Australian Dollar AUDUSDThe Ozy before the interest decision, will it continue higher or break and reverse ?
Interestrates
How I Use Treasury Futures To Better Execute The E-mini S&P 500Interest Rate Futures are the market leaders this year. Our technical indicators have less of an impact when the Bond & Treasury Markets are on the move and as Traders we have to be aware of when that is and how it impacts the price action in the E-mini S&P 500, E-mini Nasdaq 100 and Russell 2000 Futures. In this video I go over a simple, but effective way I use the 10 YR Futures ZN1! & the Micro 10 YR Treasury Futures 10Y1! to better execute the Indexes.
To learn more about the Futures Products discussed in the video please check out CME Group's Website. I also mention that I trade futures on TradingView using TradeStation so please go to TradingView's website or TradeStation's website to learn more.
Past Performance is not indicative of Future Results. This is for Educational purposes only. Derivatives Trading is not suitable for all Investors.
Reasons for Crypto-Optimism During the Next RecessionMade a list of a few things for crypto holders to be optimistic about the recession/depression about to unfold in the global markets right now.
- Crypto's market cap is less than 1% (possibly even less than 0.1%) of traditional stocks. If the stock market goes down,
- Banks are taking their time raising interest rates on savings accounts while pushing mortgage and loan rates up at the same time. This will make staking rewards (XTZ- 4.6%, ETH - 3.65%) look appealing.
- The 2008 recession coincides with a period where tech companies (Apple, Google, Facebook, Microsoft) took over the charts of the Fortune 500. We're likely to see a similar thing happen again - crypto is the industry most positioned to be in that category right now.
- Ponzi schemes exist in traditional markets too, and we're going to see Bernie Madoff-esque figures emerge as the market starts to dip. Madoff was able to keep his racket going for over 20 years just because the stock market kept on going up and up. When that stops, the scams will too. (Many of these practices have been "legalized" in the finance worlds at this point, but it won't change the fact that people will lose money and there will be a backlash against that.) This will further erode trust in the traditional markets as a whole.
People generally don't do research unless they're forced to, but the economic slowdown may force a lot of people to look further into the details out there. This generally works in favor of crypto assets since what they offer now is just a better deal for most people out there.
Bonds SlumpBonds have sold off into the mid 118's after smashing through 119'01. We have gradually drifted up from there, but are meeting resistance at 119'01. It will take some momentum to break through this level and right now it does not seem that ZN can muster the strength. The Kovach OBV has edged upward, but appears quite weak. If ZN is able to somehow break out, then 119'23 is the next target. If we sell off further, then 118'04 is the next target below.
EUR/JPY - BUY SET UP ON ECB RATE HIKES The EURO now sits under 138.000 on the exchange rate, a key resistance level that will now surely break after European Inflation hit 8.1% for the month of April 2022, igniting the debate about whether the ECB should be raising rates at 0.50% increments instead of 0.25% increments as signaled by Christian Legard.
With European Bond Yields climbing and paying a premium over Japan, the EURO will likely continue to strengthen against the YEN as interest rates rise in Europe.
The overnight carry trade will start to become profitable for the EURO into 2023, which is likely to attract investors into buying the currency pair.
Bonds Test Higher LevelsBonds have edged up higher, with ZN hitting our target of 121'00. This is a strong psychological and technical level. We are seeing a bit of a divergence between the price action and the Kovach OBV so unless more momentum comes thorugh, anticipate a dip or some ranging between 120'14 and 121'00. If we dip further, 119'23 should provide support. If we are able to break out further, then we have a fairly wide vacuum zone to the next level and target at 121'28.
XAUUSD - KOG REPORT - FOMC!FOMC – 25/05/22
This is our view for FOMC today, please do your own research and analysis to make an informed decision on the markets. It is not recommended you try to trade the event if you have less than 6 months trading experience and have a trusted risk strategy in place. The markets are extremely volatile and can cause aggressive swings in price.
We’ve seen a bit of a decline today as we suggested in yesterdays end of day analysis. We were looking for the immediate support to hold and if it broke the level below, which is yet to be targeted. We will use the 1H chart today with the 4H levels as these are more applicable in volatile markets, like the ones were seeing at the moment. So, we have support below as suggested around the 1830-35 region and immediate resistance above which is now the 1855-60 level. Excalibur has given us an indication of a move, however, we would like to trade this using the extreme levels for FOMC and rather stay out of the immediate levels while there is a chance they can move it aggressively.
As always, we will trade this with two scenarios in mind.
Scenario 1:
The push the price up into that 1855-60 level and we see resistance there, as long as this level doesn’t break we see this as an opportunity to short the market back into the 1830-35 region as the first target and below that the 1820 level.
Scenario 2:
This one would be ideal for us. They push the price down into the 1830-35 and potentially below that into 1820. If we see support formed here, we feel this would represent an opportunity to then long the market back up into 1850, 1865 and above that 1870 price points.
It’s a short on today and to be honest we don’t think we will get involved in trading the FOMC release. We would rather wait for them to take the price to where they want to buy or sell it and then we’ll look to get in for a longer term position. If you’re new to trading, don’t think you’ll get rich of these events, they take a lot of practice and experience to trade.
The trade will always come, most of the time its once the market has moved to a certain point or level.
In summary:
Look for the lower support regions to go long or the higher resistance levels to go short. We’re below 1850 but we must not close the daily below the 1830-35 level.
Hope this helps in preparation for the week ahead, we will update you as we go along as we usually do. Please do support us by hitting the like button, leaving a comment and giving us a follow. We’ve been doing this for a long time now providing traders with in-depth free analysis on Gold, so your likes and comments are very much appreciated.
As always, trade safe.
KOG
EURUSD reacted once more to the remarks of the Central Bank's chFundamenta Aspect
In a new interview, the head of the European Central Bank, who yesterday discussed the two phases of interest rate hikes, predicted that eurozone interest rates will likely be positive by the end of the third quarter of 2022.
Legard added that there is currently no chance of a recession in the eurozone. She also emphasized that the market should not consider a percentage to increase interest rates, or infer the extent of interest rate increases based on the speaker's words. The euro strengthened against the US dollar in response to the news.
Technical Aspect
Bulls
The EURUSD pair can advance from the $1.05903 support and reach $1.08714. With a breach of these levels, the market will target the $1.10500 level of resistance.
Bears
However, from the seller's perspective, if the pair breaks the partial support at $1.05903, the euro will be poised to retest the local support price at $1.03500.
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NZD/USD - BUY SET UP AS INTEREST RATES IN NEW ZEALAND RISE We are highly likely to see a strong recovery in the New Zealand Dollar Against the U.S Dollar as interest rates in New Zealand continue to rise.
Markets expect the Reserve Bank of New Zealand to raise the cash rate to 3.50% by year-end, which will be a premium 0.75% to 1.00% Interest rate over the U.S.
This means any investors holding short positions in NZD/USD will lose money holding the position open overnight.
The U.S Dollar has been strong in recent weeks as stock markets have fallen due to the Federal Reserves' commitment to raising interest rates aggressively to contain inflation running at 8.30%. When stock markets fall globally, investors historically sell international currencies and flood into the safety of the U.S Dollar, as its the worlds reserve currency.
However, when stocks recover as they always do, investors will quickly sell dollars and move back into international currencies as they invest globally in equities again, causing the dollar to weaken in exchange rates and push up NZD/USD.
EUR/JPY - BUY SET UP ON ECB RATE HIKES The Euro is now highly likely to catch a strong bid against the Yen after the European Central Bank President Christine Lagarde said the Central Bank is likely to start raising interest rates in July and exit sub-zero territory by the end of September 2022.
Interest rate differentials on Government Bonds will support the EURO higher.
In this video I breakdown the historical relationship between the difference in Japan and Europe's interest rates and how the currency pair follows the negative or positive change in European Bond Yields relative to Japan.
GBPJPY H1 - Long SignalGBPJPY H1
Nice break so far on the hourly and M30 charts, haven't quite confirmed the H4 break and close, but we still have time left on the clock.
Longs from as close to this 160.000 handle as possible, 160.000 is the area of play for shorts/longs depending on whether we are trading north of south of this zone.
Tezos (XTZ) Beats Everything This Week. What's Driving the Hype?As of this week, Tezos (XTZ) was one of the few coins that actually ended up in the green, showing a type of independent movement that has never been seen before. What's driving the excitement behind the project that caused people to buy the dip?
Bond Yields thru my 4 decades of tradingI know everyone is screaming about Interest Rates, but thought this would bring some renewed perspective.
Here is a chart of the 10 year Bond Yield dating back to the 1980s
Bonds Pick UpBonds have found support and made a run for higher levels. The ten year dipped 119'23 into the 118's, finding support just above our level at 118'04. We then saw a rebound to 120'14, which we have been identifying as the next target after 119'23. It will take some momentum to break this level however, since this is a relative high from back in April. We are already seeing steep resistance here confirmed by a red triangle on the KRI. The Kovach OBV is gradually trending up, but is a oscillating with the dips, suggesting we need to see more momentum to come through to sustain the rally. If we selloff further, then we should see support at 119'01 then 118'04.
Big resistance ahead of 10 Year T-notes future After hitting a major weekly suport level, the market starts to break the downtrend structure on H4, making a new higher low, that can show a possible reversal of prices since stocks are going downtrend and investors are going for the treasury notes and bonds...
A Fork in the Road: How Will the Recession Affect Crypto?The more positive way of looking at LUNA, and other crypto disasters in general, is that these sorts of systemic problems eventually all get caught as the foundation falls underneath.
In fiat, these sorts of issues get covered up, bailed-out, and hidden behind tools like quantitative easing as people get pushed out into the streets through inflation and housing scarcity and such. It's a more socially acceptable form of exploitation in a way - with the worst of them actually dipping into taxpayer money and public funds. Just ask the exploited classes about this stuff - they know all about it.
Keep in mind that Bernie Madoff was able to get away with his racket for 17 years because the market generally always kept on going up. When the recession hits, we're going to start seeing the ugly undersides of what's been going on in fiat, too. Ponzi schemes are not exclusive to crypto, and there's a lot of pot calling the kettle black arguments floating around, especially in finance. The guilty conscience often attacks what they themselves are doing.
The big question for crypto holders is what happens when the recession hits - there's primarily two different types of outlooks in the space right now.
The pessimistic outlook is that when fiat goes down, so does crypto, as it has typically done for most of its runs.
The optimistic outlook is that Bitcoin itself was born out of the recession and controversy of 2008, where it has experienced the biggest of its returns.
Both are true, but how 2022 turns out will largely depend on how secure people are feeling about their money in general.
A couple of things that make the economy of the US today unprecedented, compared to recessions in the past:
- A historic 8%+ inflation rate which has not yet shown signs of slowing down.
- Interest rates will likely be raised to the highest it's been in recent history (possibly 3%, but likely higher).
- A massive 36% increase in money supply since 2020, mostly gone to government spending relating to COVID.
- High costs of living and new remote work options driving record amounts of people out of the cities (where the housing prices are the most inflated).
- The US government has been in massive debt for a while and have been using "fixes" like quantitative easing to kick the can down the road. It's been relying on money printing and taxing capital gains in order to pay off its bills but if the economy goes into a recession, that will no longer be an option.
Some people say that this is the "day of reckoning" for the US economy coming that has long been overdue. Which way will the tides swing for crypto and Web3? Time will tell.
Bond - Equity Correlation: The Most Important Question?TVC:US10Y TVC:NYA
A reminder that falling bond yields are synonymous with higher bond prices. In other words, a downtrend in yield equates to a bull market in bonds.
In January, bonds were still in a technical bull market as defined by the broad declining channel that had contained the 40 year bull market. In March the break of that downtrend turned the macro trend from bullish to neutral. Now, all that is left to define a bearish trend is a substantive violation of the 3.25% pivot zone. More recently, after testing the major macro pivot in the 3.25% zone, ten year Treasury yields have fallen sharply. The decline begs the question: Is the decline the result of the decades long negative correlation between equity and fixed income reasserting itself on the back of equity weakness or is it simply the beginning of a relief rally created by the combination of major support and a deeply oversold condition? While it is too soon to answer the question with any degree of certainty, it is clear that the outcome will have vitally important macro/portfolio implications. My guess is that if equities continue to weaken, that the bonds will continue to do better, but that without the bid provided by flight-to-quality that the outlook for bonds will quickly deteriorate as the oversold condition is alleviated. In future posts I will provide a deeper dive into the shorter term technical and fundamental outlook for bonds, but the posts from January 2, 11, and February 9 should provide adequate background for now.
Early in the year I published a five part market overview detailing my macro technical and fundamental views of the "Big 4" asset classes: Equities, Rates, Commodities and the Dollar. As part of that series I discussed the importance of the correlation between equities and bonds and the central role falling inflation played in creating the relationship.
This inverse correlation is a historical anomaly, yet it drives much modern portfolio construction. The idea is that when equities decline sharply, flight to quality in bonds pushes rates lower (bond prices higher). In other words, gains in the bond portion of the portfolio partially hedge losses in the equity portfolio. Variations of the 60/40 portfolio construction (60% equities and 40% bonds) and risk parity strategies are intended to shield investors from the worst of equity declines and indeed have had an admirable track record of reducing return volatility. After decades of success, the amount of assets devoted to this strategy, both overt and passive, is staggeringly huge. If the historic positive correlation is reasserting itself due to a change in the trend of inflation (stocks down and bonds down), the subsequent unwind has the potential to create massive dislocation.
In my view, the combination of extremely negative real rates (nominal rates less inflation), an inflation cycle that has turned from virtuous to vicious, and equity markets, that at least at the index level, are extremely overvalued, may be setting the stage for a polarity switch in which bond prices and equity prices fall and rise together. That has clearly been the case so far this year. Year-to-date (YTD) the bond composite has returned approximately -12% while the S&P has returned approximately -1%. In other words, both sides of 60/40 and risk parity portfolios have lost considerable value. If the year were to end now, it would be a historically bad year for the strategy. Is the switch in correlation a short term phenomenon or the start of something much larger? To my mind, this is the central question for the remainder of this year. I think the next few months will be telling.
There is also the tension between high inflation and the growing odds of a significant recession. Not only does high inflation serve as an inhibiter to real economic growth, but so will the Federal Reserves (Fed) effort to return inflation to its long term trend. Paul Volcker had to create twin recessions to beat the great inflation. I doubt very much that this Fed will escape without having to make a similar choice.
Notes:
It is worth remembering that in an economy that is overly financialized and debt burdened, rising rates often break the weakest link in the economic chain. Weak links can be systemically important institutions, sectors or simply a dramatic sell off in the equity markets. That markets are currently in distress is clear. What isn't clear is that the distress is enough to create a systemic risk event.
Bonds and equities frequently move into and out of positive and negative correlation in shorter time frames. When I talk about historical correlation I am referring to the very long term.
Good Trading:
Stewart Taylor, CMT
Chartered Market Technician
Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
Gold Returns to a Value AreaGold has rejected $1836, and has made its back down to the value area we identified earlier. Recall that $1795 to $1815 was a range held by gold in the past. We suggested that if it did not have the strength to break out into the upper $1800's or the $1900's, it was likely to return to this range. After rejecting $1836, we fell straight through $1826, and broke through $1815, currnetly finding support somewhere in the middle of our expected range. We should have further support from $1795, but if not, there will be further support in the $1780's. We anticipate $1851 to hold as a ceiling if we catch another burst of momentum.
Crypto Outlook (Spectral Analysis: BTC) Accessing The Risks of BTC
~ Sensitive to US interest rates
~ Correlation to SPX
(Is BTC a measure of Global GDP?)
~ Communist Objectives
(Finding solution to overthrow USD?)
~ Regulations
~ Global Adoption
Utility and Resilience: MANA Bounces BackBear markets are often when long-term traders make their big moves - assets that seem to stabilize or even do well (MANA, MKR in the last few days) often show that a project has dedicated supporters and some legs to stand on during the "tough times". It's easy to make money during bull runs, but it's the projects that survive during bear markets that often lead to long-term growth.
Up-More-Down-Less: How Crypto Beats Stocks in the Long-TermDetailed analysis shows that crypto usually outperforms the stock market, even during its "winter" phases. What are the patterns to look out for? (Real growth is often very subtle.)
GBPUSD LongHi traders, my latest trade idea is long on GBPUSD around 1.14950 area toward, 1.26750 area with a RR greater than 2. Let's see how this one performs, good luck.
Interest Rates vs Everyone - How Crypto Can Bounce BackA pretty rough week for the markets - especially crypto. The recent dips are a result of mainstream money (crypto curious, but not necessarily dedicated) leaving the space as a response to inflation woes and the Federal Reserve planning to increase interest rates over 2022. The US housing markets are also set to slow down as well, possibly leading to a recession in the US markets and the global economy as a whole.
What's the silver lining? Well, the last time the housing market dipped was in 2008-2012, which coincides directly when Bitcoin itself was invented by Satoshi Nakamoto. Will the same sort of sentiment emerge as a result of fiat money crashing this time around? Time will tell.
