Transcript of WARNING: Gold is RALLYING on Bad News...
TraderNick
0:00Gold continues to rebound, actually0:02bottoming on the hawkish hike that we0:04saw this week. And is this a signal that0:07gold had already been beaten down enough0:09and expectations were in the dirt for0:12what could come from the monetary policy0:15uh release or or announcement that we0:17saw from the Fed, they voted unanimously0:20to hike interest rates and even guided0:22for more hikes by the end of this year.0:25And yet here is gold bottoming on bad0:28news. This is actually arguably one of0:30the stronger signals that you can see in0:32markets and it is quite rare. Usually0:35macro and and you know expectations etc0:38align pretty well with the charts. But0:40every once in a while you get a0:41situation in which crowd sentiment gets0:44so pessimistic, so expecting of bad news0:47that even the bad news itself is not0:50quite enough to get the market to keep0:53going lower or higher and instead0:54actually causes a rebound as that0:57sentiment has to unwind. Let me show you1:00exactly what I'm talking about with gold1:02here because we have the data.1:05Now, if you're a regular on the channel,1:07you've probably seen this chart a1:08thousand times. And it's because we use1:10it all the time to gauge crowd1:12sentiment. And notice something1:14fascinating about the gold chart here1:16with our net options volume table. Now,1:19what this does is it looks at daily call1:20volume and it subtracts daily put volume1:23to give us an overall summary of how1:25flow is looking in terms of the options1:28market and crowd sentiment surrounding1:29gold. So, check this out. As we go into1:33the Fed meeting, that was super scary to1:35markets. People worry that the Fed is1:37going to hike and guide for a ton of1:39more hikes. And we kind of got that. But1:42because that was so expected and so1:44worried about by the market itself, we1:46actually saw ahead of the Fed meeting1:49crowd sentiment getting incredibly1:51one-sided. And so then what happens is1:55crowd sentiment starts to kind of reach1:57extremes and is now actually unwinding2:00the opposite direction. This is so2:02important because most traders miss2:03this. They think the Fed's going to hike2:05rates, so the market's going to crash.2:08And yet, what actually happens is that2:09smart traders position ahead of that,2:12take advantage of the rumor, and then2:14sell the news, or in this case, maybe2:16buy the news. And I think that's exactly2:18what took place with gold this week. But2:21there was another thing I wanted to show2:22you. There was a little bit of a2:23headline that kind of went quiet. I did2:25see it and I I imagine some other people2:27saw it as well, but it wasn't like front2:29page news. Saudi Arabia, who obviously2:33is over there in the Middle East and and2:35dealing with all the uncertainty that's2:36going on with the Iran conflict, um2:39actually appealed or or spoke with China2:42uh about the recent Houthi military2:45advances near the Bob Al- Mand strait2:48and Red Sea coast. And what you can see2:50here is basically this was a bit of a2:52deescalation headline right here.2:54China's action was that Beijing2:55privately asked Iran to use its2:57influence over the Houthis to ease3:00regional tensions and protect crucial3:02energy routes. Really interesting3:04because this conflict in the Middle East3:06has been largely attributed to being3:08more of a US vers China type thing and a3:11disagreement on the flow of oil etc. But3:14what's actually kind of fascinating here3:16is that China itself also wants to sort3:18of contain things and that is actually3:21seen as a instead of this thing blowing3:23out to a broader Middle East, you know,3:25conflict and the the oil world getting3:27even more shaky, we see this thing kind3:30of actually going the other direction.3:31We do see oil prices lower here in3:33recent days. You can see they've3:35actually topped out and have been making3:37some progress to the downside. This is3:39almost certainly helping with the story3:41with gold. So if you're wondering, hey,3:42why did gold pop? I think it's a little3:44bit of a sell the rumor buy the news3:47event from the Fed. Simultaneously, we3:49also have that news from China kind of3:52deterring or wanting uh the the conflict3:55to stay relatively contained to the3:57straight of Hormuz, which by the way by3:58itself is still a huge problem for4:00markets and I don't want to undermine4:02that. It's just that again at this point4:04people are very worried about that4:05straight of Hormuz stuff. Uh and we can4:07see it in the oil price. Again, this is4:09sort of another ongoing story just like4:12the Fed meeting where people are very4:14very worried about what's going on with4:16oil here. Although sentiment may not be4:19at the same level of extremes. Let me4:22show you in our data. When we actually4:23look at net options volume for oil4:25specifically, notice something here that4:28is quite interesting. Crowd sentiment is4:30actually still very pessimistic on oil4:32even though oil is rising. That as a4:35contrarian signal tells me you actually4:37could see a little bit more upside in4:39oil if we're just using sentiment.4:41Although personally, I don't just use4:43sentiment as my only gauge for where I4:45think a market is going. That being4:46said, with oil, I don't have a massive4:48prediction or opinion of where I think4:50this thing is going because my system4:52itself is kind of getting a neutral4:53reading at this time. Some of our4:55inflation metrics are not so positive,4:57like a rise in the two-year yield, which4:59is sort of in response to oil, but also5:02acts to potentially kind of slow the5:04demand for it. If yields continue to5:06rise and it slows the global economy to5:08some extent, the demand side of oil,5:10which is what we really focus on here5:11with our macroeconomic score, is under5:14threat, right? If growth metrics slow5:16down, if jobs data slows down, the5:17demand for energy sort of also subsides5:20as well if you get a rollover in the5:22global economy. So, I continue to think5:23while the Fed did guide for modest rate5:26hikes from here, I think it's worth5:28mentioning that the largest contributor5:30to whether gold moves up or down in the5:33short term, in my opinion, is what5:35happens in the Middle East. And I5:37actually have a video coming out uh5:39tomorrow on the A1 trading YouTube5:41channel on Saturday for if you're in5:43case you're watching this on Saturday.5:44Um that I highly recommend you guys5:46check out. That'll be on the A1 YouTube5:48channel where we talked about a5:49potential exit ramp that may be going on5:52in the administration with the conflict5:54in the Middle East. It's just a5:56speculation that I have, but if you want5:57to check that out, look up A1 Trading on5:59YouTube. By the way, if you want to6:00explore the tool that I'm using here,6:02it's called EdgeFinder, and I use it for6:04all of my analysis for going over crowd6:06sentiment, institutional positioning,6:08and of course, macroeconomic stuff like6:10our economic heat maps and macro6:12scanners, and of course, our uh maybe6:14most sought-after asset scorecard, which6:18basically brings it all together and is6:19where I ultimately source for trade6:21ideas. Oh, and if you're interested in6:23trying out EdgeFinder, the link will be6:24down below in the description.6:26Alternatively, scan this QR code and you6:27can get some information about how our6:29trial system works. So, the US dollar is6:31getting a bullish reading overall. And I6:33think this is kind of interesting to6:35look at. We've had some recent data that6:37suggests to me that the US dollar still6:39could maintain a strong demand for the6:42time being. Let me show you this. So, in6:45terms of inflation, we already talked6:46about it. PPI was a little higher than6:48expected and the 2-year yield is rising.6:50Those are bullish factors arguably for6:52the dollar at this time. Simultaneously6:55services PMI is much higher than6:56expected and also in the mid50s. Same6:59with manufacturing PMIs. These are good7:01metrics on an absolute basis and in7:04terms of manufacturing we did miss7:05expectations but we beat by on uh by a7:08long shot on services PMIs here. So7:10worth mentioning that retail sales were7:12also stronger than expected. And so from7:14an economic growth perspective we have7:16kind of a neutral reading here. From an7:18inflation perspective we have a bullish7:20one. And from a jobs market perspective7:21we have a neutral reading. What's kind7:23of interesting though, at least at the7:24time of recording this, subject subject7:26to change because new institutional7:28activity data drops this evening. Um,7:30that will be very interesting because7:32right now what we can see here is that7:33the latest commitment of traders report7:35at the time of recording this shows7:37institutions are super bullish on gold.7:40Their 72.45%7:42long versus short exposure rate with new7:45data dropping tonight. But overall,7:47institutions still seem to be very much7:49on the bullish side of the US dollar.7:51Let's dive into that just for a second7:52to cover institutional positioning in a7:55couple key spots. So, if I navigate over7:57under coot data to coot data history,8:00here's the US dollar, which you can see8:02in yellow represents long exposure.8:04Notice how there is just this persistent8:06rise. Institutions continue to seem to8:09like the dollar, and that is not my8:11opinion or it's it's not subjective. It8:14is just straight up from the CFTC's8:15commitment of traders report where8:17institutions are positioned. I make that8:19distinction because you'll see lots of8:21different content creators who have8:22different ways of trying to gauge what8:24institutions are doing. They try to use8:26candlestick patterns. They do all sorts8:27of fancy patterns. I find that to be8:29less reliable than just straight up the8:31source, the CFTC putting out what8:35positioning actually is as reported by8:37hedge funds and banks, etc. Our tools8:39specialize in tracking just that. So,8:41let's also take a look at gold here8:43while we're on the subject. gold and8:44this is a bit confusing for some. Gold8:47is also super interested uh or or8:49institutions are super interested in8:51gold as well. Um so yes, you can have a8:53situation which the dollar looks strong8:55versus its peers and gold looks strong8:57against all fiat. Uh and I kind of think9:00that from an institutional perspective9:02that is kind of what's going on here or9:05actually I don't kind of think that it's9:06objectively what is going on here from9:08institutional uh ownership. But then my9:12hesitation with gold, my neutrality with9:13gold is that the US dollar, while it is9:16not always an inversely correlated9:17asset, we've been covering this a lot on9:19the channel. Um, generally speaking,9:21most of the time it is. Most of the time9:23a stronger dollar is weaker for gold,9:24but it's just not all the time. Is this9:26going to be one of the rare instances in9:28which gold maintains a bid alongside a9:31stronger dollar? Maybe, maybe not. But9:33if I'm looking at new positions to9:35activate in my portfolio, I will tell9:37you this right now. I like looking at9:38dollar longs in the short term more than9:41I even like long exposure to gold. So,9:44in terms of new trades, what am I9:45looking at with the dollar index? Well,9:47I'd be looking at pullbacks into maybe9:49this 100 level, maybe this 99.79:52uh area and looking for continuation9:54plays. And while I won't trade the DXY9:57because it's a it's an index, I would9:59actually be looking at something like,10:01for example, Euro dollar shorts. So, if10:03we do get a rally up into this area10:05here, these would be potential spots10:07where I'm looking to maybe add some10:09short exposure. Today's video is10:11sponsored by Ola Prime. Whether you're a10:13futures trader, a forex trader, a gold10:16trader, whatever you are, Ola Prime has10:19one of the widest selections of trading10:21account types for their traders. They10:23offer a lot of opportunity to scale into10:26larger accounts over time and offer some10:28of the most competitive pricing that10:30I've seen in the prop firm space. And to10:32make it even more competitive, with our10:33promo code A1 trading, you can get 20%10:36off any of their account types. 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Prop11:24firms are an excellent way for11:26experienced and skilled traders who lack11:28capital to potentially scale things up.11:31If you're interested in exploring Ola11:32Prime, use the link below and take your11:34time to review all of the different11:36terms and conditions to make sure this11:37is the right prop firm for you and your11:39trading style. Thank you to Ola Prime11:41for sponsoring today's video. Now, back11:43to the content. And confirming this idea11:44is EdgeFinder's Forex scorecard giving11:47Euro Dollar a minus 10 score. We're11:49scoring bearish readings and technicals,11:52institutional activity comparisons11:53between euro and US uh dollars. And then11:56we also have sentiment. We have economic11:58growth. We're on all categories here12:00sort of favoring dollar over euro. And12:03so this would be one that uh at the time12:05of recording this subject to change if12:07things you know adjust in our scoring12:09etc. I always check edgefinder prior to12:12taking trades. I generally speaking like12:14Euro dollar to the downside. Another12:16chart of notable interest today is the12:18dollar yen. Now, this is a bit12:20intriguing and I have another video12:22coming out where I had a discussion with12:23my friend Alan Perez. He was on the12:24stream today. Coming out today on the A112:27Trading YouTube channel, so stay tuned12:28for that. But on this side of things,12:31the dollar yen is moving higher even12:32though the Bank of Japan hiked rates.12:34Why? Well, now the suspicion is that the12:37Bank of Japan is going to hike rates,12:39but not fast enough to outpace the rise12:42in rates in the US. This is making the12:45dollar look relatively strong, and it's12:46making the yen look weak. If other12:48central banks are hiking rates at pace12:51or faster than Japan, that suddenly12:53actually creates the interest rate12:55divergence becoming even bigger. Let's12:57just say for example that in blue, this12:59is the US. Let's say the interest rates13:01here in the US actually rise at a faster13:04rate uh than Japan. And by the way,13:06these are projections put out by the13:08OECD. And what we can see here is that13:10generally speaking, if this widens, that13:14should make the dollar yen move higher.13:17The concern for a long time, the the13:19yen's going to strengthen has been off13:20the idea that Japan's going to hike13:22rates, but they're going to do so at a13:24faster pace than other places who might13:26be cutting rates. That's the yen carry13:28trade unwind. But now we're starting to13:30see suggestions that all right, the the13:32US is going to hike rates and if they're13:34hiking rates and Japan is actually13:36holding them steady or or hiking them13:38very slowly, it's effectively the same13:41net outcome as them just not hiking at13:44all and the US uh not hiking at all.13:47Like it's kind of back to square one.13:48It's all relative to one another. If13:51Japan is hiking too slow, then the yen13:53can continue to weaken versus other13:55currencies. And Bitcoin here is flying13:58high today, which is really interesting.14:00And the US is imposing new sanctions on14:02Iran. The straight of hormuz and Bitcoin14:04are the targets. From a technical14:06perspective, this is a pretty impressive14:08move higher up 5% for Bitcoin today. And14:11if this is actually able to get back14:13above the 82 81,000 mark, that becomes a14:16really interesting chart to watch14:18because that looks like a bull flag14:20pending. But right now, we've sort of14:21jumped up and are just rangebound. Uh,14:23but Bitcoin, at least from a technical14:25perspective, looks pretty strong today.14:27And the S&P 500, despite showing some14:29resilience here, is still getting a bit14:31of a bearish reading within Edgefinder.14:33And I want to watch this because it has14:35been bearish for the last few weeks, but14:36there are some things showing up that14:38are causing the score to actually rise a14:40little bit. I want to talk a little bit14:42about where I'm at with stocks and14:44equities in general. So, um, when we14:47look at the S&P 500, what we can see14:49here is that a lot of our macroeconomic14:52score has actually improved. You can see14:53it here specifically in let me just see14:56let's hover over this maybe we can zoom14:58in a little bit on the edit this is the14:59economic surprise index across Japan15:01Europe and the US and you can actually15:03see that we are seeing a little bit of15:05an uptick in data uh recently but15:08specifically with the uh the15:10macroeconomic score uh we've had this15:12week for example we had September 16th15:15we had retail sales this was an15:17improvement overall to the macro story15:19um we also had strong NFP weekly jobless15:22claims were actually a nice hit this15:24week. So solid on the job side. And so15:26you look at this and you're like, okay,15:27so maybe there's a little bit of15:28materially improving stories on the15:31growth side. And there's also something15:33that I wanted to mention when it comes15:35to the conversation around whether or15:36not AI is a bubble. There is one chart15:38that matters a lot to me and that is the15:40spenders within the AI. That is the15:42hyperscalers. If people are feeling15:44confident in the AI trade, they will15:47continue to bet on the ones doing the15:50spending. And what we actually saw a15:52while ago was some concerns around that15:54spending that have quietly started to15:57come back into all right here we go we15:59have a bit of a cup and handle type16:01looking pattern and maybe the16:03magnificent 7 are actually primed for a16:05breakout and continuation. I think it's16:07worth mentioning that when we go take a16:09look at some of our economic metrics16:11here. Check this out. If I go economic16:13uh actually we'll go economic data16:14economic growth manufacturing PMIs are16:18in the mid50s and services PMIs are in16:21the mid-50s as well. I don't want to16:23understate how important this actually16:25is. Growth metrics in the US economy are16:28still very healthy, very strong. And I16:32know right off the bat that that starts16:33to get people annoyed. They're like,16:35"How can you possibly say the US economy16:37is uh strong when consumers feel16:41absolutely like hot garbage?" And that16:43is completely fair because real wages16:46have suffered with the higher inflation,16:48the conflict in the Middle East, higher16:50gas prices. I am not in any way uh16:54defending the corporate over overlords16:56who have solid outcome results right16:58now. I'm just pointing out that we have17:00to be objective in our analysis of17:01whether or not this AI spending craze is17:04going on or going to continue. If you're17:07only asking, you know, how to feel, how17:09do things feel like from the perspective17:11of the consumer, which is important, but17:13it is not the only thing that matters in17:15the economy. Consumers are saying that17:17they feel terrible. And simultaneously,17:20retail sales data shows us that they are17:22still out there spending above17:24expectations even. Now, again, you could17:26point to that and say, "Well, uh, that's17:29someone actually made a really good17:30point in my videos. They said, "Well,17:31yeah, they're spending more because the17:33price of everything has gone up." That's17:36a fair point, but simultaneously,17:39they're still opting to go out and spend17:41money on a lot of things. And they may,17:44to the uh the concerning or the people17:47who might have criticism of this, they17:49may, to be fair, be doing it on credit17:52cards, right? they may be putting more17:53and more debt on in order to continue17:55the the consumerism that is you know the17:58United States. I'm just throwing out18:00some ideas here but the point is from an18:02from an absolute output output of the US18:05economy things are solid. Uh the AI data18:09center buildout is is chugging along18:11right now. Now that may change. I'm not18:14I'm not making a claim of 6 months 1218:15months we're going to be fine and dandy.18:18I'm just pointing out that in the here18:19and now, it's hard for me to get18:21outrageously bearish on the stock market18:23from a longer term perspective when the18:25Magnificent 7 is doing some repairing.18:28And I want to get back to this concept18:30of well, EdgeFinder is kind of leaning18:32bearish on S&P, which I actually don't18:35hate that short-term reading here that18:37we're getting. It's been bearish for a18:38couple weeks, and that has mostly been18:40the right thing. Let's let's take a18:42closer look. Let's inspect one of the a18:44couple of the things here that actually18:46could flip this thing uh more neutral in18:48very short order. Right now, I totally18:51think that seasonality favors the bears.18:54Let me show you. So, here's fullear18:56seasonality for the S&P 500. Here's18:58year-to- date performance. All right.19:00So, what we can see here is that in the19:02last 10 years, the average expected move19:05here has been or historical move here19:06has been down for the rest of September.19:09You've probably seen this all over if19:10you watch other channels. This is kind19:12of a really talked about point. And so19:14that's why I think short-term you very19:16well could continue to see some19:17bearishness in stocks as things kind of19:21uh gear up for midterm elections and19:24that September seasonality is very real19:26and observable in the data. Doesn't19:28guarantee the outcome of the next few19:29weeks, but it would lean slightly19:31bearish. So that's factored into our19:32scoring algorithm here. And this is by19:34the way, this is the perk of edgeinders.19:36It maps all this stuff automatically.19:38That contributes under our technicals19:40reading right there. And then if we also19:42take a look at uh the technical 4hour19:45and uh daily chart downtrend that we've19:47talked about um here on the channel, we19:49can actually I'll show you this. So what19:50we can see here is we have a a downtrend19:53taking place here on the daily and 4our19:56uh reading. You can actually see it a19:57little bit more prominently in the 4our19:59chart which has been trending lower here20:01uh recently. So there is a little bit of20:04softness in the print. You have20:05seasonality working against us. But20:07these things worth mentioning. I don't20:09want to overstay my welcome because20:11these things are going to probably flip20:13at some point here in the near future.20:14Well, at least one part will. The20:16seasonal trend starts to pick up and20:18become more bullish as we go into20:20October, November, and December. The20:22fourth quarter is historically speaking20:24one of the strongest periods of the20:26year. And we still have midterm20:28elections. So perhaps the the overhang20:30will drift on with us until through20:32October. Uh but I I just want to point20:34this out because macro here is almost20:37neutral. It's really technicals in the20:40short term that are kind of putting an20:41overhang on the stock market. And so I20:43think actually short-term I could see20:45the S&P kind of coming back, maybe20:47retesting this area, sitting right where20:49we currently are, chopping sideways or20:51even trending a little bit lower. Um but20:53my perspective on it is that I don't20:55want to get overwhelmingly bearish too20:57soon. I think that there has been some20:59nice short side action in the recent21:01weeks. If you've been catching that,21:02then congratulations. But generally21:04speaking, I think as we go into October,21:06November, December, I want to be more21:08neutral, if not more on the bullish side21:10going into year's end. So, long story21:12short, short term, I think you could21:14actually see a little bit of pessimism21:16and bearishness hold up in the market21:17for the time being. But then as we turn21:20the the calendar towards November,21:23that's where I start wanting to be a21:24little bit more on the positive side of21:27things. Anyways, I'm still long gold.21:29That's of course a position I've been21:30talking about all week long and it is21:32boring. It is chopping back and forth21:33and all said and done things are21:35actually pretty quiet in markets. Take a21:37look at the VIX. We're sitting at a21:3815.5. So, we'll see if that gets shaken21:41up at all going forward. Trading21:43fundamentals can be a lot of hard work,21:45but we actually made a pretty cool free21:48Telegram channel where we are publishing21:50constantly updates on what is going on21:53from a macro fundamentals perspective.21:55And no, it's not AI. It's not written by21:57a robot. It's written by a real person21:59on our team. His name is Allan. He puts22:01together a report each day on what is22:03going on in things like gold, currency22:05pairs, commodities, indices, etc. on a22:07global financial fundamental analysis22:10basis. It's a really cool newsletter22:12where you can basically stay on top of22:14things by reading for like a minute per22:16day. If that would be interesting to you22:18to join the free Telegram channel, there22:20is a link in the description down below22:21on this video that you can join and get22:24into the action there. We also offer22:26special discount perks for our products22:29as well as for funded accounts and for22:32brokerages etc. And we also do some22:34giveaways as well. So definitely take a22:36second to join the Telegram channel in22:38the description down below. I also want22:40to take a second to just genuinely thank22:41you for supporting my content here. Make22:43sure to subscribe and hit the thumbs up22:45button if you have not already. And I do22:47hope that more videos in the future will22:49continue to help you on your trading22:50journey. Good luck. Thanks for watching.
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