Transcript of Gold just Faked out a LOT of Traders...
TraderNick
0:00So yesterday's FOMC meeting seems or at0:03least feels like it was a bit of a sell0:06the rumor buy the news event when it0:09came to gold and a couple other markets.0:11Notice how today we have the S&P 5000:14sharply higher. NASDAQ is higher and you0:16have gold way higher up 2.3% actually0:20taking back all of the losses of0:22yesterday in a really quick move. Now,0:24I'm still long gold and I've been0:25sitting in this position for one, two,0:27three, four, five, six, seven, 8, 9, 10,0:3011, 12 days. So, I've just been sitting0:31in this swing trade waiting for0:34something to happen. But, I need to have0:36a really uh serious conversation about0:39whether or not I still even want to be0:40in this trade. So, in today's video,0:42we're going to talk about gold, the0:44hawkish hike that we saw, which was0:46basically the hike with guidance for0:48more hikes coming down the pipeline this0:49year, and whether or not I think that0:51that will stick.0:54So, we've talked at length on the0:55channel here about how one of the most0:57important charts to all of this is what0:59happens in the Middle East. If there is1:01conflict resolution to any capacity, oil1:03could come down very sharply. And this1:06would, in my opinion, rapidly move the1:08Fed from being more willing to hike1:11interest rates to much more willing to1:12sit tight and wait. And I don't think1:15that that's out of the question. And so1:16I think it is worth mentioning that part1:19of the reason that I have not just1:20closed out of my gold position despite1:23some of the more hawkish stuff that we1:25saw and some of the recent data that has1:27been much more strong for the dollar.1:29I'll get into that in just a moment.1:30It's also just the ginormous unknown1:32about what's going on with oil right1:34now. Because again, I want to reiterate1:37that if you get a down 15, down 20% in1:40the price of oil in the next month, if1:42something happens in the Middle East1:43that is more positively developing,1:45suddenly a lot of the inflation1:47expectations start to go out the window1:49and then maybe the Fed actually does not1:51hike interest rates further. But1:53simultaneously, the hiking spree could1:56actually turn into a multi-, you know,1:57kind of several in a row more hikes if2:01you see oil continue to rise. And I've2:03heard people say, well, you know, a2:04quarter point is not going to do2:05anything. Interest rate hikes are not2:07going to do anything to get rid of2:08inflation. But what would get interest2:11uh or or inflation to at least uh2:14subside on the demand side, meaning2:16spending activity, etc., hiring, etc.,2:18would be several rate hikes. Is that a2:21possibility that we see it? Well, again,2:23I think if oil prices keep going higher,2:25that could be a problem. You might say,2:26"Well, Nick, oil prices are not2:28controlled by what monetary policy tools2:31the Fed has, which is a very good point.2:34However, if inflation is part of their2:37dual mandate, and there are some aspects2:39of inflation that can be kept subsided,2:41meaning the spending side of things,2:43retail sales, you know, um people going2:46out and shopping and buying things,2:48etc., which they are still largely2:50doing. We saw retail sales by the way2:52which was stronger than expected which2:53by the way we can see right here here2:55under our retail sales map what we can2:57see is that the expectations were2:59exceeded pretty sharply yesterday. So we3:02had really strong retail sales. So3:03people are still out there spending. Um3:05to Kevin Morse's point he pointed out3:07the economy has been uh considerably3:09more resilient and potentially3:11accelerating. And so when we look at3:13that, we're like, okay, from that3:14mantra, the Fed has room to potentially3:17continue hiking rates if they need be.3:19But again, the big question mark, the3:21big uncertainty in the room still goes3:23back to what happens with oil prices.3:25And obviously, another big question that3:26people are having today is how the heck3:29did they guide for more hikes and yet3:31gold is rallying sharply on the day?3:34Well, this is another example of why3:36markets are very difficult. Markets are3:39really smart and ahead of the FOMC, you3:42know, commentary and dotplot, etc.3:44Markets had already sort of been3:46positioning for a worst case scenario,3:48which was the idea that they're going to3:49hike and they're going to hike multiple3:50times and that was what they were going3:52to guide for. So yesterday, we kind of3:54got that that confluence there or that3:56uh meeting of expectations. And then3:58what's interesting is that when we take4:00a look at yields today, they're actually4:01lower today. Now, of course, this is4:03baked into a lower oil price today.4:05That's going to play a role in this. But4:07the other thing that I think may be also4:09part of the story is that the bond4:11market is sufficiently like, "All right,4:12cool. They're going to hike rates if4:14they need to." And that gives people in4:17the bond market, the bond vigilante, if4:19you will, is a little bit uh quelled by4:21that. That's been the word of the week4:22that I keep saying. But the idea is that4:24they've been they're cool with it.4:26They're like, "Okay, so if inflation4:28rises, the Fed is credible enough to4:30hike interest rates and to keep4:32inflation tampered down with whatever4:34tools they can." And I think the bond4:36market likes that. So people are like4:38more willing to buy bonds sending yields4:40a little bit lower. I think that's part4:41of the story today. Is the credibility4:43of the Fed check that took place4:44yesterday um sort of is actually sending4:47yields lower despite the guide for rate4:49hikes. Again, we already saw the market4:52price in, hey, they're going to hike4:53rates in this ginormous up move that4:56we've seen in the 10-year yield. So I4:58think that's worth mentioning, right? is4:59you have this circumstance where the5:01bond market may have already priced in a5:04hawkish Federal Reserve and maybe more5:06so than even expected. Again, made5:08evident by oil uh or I'm sorry, gold and5:11silver up sharply today. Silver's up5:13almost 4%. Now, let's get back to this5:15gold trade that I'm in. I'm in a slight5:18amount of profit. Trades not moved5:20dramatically in one direction or the5:21other. Initially, I was in much more5:23profit, but have given back a lot of it.5:25The question is every single day when5:27you're in trades, you should evaluate5:28should I still be in these trades and5:30why? And I think you know that's that's5:33what matters most is not just a you know5:36top of your head should I be in this5:38trade or not but rather systematically5:40should you be in this trade and my5:42trading system which is heavily built5:44around what goes on in edgefinder has5:46something interesting to say about gold5:48which is gold is still neutral. Now,5:51that might not be interesting in itself,5:53but given context, let's look at the5:54score history. So, if you're unfamiliar5:56with the tool that I'm using, it's a5:58screening tool that I use to help find5:59my trades. It's called EdgeFinder, and6:01under the asset scorecard page, it maps6:03tech technicals, institutional activity,6:05economic growth readings, inflation6:07readings, and jobs market statistics.6:09This morning's weekly jobless claims6:11came in stronger than expected. That's6:13another bullish thing for the dollar and6:14a bearish one for gold. Simultaneously,6:17I mentioned those retail sales numbers.6:18They came in really good. So, there are6:21some things here that are forming that6:22are more bullish for the dollar and6:24challenging my thesis even further on my6:27gold long. Meanwhile, I'm sitting in a6:29long position and I had several6:31questions yesterday. Nick, if the Fed is6:33hawkish, why haven't you just closed out6:36of your gold trade? And I have a system,6:39and I'm very glad that I do because I6:41don't make spur-of-the- moment trading6:43decisions. I'm not a scalper. I'm not a6:44day trader. So, I can take my time to6:46really think about like what I want to6:47do. doesn't mean I know what's going to6:49happen next in markets. But more6:51important than being able to predict6:52every single move in markets is knowing6:54for sure what your strategy tells you to6:57do in various circumstances. And here is6:59what it tells me. All right, so I went7:01long gold. I am comfortable holding my7:04gold position as long as the score7:06doesn't go bearish. If and we're pretty7:09close. So, if we tilt into the bearish7:11territory, what I may choose to do is go7:13ahead and either trail my stop-loss7:15aggressively into profit or just take7:18profits entirely and get out of this7:19gold trade because again, a lot of the7:21thesis that I initially had on my gold7:23short-term long bet has kind of faded7:26away. But we're not in bearish territory7:28yet. That is the defining line for me is7:31that we're neutral on edgeinders7:33reading. So, I'll just hold on to the7:35trade because if oil drops sharply7:37tomorrow or yields come down7:39aggressively, then I think that this7:41gold trade could actually return back7:43into being a very bullish reading within7:45edgefinder. Let's just theorize here a7:48little bit of what is giving us more of7:49a bearish reading. Well, it's a downward7:51technicals. If that were to rip higher,7:53then that would turn bullish. Seasonal,7:55we know that the month of October is7:58historically a pretty strong one for7:59gold, which let me pull that up. Okay,8:02so here's the seasonality for gold.8:03Check this out. So, this is a 10-year8:05average performance of gold. We're8:06looking at the year-to- date8:07performance, which has mostly lined up8:09with the sort of pessimistic region8:12here. But then we go into October, which8:14is historically a pretty positive month8:16for gold, at least mapped out against8:18our historical averages. So, I like8:20that. And I don't necessarily want to8:22get out of the trade if I know that that8:24is right around the corner. Doesn't8:25guarantee gold's going to go up, by the8:27way. We never have guarantees and I know8:28that can be frustrating as a newer8:29trader, but it's the reality. Nothing in8:31markets is certain. It's all educated8:33guesswork. So that going back to our8:36asset scorecard here could flip bullish.8:39So we could very quickly have a very8:40technical bullish setup for gold if we8:43get a couple updates and go into October8:45with seasonal strength coming in8:47simultaneously. And and by the way, all8:49of this is automated mapped out. If you8:50want to try out the tool that I'm using,8:52I'll leave a link in the description8:53down below to explore it. It is8:56massively worth getting a copy. If you8:58don't have access to it, you should8:59because what this does is it makes macro9:02fundamentals, crowd sentiment,9:04seasonality, all these things brought9:06into one hub. And that is again the9:08central point to the strategy that I9:10personally use is using a screener like9:12this to spot opportunities. So with that9:15said, inflation though is working9:17against us. PPI was higher than expected9:18in the 2-year yield. This is another one9:20that is sort of up for potential9:22reversal. If the 2-year yield comes down9:24for a few days, this could flip bullish9:26and we could suddenly have more of a9:28macro bullish scenario. So, right now we9:30have kind of a mixed bag. Do I exit the9:33position just because we have some9:34neutrality now? No. But if we go9:37bearish, meaning if for example more9:40jobs data comes in and it's really9:41bearish for gold, meaning it's strong9:43for the dollar. If more jobs data comes9:45in, strong for the dollar, if inflation9:46keeps ticking higher, at some point I9:49have to throw in the towel and actually9:50get rid of this gold long position that9:52I'm currently sitting in. Most traders9:54don't realize that having a brokerage9:56with good trading costs can make or9:58break your long-term trading results. In10:01fact, things like slippage or spreads10:03can seriously cost you more than you may10:05be realizing when trading with10:07brokerages that widen their spreads10:09dramatically. And I want to make sure I10:11reiterate that you can literally go from10:13a profitable trader to an unprofitable10:15one just by high trading costs with the10:17brokerage you may be using now. And so I10:20wanted to tell you about today's video10:21sponsor, which is Blackbull Markets.10:23Black Bull Markets is a New Zealand FMA10:26regulated brokerage offering forex,10:28metals, and crypto trading with over10:3026,000 tradable instruments. They offer10:33CFDs on so many different products, and10:35they keep their spreads rock solid even10:38during volatile market periods. 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And if you create and11:33deposit a $10,000 plus account, you get11:36lifetime access to the EdgeFinder and11:38Gold VIP. With this unique and limited11:41time offer, you can get access to some11:43of our products here at A1 Trading11:44completely for free, bought and paid for11:47by Black Bull Markets. It's a win-winwin11:49scenario. You get a great brokerage and11:52free tools. The brokerage gets access to11:54a new client. And on our side of things,11:56support our channel with this sign up.11:59And a bit of a disclaimer. Please do12:00your due diligence and make sure that12:02this brokerage is good for you before12:04proceeding with the offer down below.12:06The full terms and conditions as well as12:08disclaimer can be found on the page12:10linked below. Thanks to Blackpool12:11Markets for sponsoring today's video.12:13Now, back to the content. So, I'm12:14open-minded. I'm just watching the12:16reading here on edgefinder because if12:18data keeps coming in in a way that is12:20dollar strong then I have to sort of12:22abandon ship on this gold trade and12:24that's how I personally trade and and12:26here's the thing is I have a mechanical12:29way of knowing what I'm supposed to do12:30right I have edgefinder I have my own12:32entry and exit system trailing stop12:34method and I'm not guessing if I should12:37do something with gold and I know as I12:40used to do this that a lot of people who12:41are probably watching this video they12:43jump strategy to strategy they don't12:45know, you know, they don't have some12:47sort of rubric or layout of what they12:49should be doing with their trades, when12:50they should be doing it, how they should12:52be managing risk, how they should be12:54entering, how they should be exiting.12:56And if you don't have that, then I would12:58encourage you to switch to a demo and13:01spend some time actually building a13:03trading system. Because instead of13:05guessing what we should be doing next,13:08instead we should just be sticking to a13:10strategy or a plan that long-term we13:12know will generally produce more returns13:14than losses. That is all we can do as13:16profitable traders. You know, basically13:19traders who lose money, they are sort of13:21always second guessing themselves.13:22They're always like, "Oh, should I13:23should I get out or maybe I should get13:24back in or and there's no there's no13:26system there." And that is is tormenting13:30to a trading, you know, psychology or13:32someone's psychology, right? You're13:33constantly wondering, should I be in13:35this trade? Maybe I should have closed13:36it. You're running in circles. Stop13:38doing that. If that is you, I'm telling13:40you, stop doing that. Spend some time,13:42back test, build a system. Whether you13:44are a macro trader like myself, whatever13:47you do, get something systematic going.13:49Stop chasing your tail. It is a painful,13:53dramatic, traumatic experience to be a13:56trader who is sort of switching up on13:57yourself all the time. So, instead, you14:00know, I'm showing you in my videos what14:02I do. Of course, I'm not giving anyone14:03financial advice here. It's always on14:05the screen. Trading is high risk, etc.14:07But I'm sharing with you what I14:08generally tend to do in markets, which14:10is I have a system. I follow it to the14:12tea, and I don't I don't sway from it14:14because it is mental clarity for me to14:16stick to my system as opposed to jumping14:19strategy to strategy every week and14:22believing that I have some sort of14:23godlevel ability to predict what markets14:25are going to do. I don't. I'm just14:27following macro trends which I use14:29edgefinder for and I'm using price14:30action technical trends to follow when14:32I'm supposed to be in and out of various14:35positions. So directionals come from14:36edgefinder and of course my my14:39underlying what it actually is is macro14:40fundamentals and then entries and exits14:43come from the technical side which is14:45you know my simple very textbook uh14:48technical analysis stuff that I use.14:50What I like about gold here is we've14:51held that 61.8% retracement really well.14:54a nice bullish engulfing candle. And so14:55this gives me a little bit like a a14:57positive, right? I think technicals14:58actually can flip here to the positive15:01territory. And if you're an edgefinder15:02super fan, then you know how we15:04generally calculate trend with an15:06edgefinder. We use a very simple set of15:08moving averages 3 and 14. And we're15:11starting to show some signs of potential15:13reversal. That said, the end all beall15:16is that if this thing reverses and we15:17crash through the lows, gone. The gold15:20trade is dead. I'm out of there. And15:22I've said that from the beginning,15:23right? So I have a very set outcome. I15:26know how this gold trade is going to15:29exit if I am wrong. And if I'm right in15:32thinking that maybe I should continue to15:34hold this gold trade and see what15:36happens with yields, I actually do lean15:38a little bit more in the camp of15:39thinking yields are going to come down15:40rather than keeping going up. And so if15:43I'm right in thinking that and the15:44technicals are sort of supporting this15:4661.8% retracement, I'm just going to sit15:48tight. I'm not going to do anything. And15:50I found often in my trading, the best15:52thing I can do is do nothing, right? Let15:55a trend keep going or let the market15:57kind of sort itself out. And I'll feel16:00perfectly fine with the decision. If I16:01give back gains and this thing crashes16:03through the lows and I'm out of the16:05trade, I accept that as a possible16:07outcome. And instead of trying to shy16:09away and avoid losses like the plague, I16:12am perfectly fine with taking losses as16:15part of the journey to finding the next16:17really big trade that I occasionally16:19catch. Someone in my videos uh in my16:21comment section yesterday said, "Nick,16:22I've been following you for months and16:24you have been very wrong recently on a16:27lot of ideas." And I would agree.16:28There's a lot of things when it comes to16:30my trading style. I am wrong more often16:32than I am right on a stop-loss getting16:35hit level. You might think, well, how16:37does that how does that work? Aren't you16:39going to be losing money overall? And16:40the answer is no. Because while I can go16:42into a draw down like any other trader,16:44I can lose a lot of trades relative to16:47my winners, which are very large16:50compared to my losses. It's all16:52relative. If you lose more often, but16:54then your big winners maximized, you16:56know, ultimately outweigh the losses,16:58that's all that matters in the end of16:59the day. And some traders, they go for17:01like a 90% win rate, but then their17:03losses are huge, right? That's the17:05trade-off. You can't have both. Can't17:07have high win rate and massive winners17:09relative to losers. And if you are, then17:11uh hit me up because you must you must17:13be Nancy Pelosi. That's my my running17:15joke on the stream or the videos. But17:17anyways, let's also talk about the17:18dollar because here's where things get17:20really tricky. Some of the dollar17:21readings that we have are actually17:23straight up strong. So, I'm in a weird17:26predicament where the dollar I am kind17:29of leaning bullish on and gold I'm sort17:32of neutral on. And that can coexist. We17:35have talked about this many times on the17:37channel, but if you are newer, the17:38dollar is not perfectly inversely17:40correlated to gold. Many traders think17:42that dollar up, gold down, dollar down,17:44gold up. It's not that perfect. We've17:46talked about this a lot, but there are17:48circumstances in which the dollar can17:50strengthen alongside gold. And that is17:52because the dollar is dollar versus17:53other currencies and gold is effectively17:56gold versus all currencies. Yes, I know17:58it is gold versus dollar on the XAUSD18:01spot price, but ultimately gold has a18:04lot of factors that are sensitive to18:06global central bank policy. Uh other18:09currencies as well, even though other18:11currencies are not listed in the ticker18:12symbol, right? Even though it's XAUSD,18:15gold still is sort of it's gold versus18:18the dollar, fiat versus the kind of18:21anti-fiat. So anyways, going off of18:24that, the dollar index is actually18:26showing a lot of strength. Really strong18:27price action here, breaking lows, double18:30bottomed here, broke out of resistance18:32and threatening to do so again here.18:34We're actually back dating, back testing18:35into this area of support today. I'm18:37curious to see how price reacts to this.18:39What flipped here for me? Well, couple18:41economic metrics really came in solid.18:44retail sales services PMIs uh non-farm18:47was strong weekly jobs claims this past18:49or or this uh this week really good PPI18:52higher than expected in the 2-year yield18:53is rising so generally speaking the18:56dollar I think actually does also have18:59upside alongside my kind of neutrality19:02on gold so I know that sounds confusing19:05at first glance but I I think that those19:07those things can coexist in fact there's19:09actually many instances in history I19:12encourage you to go look through um19:13where the dollar has actually19:14strengthened alongside a rise in the19:16precious metals. So which currency pairs19:20would I be interested in looking closer19:22at? Well, I'll tell you I have one right19:23off the top of my head and that is19:25shorting euro looking at long dollar.19:27Okay, so look at this very bearish19:28reading on edgeinder. Finally something19:30with a little bit of conviction, right?19:32Edgefinder's been neutral on several19:34charts that I care about and watch like19:36gold, but not so much on euro. Euro has19:38a pretty definitively bearish reading19:40within edgefinder which tells me all19:42right I'm going to look for shorts. So19:43if I pull up Euro US dollar and what I'm19:46looking at here is this level of support19:48I can actually drop down to a 4hour time19:50frame. I think that might actually even19:52be better and I can kind of get my fibs19:54out and just go all right we had a big19:55impulsive move lower. A retracement up19:58into this 38.2% zone actually looks20:01pretty attractive for a short setup here20:03in my personal view. We also have the20:0661.8% 8% retracement. So, this is an20:08idea for me. This is one that I'm20:10watching. And if we do get a rally back20:13a little bit, the dollar kind of cools20:14off for a few days, this 38.2 and 61.8%20:18retracement zone produce a couple20:20opportunities where I could be looking20:21for some some short setups. If I take20:24this trade, I share all trades that I'm20:26taking inside of our VIP Discord20:27service. If that's something that you're20:29interested in joining, I'll leave a link20:30in the description down below. And just20:32for context, this is what that service20:33looks like. So, I share all of my20:34entries and breakdowns as to why I took20:37the trade with full context and20:39reasoning behind every trade. It's not20:41just my trades. You can also get Marco's20:43trades, Allen's trades, Ivan's trades,20:45and Chris Pulver's trades, who you may20:47recognize these names and people from20:49our daily live streams here on the20:50channel. 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