Inflation & Interest Rate Series – Below 5.3% is Crucial for CPIContent:
• Why CPI must be below 5.3%?
• Can we invest or trade or hedge into inflation?
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
Stay tuned for our next episode in this series, we will discuss more on the insight of inflation and rising interest rates. More importantly, how to use this knowledge, turning it to our advantage in these challenging times for all of us.
Micro 5-Year Yield Futures
1/10 of 1bp = US$1 or
0.001% = US$1
3.000% to 3.050% = US$50
3.000% to 4.000% = US$1,000
See below ideas on the previous videos for this series.
Inflationhedge
Inflation & Interest Rate Series – The CPI Rally Content:
• Why CPI could be at the beginning of a rally?
• On 14 Dec 21, Fed: “Inflation is not transitory” changes everything
• Strategy to counter inflation
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
If you are into shorter-term trading, the live data feed is definitely a must for traders.
In part 2 of this series, we will do a deep dive on if CPI were to decline, to at what specific level? Before we can consider inflation is under control.
Stay tuned for our next episode in this series, we will discuss more on the insight of inflation and rising interest rates. More importantly, how to use this knowledge, turning it to our advantage in these challenging times for all of us.
COMEX Micro Gold
0.1 = US$1
1.0 = US$10
1700 points = US$17,000
Eg. 100 points profit = US$1,000
Inflation & Interest Rate Series / Dollar and Gold I have started this inflation and interest rate series, in our last video, we discussed "Inverted Yield". Today will be discussing the relationship between:
. Inflation
. Interest rate
. Dollar and
. Gold
Today's Content:
• Why with higher interest rates, it strengthens the USD
• Is USD the strongest currency? If not, then who?
• Strategy to counter inflation
• Interest rate higher, but a lower USD?
Dollar Index:
. Measure the value of the dollar against a basket of six foreign currencies.
. These are: the Euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona.
. With the increase of money supply over the decades, it causes currencies dilution. When currencies weaken, inflation follows.
COMEX Gold
0.1 = US$10
1.0 = US$100
10 points = US$1,000
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
Stay tuned for our next episode in this series, we will discuss more on the insight of inflation and rising interest rates. More importantly, how to use this knowledge, turning it to our advantage in these challenging times for all of us.
Buy Oil WTI - IMO should bounce on this L/T +++ Ascending Trend line Line - L/T Technical support from March 2020 lows.
Using a weekly candle chart,
Crude right on an upward trend line testing, using the March 2020 low.
Crude should bounce from here current level having been tough to break over the last 2 years.
Unless we are about to live a historical correction moment on Oil (liquidation/ news flow / Itan) the current price action set up is favouring longs here.
As an aside we are also reaching a 50% retardement Fibonacci ratio level taking High 2022/ March 2020 Low.
NYMEX:CL1!
Bitcoin Adjusted For Commodity & M2SLChart shows historical price of Bitcoin adjusted against both the Global Commodity Price Index and M2SL, and may serve as a visual aid to illustrate Bitcoin price adjusted for rise in commodity prices while taking into account increase in money supply.
This chart therefore accentuates and magnifies the recent downturn by taking into account both rising commodity prices due partially to increase in Money Supply and money supply increase itself. One could make the case that this chart distorts the price of Bitcoin. One could also make the case that the chart illustrates Bitcoin's shortcomings as an inflation hedge.
Regression analysis shows retrace from cycle ATH to ATL becoming more severe with each downturn. By this measure, we might try to look for 88% retrace on this chart.
Where are commodities heading to? Beyond 2022Where are the meat or commodity prices heading?
Meat prices have been rising at a rate of about 3% per annual over the last 40 years.
Meat is what I classified as an edible commodity, so is corn, wheat and rice. And as these commodities start picking up in prices, they are the one that will give the central banks a huge headache and to consider to hike its interest rates than the other commodities in the CPI basket.
Why is this so?
In short, people can still live with some inconvenience without cars or petrol, but not without food. Therefore, there is an urgency for the policy makers to first take care of the basic needs of the people.
Content:
. Long-term direction of Live Cattle
. Trading ideas
. Investing ideas
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
A little hack here to project the coming CPI data and also to know how aggressive the Fed will be with interest rate hike - you may consider to track the development of these edible commodity prices, if it is still trending up, we should be expecting a higher CPI and interest rates.
Example on Live Cattle Futures:
0.025cts = US$10
0.10cts = US$40
145.00 = 1450 x US$40 = US$58,000
From 144 to 145 = US$400
XAUUSD LONG-TERM PLAN, Ideal prices for investmentGold is a practical and easy investment for anyone. For those of you who have medium or long-term goals, such as sending your children to a higher level or buying a house, gold investment is one of the keys. Gold often referred to as a safe haven asset, which is an asset that is known to be unrelated or has a negative correlation with other assets or investment portfolios when there is turmoil or uncertainty in the financial markets.
When global economic uncertainty and a decline in market participants' confidence in the government, the price of gold increases. In other words, gold is a valuable safe haven and can protect investors' assets during a crisis.
We know for now there is still a lot of uncertainty in financial markets, geopolitics, military, and disease outbreaks. Gold still tends in highly priced for long-term investment. Technically in the next few months gold may breakout from the green support area due to tightening monetary policy from the most central bank around the world. then towards macro support.
This is my strategy which can be seen in the chart of the best prices to buy gold for long-term investment.
S&P 500 Daily Chart Analysis For September 2, 2022 Technical Analysis and Outlook
The current market fate is the lower Mean Res 4015 rather than the
previous week's inverse Mean Sup 4205. and 4050 designated rebound.
The current downtrend is the Inner Index Dip 3760. Interim bullish moves are possible within the current downtrend.
wait for silver just wait a little more if u can start ur sips in silver u won't regret it just keep an eye on the marked area it is of too much importance
happy trading
only if oil was this easy
The Return of the Golden BullThe Return of the Golden Bull
Technical Analysis
- Gold has been in a 2 year consolidation, after a 7 year uptrend of over 90% from 2018 to 2020.
- Price Action is contracting on a monthly basis, within a bullish pennant.
- After an intermediate bear trend of 3 months, Gold is at a massive horizontal support, coming from the 2011 High.
- Gold is also right above the rising trendline from the march 2021 low and above the falling trendline from the august 2020 high.
- This might be a multi year buying opportunity for Gold, it is hard to put a price target on it, but I would assume around 4000$ could be achieved, if everything goes as expected.
Fundamental Analysis
- There is also a point to be made for gold, fundamentally.
- We are at record inflation, tightening into slowing economic conditions.
- Bonds are loosing massively, as are equities and Bitcoin.
- Gold has been holding up rather well, despite the US10Y and the DXY rising relentlessly.
- In my opinion this is an indicator, that Gold is still the true safe hafen asset to investors, in case of monetary debasement and simultaneously worsening economic conditions.
Enter the trade
- I am waiting for a short term trend change, as we are currently below the 5, 10, 20, and 50 day moving averages.
- I want to see Gold above a rising 5dma, crossing the 10dma.
- I am also looking for a weekly close above 1877$.
- Gold has been awfully hard to trade in the past months, due to extremely choppy action, often giving daily buy and sell signals on the RSC Trend Trading Indicator, right after each other, so I will be cautious.
This is not financial advice, I wish you good luck trading.
Cheers
Tom
BITCOIN - Updated Mini ChartToss a coin? Close to just that but the situation is bad:
Inflation announced as hotter-than-expected inflation data fanned fears that the Federal Reserve might take a more aggressive stance on interest rate hikes, potentially tipping the economy into a recession.
The main indexes, however, bounced off session lows as investors looked for signs that inflation had peaked amid a broad retreat in commodity prices, with Brent and U.S. crude now trading below $100 a barrel.
U.S. consumer prices accelerated in June as gasoline and food costs remained elevated, data showed, resulting in the largest annual increase in inflation in 40-1/2 years and cementing the case for the Fed to go big on rate hikes.
It used to be that Inflation was high and Bitcoin would rise..that was the norm
In reality we all saw what we expected today: that BTC would follow the indices which would follow the result.
So, at the end of the day yes: Bitcoin is deflationary, trustless, limited in number and all the good things that we know about it; and yes, it should rise...
but for the time being things look bad and a rejection is most likely.
Personally i prefer it to break higher but that's just my personal opinion.
One Love,
the FXPROFESSOR
ps. Very tricky market today, been a bad day but a trader knows how to handle it. I am short on Ethereum at the moment with money i can afford to speculate with.. off to bed and see you all tomorrow 💙✍️
GDX GOLD MINER may bottom@24 or 21 zone to retest channel.GDX seems to be doing a BIG UPCHANNEL started from the 2016 low & retested at the 2018 low. If this lower channel is to be retested, GDX may bottom at the 24 green zone. This is the most probable since this is also the 2016 VWAP & the FIB 0.618 retracement from 2016 low.
However, if you look at the VOLUME PROFILE, then GDX may fall more to the 21 zone to create a divergence, ending wave 1 of wave III.
BULLISH longterm: Gold & gold miners will be a good hedge during rising inflation or recession. Every portfolio should have this insurance policy & some other defensives like XLV health, XLP staples & XLU utilities. TLT bonds will also rise during recession while US10Y rates go down in a deflationary environment. GDX may be just in the early stages of the longest wave III rally & has a long way to go.
GDXJ Junior miners fell a lot more so I think percentage wise it will have to rise more just like today. Miners tend to be the leading indicator for GOLD. Gold may fall more to the 1670 to 1760 zone. Gold recovering 1800 will be very bullish while GDX reclaiming 30.37 wave 1 top & previous neckline pivot will also be bullish.
Not trading advice.
It's the market, babyINVESTMENT CONTEXT
For the first time in over three decades Germany reported monthly trade deficit in goods, which accounts for EUR 1bn, against analyst expectations of EUR 1.2bn surplus. The spike in energy prices translated into higher import costs, while the sanctions imposed on Russia and China’s coronavirus lockdowns negatively affected exports
Iran slashed the prices of its crude oil to stay competitive with Russia in regards to Chinese clients, in an attempt to maintain market share amidst OPEC's approved volume increases
In the first half of 2022 coal imports in Europe increased by 35% on a yearly basis, earmarking the continent's struggle to cope with lower crude oil and natural gas supplies from Russia
In June, the Caixin China General Services Purchasing Managers Index reached 54.5, beating analysts expectations of 49.7. Analysts appreciate the index crossing the 50-point threshold which separates expansion from contraction
The ECB expressed concern on the potential overlapping amongst the EU member States in the matter of regulating cryptocurrencies. Aiming at "harmonizing" the bloc's policy-making on the issue, the bloc is about to implement Markets in Crypto-Assets, or MiCA, framework
After shedding USD 200mln assets in the past three weeks, Coinbase-backed crypto lender Vauld suspended trading and withdrawals. Meanwhile, Estonian cryptocurrency exchange capped withdrawals to USD 5k a day
PROFONE'S TAKE
European electricity prices hit record high levels, soaring on July 4 to EUR 325/MWh in Germany and EUR 366/MWh in France. European zinc and aluminum producers, whose activity hinges on energy prices, are struggling due to the combined effect of surging costs and falling prices on industrial metals as recession fears loom. Profs maintain bearish views on European energy, not ultimately considering that Nord Stream 1 pipeline will be closed for maintenance starting July 11. Elsewhere, French nuclear capacity stands at historical lows, since the country had to shut down for an indefinite period 12 of its 56 reactors due to unexpected corrosion of infrastructures. As a result, neighboring countries are now forced to burn additional gas to provide France with electricity, while all continent struggles to fill inventories before winter under mounting fears of further Russia's cuts of gas supply.
PROFZERO'S TAKE
What is a currency?
To think of currencies in terms of supply and demand tends to be trickier than, for instance, commodities. After all, how can there be "demand" for money? What is the use for one, especially if foreign? And what is the return?
In reality, it takes but to look at 2 pairs to understand the extend of supply-demand logics into FX markets. Looking at RUB/USD, we see right away that something must be off. The pair is now trading below its point before the war (61.08 vs. 75.45 on February 7), at a time when Russia had 9.5% interest rate and U.S. was still stuck at zero-rate. Today, the base rate applied by the Russian Central Bank is still 9.5% (after it shot to 20% a few days following the invasion of Ukraine), while that imparted by the Fed is 1.50%; yet, RUB is stronger than ever. Why? Because demand can't fully satisfy itself unloading RUB-based exposure (think of Russian equities held by international investors), while artificial demand for RUB has been created when Gazprom (GAZP) demanded energy bills to be honored in currency.
Looking at EUR/USD instead, it is hard to justify the 15% slide on a yearly basis just by looking at fundamentals. While it is true that the Fed's monetary policy has been much more responsive to inflation than the ECB's, forward rates ought to be tilted to a sensibly stronger EUR due to more resilient growth in the area. Why is that not happening? The answer lies in the USD 4tn capitalization wiped from the S&P 500 and perhaps also the USD 2.1tn evaporated in the blockchain space - an unprecedented watershed of cash which sought refuge in cash USD-denominated deposits.
The heat may be offINVESTMENT CONTEXT
Inflation in Eurozone climbed from 8.1% in May to 8.6% in June, growing in 17 of 19 countries, with the notable exception of Germany (slide from 8.7% to 8.2%) and the Netherlands (from 10.2% to 9.9%). ECB officially scrapped its EUR 20bn/months bond-buying program on July 1
S&P 500 energy sub-index fell 17% in June, ranking as the worst-performing within the index
While U.K. Prime Minister Boris Johnson and Chancellor Rishi Sunak announced “the single biggest tax cut in a decade”, estimated in of GBP 6bn (USD 7.4bn), France slashed its forecast for GDP growth in 2022 from 4% to 2.5%
After lifting objections, Turkey said that it could still block Finland and Sweden’s accession to Nato in case if Nordic countries failed to meet the demand of Kurdish separatists extradition. Inflation in the country is still just a hair below 80%, as the Central Bank refuses to raise interest rates, leaving analysts to presume capital controls may be introduced to stop the bleeding
On July 3, Russia announced its full control of Luhansk region in Eastern Ukraine, after seizing the city of Lycychansk, the last Ukrainian holdout in the area
Digital asset brokerage Voyager Digital suspended trading, deposits, loyalty rewards and withdrawals on July 1, after sending a default notice to hedge fund Three Arrows Capital (3AC)
U.S. markets closed on July 4 for Independence Day; European markets regularly open
PROFONE'S TAKE
Global equity markets recorded their worst half of a year since 1970, with S&P 500 and Nasdaq collapsing 21% and 30%, respectively. Deep risk-off sentiment still grips most areas of the market, fueled by growing inflation (8.6% in June after 8.1% in May in Eurozone; U.S. print expected in the coming days) and next steps of tightening monetary policy (in July, both the Fed and the ECB are expected to hike rates by 75 bps and 25-50 bps, respectively). The correction in energy and industrial metals prices was caused by mounting recession fears, while also a potentially better than forecasted harvest season in some parts of globe (U.S., Europe, Australia) could ease the pressure on consumer prices. Still, Profs don’t see the emergence of any major catalyst that could trigger a sustained reversal: for instance, on the macro front, there are no clear-cut signs of a ceasefire happening in Ukraine, thus leaving the threat of supply chain disruptions looming.
PROFZERO'S TAKE
As early as May 6, ProfZero placed global credit markets on particular watch, as much of the global pressures could be expected not only to raise the costs of business financing; but in more dire terms, to trigger defaults on weakest borrowers. On May 20, Sri Lanka defaulted for the first time in its history, as the economy was crushed by unsustainable fuel and food prices; at the time of writing, also the State of Laos faces fuel shortages and growing default risk. ProfZero is not particularly concerned by Russia's technical default, which has been clearly caused by the effect of sanctions; in contrast, what catches its attention is the state of financial health of several European countries, and chiefly Italy, who relied excessively on both low interest rates and the ECB role of buyer of last resort. Analysts have already dubbed ECB President Christine Lagarde messages on fragmentation as "vague" - and nothing irritates traders more than ambiguity, save, perhaps, short sellers, who indeed are piling up bear positions (Ray Dalio's Bridgewater has amassed some USD 10.5bn sell-side positions). Europe is the epicenter of this bear market - and ProfZero unfortunately sees scant chances for a quick turnaround
ProfZero is also unfazed by the purported fall in commodity prices. While certainly the prices of cotton, wheat, copper and iron ore are are down even up to more than 30%, European natural gas is trading at EUR 155/MWh for 1-month deliveries - compared to EUR 22.11/MWh on July 4, 2021. Inflation is certainly receding from certain corners of the economy - but the European energy tangle remains far from being undone
Don't fear the capitulationINVESTMENT CONTEXT
Fed Chair Jerome Powell confirmed the key priority of the Fed is bringing down inflation, even while acknowledging that monetary policy can't address critical components like food and energy. Powell also a stated a recession is “certainly possible,” but not in the near term as the U.S. economy remains “in good shape.”
Turkey's central bank is expected to hold its benchmark rate steady at 14% on June 23, after it kept interest rates deeply below zero when adjusted for inflation. Norway's Norges Bank is instead set to hike its key rate 25bps to 0.75%
Russia is facing three interest payment transfers totaling almost USD 400mln on June 23-24, but more pressing is a Sunday-night deadline on previous missed payments from late May. If the country fails to make those payment - ca. USD 100mln of bond coupons - it will effectively be declared in default
Global bank Citi said the probability of a recession is now approaching 50%. The Bank expects 3% growth for the world economy this year and 2.8% in 2023
U.S. President Joe Biden called for a gasoline tax holiday, in an effort to relief households from pump gasoline prices, which briefly surpassed USD 5/gallon
BTC trades have entered a dangerous (4) channel with trading range set between 19-21k as volumes fail to return to the blockchain space
PROFZERO'S TAKE
Value investing has been the key theme across Q1 and most part of Q2 this year, as investors unloaded Growth assets whose bulk of profits are located deep into the future, hence more exposed to higher interest/discount rates. That trend is set to reverse should a recession materialize. In particular, the undisputed champions of the past 150 days, namely Oil & Gas stocks, may steeply retrace as energy demand is threatened by slowing pace of industrial expansion, particularly in China. ProfZero warned back in April that the fat dividends paid this year may dwindle in 2023 as a protracted bear market triggers a recession; consistent with that, ProfZero maintains faith in Value-like Growth stocks, which enjoy state-of the-art balance sheets; top cash generation; and most importantly excel at intangible assets and services - natural price deflators for the economy
ProfZero concurs with ProfThree thinking one step ahead - demand for industrial commodities is by definition pre-cyclical, and any slowdown in the near-term should be taken as an early sign of a cooling global economy. Seeing Brent crude tumbling more than 2% just on recession concerns confirms in ProfZero a sense of unease while looking forward on Energy equities; thinking even further though, the feeling of concern permeates the post-recession recovery, whose seeds do not look planted as of yet
PROFTHREE'S TAKE
One of the commodities to watch this week is iron ore, which has seen a slump to USD 110/ton on June 20 after topping USD 150/ton just two weeks ago. Profs’ eyes are obviously on China (ca. 60% of global steel output), where demand seems to be under threat following the news that steel mills are cutting production in response to weakening real estate sector. ProfThree contends iron ore quotes are finally close to their fundamentally justified levels after a long period of speculation-driven pricing. Yet, a further dramatic correction could still happen since the second half of this year is expected to bring an increase in steel output from China, compensating for the 10% y-o-y output reduction in Q1 due to the Olympics-related emission restrictions. ProfThree also sees infrastructure spending and targeted fiscal as well as monetary stimulus also to prove supportive to supply, thus boosting prices
It's the energy, babyINVESTMENT CONTEXT
Inflation in the UK reached 9.1% in May, up a tad from 9.0% reading in April
IEA warned the EU to brace for a potential full cut of energy supply from Russia, with outsized repercussions on the bloc's GDP
Germany’s finance minister called the EU ban on sales of combustion engines cars by 2035 a “wrong decision”
Goldman Sachs upped its latest forecast for probability of a recession over the next two years from 35% to 48%; ARK's CEO Cathie Wood identified in the Fed's excessively tightening monetary policy a cause that could plunge the economy into recession
On June 21, ProShares launched its Short Bitcoin Strategy ETF (BITI), the first inverse exchange-traded fund linked to BTC, which allows investors to bet against the world's largest cryptocurrency by market cap
Crypto exchange FTX extended a USD 250mln credit line to crypto lender BlockFi, shortly after bailing out crypto broker Voyager Digital with a USD 485mln loan
PROFZERO'S TAKE
All Profs timely highlighted the criticality of energy driving the next steps of the ECB monetary policy - other than hopefully accelerating replies from the industrial side, in an effort to ensure greater security and diversification of supply to the continent. Now those warnings are coming to the fore. The Central Bank of Spain estimates a full halt of energy supplies from Russia would plunge EU GDP by between 2.5% and 4.2%; Goldman Sachs locates the crunch at 2.2%, with sizable impacts in Germany (-3.4%) and Italy (-2.6%). Risk management predicates the "build back better" doctrine - when a major crisis strikes, opportunities arise for decision makers to rebuild infrastructures, making them more resilient. Profs really hope this time the EU won't turn a blind eye to the opportunity of pursuing for once a coordinated, integrated, energy strategy
The escalating narrative between U.S. President Biden and the energy sector majors regarding lifting energy output is starting to look paradoxical to ProfZero. According to EIA, U.S. crude oil production was 17.44mboe/d in Q2 2020, at the trough of the pandemic (on April 20, 2020, WTI futures closed on negative territory at USD 37.65/boe below zero); it took 5 quarters for the industry to add 1.5mboe/d, setting production at 18.94mboe/d in Q3 2021, and yet 3 more quarters to add another 1mboe/d (output in Q2 2022 is estimated at 19.94mboe/d). U.S. production broke through 20mboe/d only once in history, on Q4 2019 - at the peak of the previous economic cycle. President Biden demand to hike internal output in a bout to put a lid on retail fuel prices looks therefore hazardous; it would heavily backtrack on the much-touted energy transition off from fossil fuels, while amassing capital investment in a sector that has been demonstrated to require entire quarters before its output may adjust. Even deeper into detail, U.S. refining capacity plummeted from all-time high in - guess when - Q2 2020 at 17.72mboe/d to 15.56mboe/d in Q1 2022, owing exactly to the energy transition kicking older plants off the industry, while leaving higher margins ("crack spreads") to those who stayed. As much as soft commodities, the move off from crude oil into natural gas has been taken for granted for too long. Policy makers were swift to point the finger to the bad guys; but too little was done to build the infrastructures of the energy of the future. A few more refinery runs won't make up for the problem
PROFTHREE'S TAKE
Out of the crude oil frying pan, into natural gas fire - mindful of coal burn. The Netherlands lifted limits on its three coal-fired power plants from 35% to full capacity until 2024; similar measures were undertaken by Austria, Germany and Italy as Russia goes all-out on natural gas curtailments. European Commission President Ursula von der Leyen urged Europe not to "backslide" its long-term commitment to cut fossil fuel usage, and to remain focused on "massive investments in renewables". ProfZero and ProfThree's eyebrows are as high as TTF gas prices - with but 4 months ahead of winter season, and the notorious impossibility for renewable energy to be stored, Profs are in fact fearing a much more worrisome backslide for the EU - one into full energy recession
SharktoothINVESTMENT CONTEXT
U.S. stocks dropped sharply on growing fears of recession. S&P 500 dropped 3.27% on June 16, recording its steepest weekly decline (more than 6%) since March 2020
To calm the fears of a new debt crisis in EU, the ECB is reportedly structuring a specific bond-buying program specifically aimed at supporting its most indebted economies
Turkey maintains its opposition to Finland and Sweden joining NATO
For the first time since 2007 the Swiss National Bank raised its policy rate by 50bps
Russia increased the cut of natural gas supply to Italy to 35%, sending TTF up 25%
U.S. mortgage rates at 5.78% hit the maximum since 2008, causing new home constructions to fall by 14.4% in May
Blockchain assets are dragged by investors shunning risk assets across the board. BTC is repeatedly testing USD 20k strong resistance, seen by some analysts as "critical" before a raft of leveraged trades get margin-called, potentially causing position defaults
PROFZERO'S TAKE
On June 16, ahead of the market open, ProfZero called the feeble rebound of June 15 a "dead cat's bounce" - nothing different from what happened on May 6, two days after the Fed announced a 50bps interest rate increase: after an initial relief trade, market engaged a steep sell-off, one that brought Nasdaq from 12.9 to 11.4k within a week. Until markets will have embraced the deep rooting of the current disruption; will have stopped looking at Regulators for cheap and quick fixes, and will have started to work on structural solutions on energy and food - ProfZero argues we are bound to trade in a nervous, sharktooth, lose-lose type of environment
It is not "are we holding 20k on BTC?" that should be asked. Rather: "what for is it worth paying 20k?"
Dead cat's bounceINVESTMENT CONTEXT
Markets reacted positively to the Fed's 75bps rates hike on June 15. Traders in particular appreciated the positive tone on 75-50bps increase next month
According to the latest Fed forecast, inflation is expected to top 4.3% by the end of 2022 and 2.7% in 2023; unemployment is said to reach 3.9% in 2023 and 4.1% in 2024
On June 16 the Bank of England raised interest rates by 25bps to 1.25%
U.S. retail spending including food and fuel decreased by 0.3% in May, against analyst expectations of 0.2% growth
Russia increased the initial cut of gas supply on Nord Stream pipeline to 60%; supplies to Italy were reported by energy giant ENI to be down 15% already as of June 15
The leaders of France, German and Italy arrived on June 16 in Ukraine to discuss the country's bid to join the EU
Blockchain assets mildly joined the broader markets rally. BTC regained USD 22k and all Layer-1 altcoins jumped by 10% on average
PROFZERO'S TAKE
"Dead cat's bounce" is a rather grim traders' jargon for abrupt asset price spikes after a steep selloff. ProfZero is not buying the broader narrative of an equity comeback - even yesterday's rally, while remarkably setting Nasdaq once again above 11k threshold, looks set to be fizzling out already by today, as live future quotes point to a rather harsh opening, with the S&P 500 and Nasdaq falling 1.78% and 2.24% in pre-market - in fact, giving back all yesterday's gains. If we look carefully, the very same thing happened on April 29 this year - Fed Chair Jerome Powell announced a widely expected 50bps rate hike; markets rejoiced for literally one session, before engaging one of the most spectacular one-day sell-offs since the onset of the pandemic in Q2 2020.
The difference between a good trade and a bad trade is not in its profitability. Trading is not a one-day endeavor. It is not a daytime job. As shared with ProfThree back in the day, trading is a vocation. And like all vocations, it requires but one thing: consistency. ProfZero consistently called for calm, and to set eyes on value. And as of now, value is simply nowhere to be found, as the joint forces of commodity record-high prices, energy transition, China's fading role as "world's engine of growth" and crawling uncertainty in fixed income markets are questioning the very industrial model our reality is built upon.
"Who you gonna call?" More than Ghostbusters, ProfZero would love to see a political and industrial class of reliable, committed agents gauging head-on re-industrialization, de-materialization and new energy. Too much too ask on a post-rally hangover morning?
ProfZero is still kind of wondering what ultimately triggered the Fed's 75bps rate hike, after that no later than in May it committed to a series of 50bps raises in its upcoming meetings this year. Was it the negative surprise on inflation (8.6% in May vs. 8.3% in April)? Or was it rather June 13 market meltdown? And strictly related - are we going to be "surprised" again, when June inflation readings will be circulated in a couple of weeks?
According to EIA, global demand for crude oil in 2022 will sit just below 101mboe/d - substantially restoring pre-pandemic consumption. A slight 0.7mboe/d oversupply would then act as trigger for prices to cool down - even considering 1.3mboe/d missing barrels from Russia. The picture for natural gas however looks less bright. Russia's acceleration on volume curbs to Europe is set to exacerbate pressures on energy transition - yet undermining near-term supplies right amidst stock-up season. European leaders have turned to new partners in Algeria, Congo, Egypt and Israel amongst others, and loosened restrictions on coal to endure the next winter season; yet the plan to have 45% of the energy mix from renewables by 2030 hinges on immediate layout of plants across the continent. Perhaps ProfZero did miss some news out there?
Blockchain assets only timidly participated June 15 rebound, as investors keep shunning the riskiest corners of the market
Long-term Silver pick. Really like some of these silver junior stocks for the potential explosive move if silver can get too new all time highs over the coming years. Historically 50x moves on the cards. This is a take a position and hold for years play. A nice pullback of late has given us a nice entry price. Allocating 2% of portfolio here. #inflation hedge
Gold: Long on a classic uptrend lineDiscussion:
1. 2 rules to draw an uptrend line
2. Primary uptrend line
3. Secondary uptrend line
4. Time for buy Gold?
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
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ProfZero likes relief trades, but calls BTC overheat for now 🤒INVESTMENT CONTEXT
After choppy negotiations, the EU finally agreed on May 31 to ban oil and petroleum products from Russia, with a temporary exception for imports carried via pipeline
Inflation reading in EU for the month of May scored 8.1% on a yearly basis, well above median analyst estimates of 7.8% and April 7.5% reading, underscoring inflation is still far from having peaked
Insider buying at S&P 500 companies in May has been the strongest since March 2020, signaling that blue chip executives have called the bottom on their stocks
President Joe Biden said on May 30 that the U.S. will not send Ukraine long-range rocket systems that could attack Russian territory, in an apparently de-escalatory move
Blockchain assets confidently extended gains even as market sentiment persists in Extreme Fear territory, with BTC attempting to regain 32k in upward channel breakout
PROFZERO'S TAKE
ProfZero reads the latest signals from the West to Ukraine as underwhelming, and only mildly conductive of greater resolve to bring the conflict to an end. In fact, ProfZero and ProfOne already remarked the faltering cohesion of the bloc on crude oil could only translate into yet deeper fractures on natural gas, especially as the buy season for winter 2022-2023 is now reaching its peak
Russia has signaled its willingness to facilitate the unhindered export of grain from Ukrainian ports to destination countries, in coordination with Turkey. The move may represent a major relief to several Middle Eastern and North African economies (Egypt, Lebanon, Libya and Tunisia in particular) that rely for at least half of the daily cereal supply from Ukraine - and a deflation factor on soft commodities at large
ProfZero highly values insider buying to read bull cycles - definitely another relief element in the picture
ProfZero is amongst those not caught off-guard by EU spike in inflation in May. As it was shared for the past month, there simply is no corner of the economy as of now from which price decreases could originate. Brent prices in fact keep swelling, and on May 30 they broke through USD 120/boe, a major technical as well as fundamental indicator; the embargo on two-thirds of crude imports from Russia certainly will not contribute to bringing prices down. With the ECB still expected to officialize its monetary policy, it is easy to see mounting pressure to for tighter interest rate increases - with all too known prospective effects on markets
The two-day rebound staged by blockchain assets has reached a standstill, with BTC nonetheless trading firmly above USD 31.5k, pulling up the entire asset class (noteworthy overperformance of Layer-1 asset ADA, up 45% in 3 days). Yet ProfZero sides with rather bearish analysts, interpreting the rally as largely a relief trade out of oversold territory. Still, seeing BTC breaking out of the 2-week range-bound channel and potentially setting for leg (D) of a bearish Elliott wave may concur to moderately optimistic scenario in the short term
PROFTHREE'S TAKE
ProfThree and ProfZero agree - it’s time to talk about gold. Bullion has historically been responsive to changes in the Fed’s monetary policy, as well as to fluctuations in bond yields and US dollar. ProfThree doubts the recent slowdown in U.S. Personal Consumption Expenditures (PCE) print points to the peak of inflation already being at our back; in fact, the +50bps interest rate hikes expected for July and August are clear pitfalls ahead for zero-yielding gold. On a balancing note, ProfZero and ProfThree concur gold shall still enjoy price support on persistently higher inflation, and on Central Banks bolstering reserves in the wake of volatility
BTC decouples from stocks but something is not right. BULLTRAP?BTC in the past week drops while stocks rise big time last Friday. But Why?
In the chart, BTC is still unable to get back inside the wedge & may be going lower.
It may be that investors are selling BTC to rotate into stocks & also bonds when they see the FED not overly hawkish & the $Dollar & 10 yr yield stabilizing & may be having a shortterm top.
It would be better if we can use BTC as a hedge against rising rates, rising inflation & falling stocks. That we need to see.
If the correlation of BTC with risk assets is still valid, this may be a bulltrap. Retails FOMO in last Friday may see a rugpull next week as they realize that the underlying conditions in the market remains unchanged.
Not trading advice
XAGUSD Silver : Stairway to heaven? Bull flag behemoth! 25.5A "bull flag" is a bullish candlestick pattern which is defined by -
1) A linear movement up (flag pole)
2) A tunnel or channel which is on top of the linear movement up (flag)
3) A break above the top of the channel which is the continuation of the up-trend (target)
The target is the size of the flag pole movement stretched from the breakout of the tunnel. In this specific case the long-term target is around $45.
The tunnel or channel range is between 20.20 - 26.20
Looking at the MACD we are furthest away from the baseline since March 2020 and showing convergence similar as back than before the flag pole movement of $17, which of course is a very bullish technical sign.
Silver is fundamentally bullish as well due to rising inflation globally.
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