Hello traders,
When events develop in an illogical manner, emotions and manipulation are often the first two factors to consider.
1. The "illogical" phenomenon behind last Friday's U.S. stock market surge
Last night, U.S. stocks experienced a significant rally despite lacking fundamental support. However, from the perspective of economic data and market dynamics, this surge appears to lack rationality.
1. Inflationary pressures are significantly increasing
In January, the Producer Price Index (PPI) inflation rate unexpectedly rose to 3.5% (higher than the expected 3.2%), while the core PPI inflation rate reached 3.6% (higher than the expected 3.3%).
This marks the highest PPI inflation rate since February 2023. More importantly, this data confirms that the previous 0.5% month-on-month increase in CPI was not due to seasonal factors but rather a reflection of persistent inflationary pressures.
2. Employment data indicates an overheated economy
Last week, initial jobless claims came in at 213K, lower than the expected 216K, while continuing claims reached 1850K, below the expected 1882K.
This demonstrates that the labor market remains strong, and the "hot" employment data further reinforces concerns about an overheating economy.
3. Rate cut expectations are delayed
With CPI, PPI, and employment data all exceeding expectations, the Federal Reserve's rate cut expectations have been pushed further back. Currently, the market generally anticipates the earliest rate cuts to occur in September 2025.
Even worse, if the Fed's core Personal Consumption Expenditures (PCE) data, which is expected to be released today, also shows an increase, the market may reprice rate hike expectations. The two-year U.S. Treasury yield has already broken out of its symmetrical triangle, with technical analysis suggesting its next target could be 5%, further strengthening expectations that the Fed may resume rate hikes instead of continuing to cut rates.
4. Liquidity is shrinking
On Thursday (February 13), the Federal Reserve's overnight reverse repurchase agreement (RRP) usage dropped to $67.82 billion, the lowest level since April 2021, indicating that market liquidity is rapidly contracting.
From this data, it is evident that U.S. stocks lack fundamental support for their rally. However, under such circumstances, the significant rise in U.S. stocks raises questions about whether emotional trading and market manipulation are at play.
---
2. Crowded markets: Risk appetite reaches extremes
Scott Rubner, Managing Director and Tactical Expert at Goldman Sachs Global Markets, published a report following last night's U.S. stock market rally, bluntly stating that this is his final bullish email on U.S. stocks for this quarter. He pointed out:
> “Everyone is in this pool, including retail investors, 401(k) retirement fund inflows, beginning-of-year fund allocations, and corporations. The dynamics of fund flow demand are rapidly changing, and negative seasonality is approaching.”
This suggests that the market is already too crowded, and the momentum for buying on dips is rapidly diminishing. The following data further confirms the extreme crowding in the market:
1. Assets in leveraged long equity ETFs reached a record high of $95 billion last week, compared to $67.6 billion during the stock market frenzy of 2021.
2. Since the third quarter of 2022, the total assets of funds using derivatives for long bets have tripled.
3. Assets in leveraged short equity ETFs decreased by $13.3 billion, falling to $8.5 billion. In other words, for every $1 in leveraged short ETFs, there is a record $11 in leveraged long ETFs.
The level of crowding in market trading has reached an extreme, or even "crazy," state. This extreme risk appetite has planted hidden risks for the future trajectory of the market.
---
3. Why did gold pull back?
In such an extreme market environment for U.S. stocks, gold, as a safe-haven asset, failed to reach new highs last Friday and instead retreated. The reasons behind this phenomenon mainly include the following:
1. A stronger U.S. dollar
Due to rising expectations that the Fed may resume rate hikes, the U.S. Dollar Index saw a significant rebound last Friday. Gold prices typically have a negative correlation with the dollar, and a stronger dollar directly suppressed gold's upward momentum.
2. Rising real interest rates
The upward movement in the two-year U.S. Treasury yield and the market's repricing of the Fed's monetary policy caused real interest rates to rise. Gold, as a non-yielding asset, is highly sensitive to real interest rates. Rising real interest rates weaken gold's appeal.
3. Market sentiment shifting toward risk assets
Despite the market's uncertainties, the strong performance of U.S. stocks attracted substantial capital inflows into risk assets. Increased risk appetite among investors reduced demand for safe-haven assets like gold.
4. Technical resistance
From a technical analysis perspective, gold faced significant resistance near its previous highs. Profit-taking by bulls further exacerbated gold's pullback.
---
4. Technical Analysis
Weekly Chart
It is evident that gold has entered a period of consolidation near its top. Last week closed with a bearish candle, forming a multi-candle evening star pattern on the weekly chart, which is a bearish reversal signal. For the upcoming week, the trading strategy will focus on identifying short opportunities on lower timeframes.
Four-Hour Chart
The five-wave structure appears to have ended, with the final wave reaching higher and broader levels than previously anticipated.
Considering the gradual formation of a top structure, next week's trading plan will focus on short opportunities below the four-hour EMA.
---
GOOD LUCK!
LESS IS MORE!
When events develop in an illogical manner, emotions and manipulation are often the first two factors to consider.
1. The "illogical" phenomenon behind last Friday's U.S. stock market surge
Last night, U.S. stocks experienced a significant rally despite lacking fundamental support. However, from the perspective of economic data and market dynamics, this surge appears to lack rationality.
1. Inflationary pressures are significantly increasing
In January, the Producer Price Index (PPI) inflation rate unexpectedly rose to 3.5% (higher than the expected 3.2%), while the core PPI inflation rate reached 3.6% (higher than the expected 3.3%).
This marks the highest PPI inflation rate since February 2023. More importantly, this data confirms that the previous 0.5% month-on-month increase in CPI was not due to seasonal factors but rather a reflection of persistent inflationary pressures.
2. Employment data indicates an overheated economy
Last week, initial jobless claims came in at 213K, lower than the expected 216K, while continuing claims reached 1850K, below the expected 1882K.
This demonstrates that the labor market remains strong, and the "hot" employment data further reinforces concerns about an overheating economy.
3. Rate cut expectations are delayed
With CPI, PPI, and employment data all exceeding expectations, the Federal Reserve's rate cut expectations have been pushed further back. Currently, the market generally anticipates the earliest rate cuts to occur in September 2025.
Even worse, if the Fed's core Personal Consumption Expenditures (PCE) data, which is expected to be released today, also shows an increase, the market may reprice rate hike expectations. The two-year U.S. Treasury yield has already broken out of its symmetrical triangle, with technical analysis suggesting its next target could be 5%, further strengthening expectations that the Fed may resume rate hikes instead of continuing to cut rates.
4. Liquidity is shrinking
On Thursday (February 13), the Federal Reserve's overnight reverse repurchase agreement (RRP) usage dropped to $67.82 billion, the lowest level since April 2021, indicating that market liquidity is rapidly contracting.
From this data, it is evident that U.S. stocks lack fundamental support for their rally. However, under such circumstances, the significant rise in U.S. stocks raises questions about whether emotional trading and market manipulation are at play.
---
2. Crowded markets: Risk appetite reaches extremes
Scott Rubner, Managing Director and Tactical Expert at Goldman Sachs Global Markets, published a report following last night's U.S. stock market rally, bluntly stating that this is his final bullish email on U.S. stocks for this quarter. He pointed out:
> “Everyone is in this pool, including retail investors, 401(k) retirement fund inflows, beginning-of-year fund allocations, and corporations. The dynamics of fund flow demand are rapidly changing, and negative seasonality is approaching.”
This suggests that the market is already too crowded, and the momentum for buying on dips is rapidly diminishing. The following data further confirms the extreme crowding in the market:
1. Assets in leveraged long equity ETFs reached a record high of $95 billion last week, compared to $67.6 billion during the stock market frenzy of 2021.
2. Since the third quarter of 2022, the total assets of funds using derivatives for long bets have tripled.
3. Assets in leveraged short equity ETFs decreased by $13.3 billion, falling to $8.5 billion. In other words, for every $1 in leveraged short ETFs, there is a record $11 in leveraged long ETFs.
The level of crowding in market trading has reached an extreme, or even "crazy," state. This extreme risk appetite has planted hidden risks for the future trajectory of the market.
---
3. Why did gold pull back?
In such an extreme market environment for U.S. stocks, gold, as a safe-haven asset, failed to reach new highs last Friday and instead retreated. The reasons behind this phenomenon mainly include the following:
1. A stronger U.S. dollar
Due to rising expectations that the Fed may resume rate hikes, the U.S. Dollar Index saw a significant rebound last Friday. Gold prices typically have a negative correlation with the dollar, and a stronger dollar directly suppressed gold's upward momentum.
2. Rising real interest rates
The upward movement in the two-year U.S. Treasury yield and the market's repricing of the Fed's monetary policy caused real interest rates to rise. Gold, as a non-yielding asset, is highly sensitive to real interest rates. Rising real interest rates weaken gold's appeal.
3. Market sentiment shifting toward risk assets
Despite the market's uncertainties, the strong performance of U.S. stocks attracted substantial capital inflows into risk assets. Increased risk appetite among investors reduced demand for safe-haven assets like gold.
4. Technical resistance
From a technical analysis perspective, gold faced significant resistance near its previous highs. Profit-taking by bulls further exacerbated gold's pullback.
---
4. Technical Analysis
Weekly Chart
It is evident that gold has entered a period of consolidation near its top. Last week closed with a bearish candle, forming a multi-candle evening star pattern on the weekly chart, which is a bearish reversal signal. For the upcoming week, the trading strategy will focus on identifying short opportunities on lower timeframes.
Four-Hour Chart
The five-wave structure appears to have ended, with the final wave reaching higher and broader levels than previously anticipated.
Considering the gradual formation of a top structure, next week's trading plan will focus on short opportunities below the four-hour EMA.
---
GOOD LUCK!
LESS IS MORE!
Trade active
Gold Bears May Be Poised to Act at High Levels, Exercise Caution When Going LongRecently, global financial market volatility has significantly increased, and gold, as a safe-haven asset, has drawn considerable attention. However, as market interest in gold gradually rises, bearish forces may be preparing for a high-level counterattack. Investors going long on gold need to exercise extra caution, especially as the weekend approaches.
Bessent's Comments and Their Connection to the Gold Market
In a recent interview, U.S. Treasury Secretary Bessent explicitly stated that "sovereign funds are not considering gold reserves" and emphasized that "reassessing gold reserves is not currently a priority." While Bessent attempted to downplay the importance of gold, from a macroeconomic perspective, the debt burden and dollar devaluation pressures facing the U.S. have only heightened gold's strategic significance.
Key Background Data:
- Foreign Sales of U.S. Treasuries: In December 2024, foreign investors reduced their holdings of U.S. Treasury bonds by $49.7 billion, the largest drop since 2021. China and Japan, the two largest holders of U.S. debt, cut their holdings by $76.9 billion and $57.3 billion, respectively.
- The Fed's Dilemma: The Federal Reserve, persisting with quantitative tightening (QT) in a high-interest-rate environment, faces unrealized losses of up to $325 billion in the banking system. In this scenario, pausing balance sheet reductions has been put on the agenda, but a return to quantitative easing (QE) remains far off.
In such a complex economic environment, gold, recognized as a first-tier global asset under the Basel Accords, has become irreplaceable. Whether due to dollar devaluation pressures or weakening U.S. Treasury credit, gold could become a critical tool for the U.S. government to bolster confidence.
Potential Strategies of Gold Bears
The current gold market is influenced by multiple factors, including physical demand, capital flows in the futures market, and macroeconomic data. From last night's market performance, gold prices tested the high of $2,950 per ounce but fell back to the $2,940 range under the influence of Bessent's comments.
Key observations include:
- The correlation between U.S. equities and gold has recently reached a high of 0.93, showing a positive relationship. Typically, gold leads U.S. equities to new highs, followed by a short-term pullback after equities decline.
- Last night, all three major U.S. stock indices fell, with the Dow Jones Industrial Average dropping by 1.01%. This could signal a potential gold pullback.
Bearish forces often intensify their counterattacks before delivery dates, especially when gold prices approach psychological thresholds (e.g., $3,000 per ounce). They may suppress prices to shake out long positions. Based on current futures market data:
- Key Comex Gold Levels: $2,907/$2,965
- Put Wall (Key Bearish Option Area): $2,800
- Call Wall (Key Bullish Option Area): $3,000
- Skew Rate: 0.8, indicating a slight bearish market tilt.
Weekend Factors and Risk Warnings
As the weekend approaches, market uncertainty increases, particularly with bearish forces gradually strengthening. Gold price volatility may further amplify. For investors going long on gold, pay special attention to the following:
1. Maintain Light Positions: Given current market volatility, light positions can effectively control risk.
2. Monitor U.S. Equity Performance: The positive correlation between gold and U.S. equities makes equity market trends an important leading indicator. If U.S. equities continue to decline, gold may experience a short-term pullback.
3. Beware of Bearish Price Suppression: As the delivery date nears, bears may create high-level price fluctuations to liquidate long positions.
4. Support from Physical Demand: Despite significant futures market volatility, physical gold demand remains robust.
Final Reminder: Market uncertainty is higher over the weekend. Stay rational and avoid heavy positions.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
10 year 4H swing trader! Join group for free； Contact wechat: ziyuvera; ABC Swing trading strategy Course Consul wechat: ziyuvera
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.