.5&QE-4?[CAPITULATION WEEK 2020]The state of global markets and individual asset classes, ahead of one of the most speculative weekends since the financial crises Did we capitulate this week? What will be the most likely policy response of central banks and governments globally? What factors will facilitate a bounce in stocks? How low can stocks go? Is the virus panic justified? Performance of gold? Many, many questions... - I'll attempt to share my perspective through charts on each issue. Starting off with the US stock market. 1. The recent sell-off, no doubt compares closely to some of the largest single week sell-offs in history(1930's, 9/11, 2008, flash crash 1987). The issue with the recent sell-off is the fact that it exemplifies the scary nature of momentum, a product of the rise of passive investing and of course, algo trading. Obviously, this drop was extremely unpredictable, but it has to be said that valuations were walking on a thin string and the coronavirus was the stone that knocked the market out of balance . My idea was based on YoY miss in earnings/growth, hence I can't absolutely take any credit for forecasting the recent crash. Either-way the chart and the analysis are still valid. Update: Since 2018, each significant drop bounced off the 55 week EMA, except this time the market just blew right through it. 3050 was the crucial level that was taken out, currently should serve as a pivotal point once or if a bounce occurs. 2. In terms of finding the bottom- the market will run lower as long as there's no coordinated response from monetary authorities globally. As they've been silent lately, the market is already pricing in three rate cuts for the year. It seems that they're about to unload stimulus hopefully by the start of next week, otherwise there's no way out. We're already in the late-cycle and markets are as sensitive as it gets to any shocks of reduced earnings. That said, late 2018 can be used as a proxy of the absolute bottom, which should be at the 200 Weekly MA in the range of 2630-2730 . At this level is the -20%-25% threshold , that equities can take before recession talks intensify. 3. I am not an expert in epidemiology, and I am not going to discuss any of the potential virus risks. You can read about it here, www.bbc.com The facts thus far are the following; 1) Each case implies at least 1-2 months loss of productivity 2) Economic impact will extend into the next quarter possible Q3 3) The scariest idea of all is the potential that the virus could spread to the poor developing countries, that do not have transparent media and lack adequate health care systems (Countries such as Iran, that could serve as breeding grounds for the virus - bnonews.com ) 4. The liquidity channel is close to the bottom, which could imply that the bottom in equities in the near term is close. This is the idea from that I am basing my 2022 liquidity cycle bottom call. 5. Speaking of liquidity, credit markets are seeing incredible reversal from a week ago. Junk bond credit spreads are on the rise fred.stlouisfed.org , which even further increases the probability that the FED would have to step in to encourage liquidity flow into the credit markets. 6. Equally bad are European sovereign bonds. Just goes to say about how dysfunctional the market is, when northern European banks/investors, do not have faith that the southern states will repay their debt. Bare in mind, it's not corporate debt, but national debt. If sovereign yields rise, so do corporate yields in these countries= COMPLETELY restraining access to financing for businesses. Taking one country, for instance, Italy without a doubt will enter into a mini-recession at best (similar to the end 2018 x2 Q negative GDP growth). But then again, Italy wasn't really growing in the first place for years now- just the sad reality. 7. Similarly, we have a breakout in 10 year US T. notes, raising the possibility of yield curve control, and the likelihood that the FED would increase the supply of long-duration notes. Just start QE-4 already, what's the point of even canceling the current soft QE repo facilities? In comparison here's TLT. Likely breakout, although not until the retest happens. Before I continue into analyzing gold and other commodities, these are some of the news that could facilitate a bounce in stocks. 1) Trump ending the tariffs that were left in place for China and the EU as soon as possible! No one cares about the deal anymore, we all know those promises aren't and can't be kept. 2) 50 bps cut in March, + start of QE-4, further cuts if necessary. The same is required from other major central banks. The FED must continue their bill purchases and extend the repo program. This of course only buys time as it can be seen from the decision tree above. 3) S.Carolina + Super Tuesday in the upcoming days, watch-out on Bernie. 4) When it comes to Europe, fiscal stimulus matters. Monetary policy has reached its limits, hence preferred news would be German fiscal stimulus. Of course, this hasn't happened since the early 2010s, which makes me skeptical that it'll happen this time. Just briefly on commodities and how hard it is to argue for a bearish case in gold 1. Wave III target reached, regular profit-taking in place today. The sell-off today in gold might seem weird, but it has happened at the onset of the last three broader market downfalls(2008, 2000 ~, etc). Currently, on its way to wave IV. Updated chart: With all said, the only thing that can trigger a sell-off in gold, is a resurgence in global growth . For 2020, global growth was estimated at 3.3%. Considering that growth occurs naturally, simply by growth in population, if we get a dip in growth below 2% and with the onset of the virus that makes this plausible, one safe spot to put your money in would be gold. 2. Crude looking for support around 42 . I do not think we will immediately drop below 42, most likely will get a chop first. One thing's for sure, oil is not going above 56$ for the rest of 2020. 3. Lastly, Reuters core-commodity index continuing the downward trend. Of course with a relatively lower drop than equities, nevertheless, this is not a good indicator for aggregate demand, moreover confirming issues over supply chains globally due to the virus. To conclude this idea, one thing's for certain and that's the uptrend in volatility will continue. If I haven't mentioned already soo many scary indicators, I'd have to include the best one for last. Trump and his administration (Mr. sniff guy Larry) are actually turning into contrarian indicators! His latest tweets on the virus, and the press conf. with the CDC, both turned out to be sell signal s. Some will argue that this shock is temporary - I'm arguing that it is permanent. Simply because of the fact that lately there has been a growing lack of trust in the system, that'll last as long as the virus spreads. Lack of trust in the Chinese system(no one knows the true number of cases), as well as the system in the US. Trump's only talking point is about the economy, I've addressed this many times in the previous analysis. The market drop coincides with the drop in his approval ratings for a reason(projects.fivethirtyeight.com). He was the champion of the markets and one of the main factors that created this, now arguably, "irrational exuberance" environment. The last thing that's certain is that the probability of a democratic president in 2020, has risen substantially. Bernie 2020, could become a reality. This is it, apologies for the long & extensive idea, but I haven't posted any ideas in some time. Hope that at least some found it useful. I would really appreciate feedback and comments with arguments that you have . It's been a busy week! Step_ahead_ofthemarket- ________________________________________________________________________________________ >>I do not share my ideas for the likes or the views. This channel is only dedicated to well informed research and other noteworthy and interesting market stories.>> However, if you'd like to support me and get informed in the greatest of details , every thumbs up and follow is greatly appreciated! Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content- contact me through any of my social media channels.
TVC:GOLDLong
by step_ahead_ofthemarket
12