Transcript of This Could Get A Lot Worse...
FX Evolution - Trading Academy
0:00Something seems a little off when it0:02comes to these markets, but what is Wall0:04Street up to? And are we witnessing some0:06big breaking points happening right now0:09with a squeeze on the US dollar yen,0:11treasuries getting put under pressure,0:13and credit default swaps showing two0:15different stories. One extreme risk and0:18the other one the calm before a0:20potential storm. With even tech getting0:23involved over the last couple of0:24sessions, there's a lot to talk about0:26and a lot of opportunity, but also some0:28ugly things. So, let's get into it in0:31one of the largest daily shows on the0:32planet when it comes to stocks,0:33commodities, and cryptos. Thanks to you0:36guys, we'll see you very soon. This one0:38is not to be missed.0:46Well, welcome back to one of the largest0:48daily shows on the planet when it comes0:49to everything that you love about0:51markets. Whether it's macro, Wall Street0:53flows, or just some good charts, we've0:55got plenty of stuff to discuss in0:57today's video as tech rebounds and the0:59rest of the market shows a little bit of1:01shakiness after those non-farm payrolls1:03numbers. But let's discuss here one of1:06the big charts underneath as we go1:07through the good, the bad, and the ugly1:09when it comes to these markets. First1:11up, the kind of good sign, but also1:13something of a cautionary tale, comes1:15from the New York Stock Exchange daily1:17chart. Why? Well, the advanced decline1:20has been going up for ages. That's a1:22great sign. When more stocks are going1:24up than down, that's bread. That's a1:26also sometimes thrust and a very good1:29signal for markets. But recently, we've1:31been pressuring this trend line. And if1:33we do lose it and let's say make a lower1:35high here, it could be one of those1:37signs that many people aren't going to1:39be looking at. Most people just check1:40out the S&P 500 or the NASDAQ. If that's1:43you, start looking at the New York Stock1:45Exchange. Always a good one to have on1:46your charts. Another big problem that's1:49starting to appear as well has been the1:50squeezing of the Japanese yen. That is1:52that yields, which we've talked about1:54several times here over the last couple1:56of weeks. We're just accelerating,1:57accelerating, accelerating, forcing the1:59Bank of Japan to raise rates at a very2:02fast rate. Now, the problem with this is2:04it brings up the question of, of course,2:06the carry trade. that is, are we going2:08to see more money taken out of2:11treasuries and bought back to Japan?2:14Now, if that happens, we could be2:16seeing, of course, illiquidity, and it's2:17already been a big problem, which a few2:19charts in the future of today's video2:21are going to show you. The other one on2:24everyone's lips is crack. Now, I have2:26seen reports, and this is pretty scary2:29stuff, that diesel price in places such2:32as California is over what, 950 or2:34something like that, a gallon. Now,2:36these are hitting new record highs. So,2:38we are seeing things like diesel price2:40over $100 for the first time per barrel.2:43And we're also seeing a nons slowing2:45down market. And I kind of laugh at it2:48because it just goes to show again that2:50press and price concept we always talk2:52about. If it's in the press, it's in the2:54price, guys. And this is just the story.2:57Remember weeks ago we started talking2:59about this. Now, every single3:01publication is discussing it, but it3:03doesn't seem to be slowing down. And3:05coming into this week, we've got PPI and3:08of course CPI, the inflation read, and3:10that happens on Friday. So, make sure to3:12be looking at that because it's going to3:13have a huge impact to this chart here,3:16which is the Fed watch tool. Basically,3:18are we going to get an interest rate3:20hike during the month of September, or3:23is it just going to be same as usual?3:25The problem is, if we do get a hike, it3:27could put pressure on the debts and the3:29bonds market, and that's where people3:31have the biggest concern. And we've been3:33flip-flopping all over this place. It's3:35now back to around 60% at the time of3:37this recording. Last week we went to3:39like 65% I think. Then we went down to3:4150% and now we're back to 60. This is3:44showing kind of uncertainty in the3:46markets. And whenever markets have3:48uncertainty in them, they're prone to3:50just like that type of volatility. So3:53it's something that you need to be3:54watching. And of course, we'll be3:55tracking here together. Speaking of3:57which, this great chart here from Topown3:59Charts and also shared from Ryan Detrich4:01over on X. We also reshared it over4:03there. Give them a follow, guys. Shows4:05that 5-year corporate CDs. So, basically4:08the credit default swaps are starting to4:11completely dislocate. So, we do not have4:14any concern in the banks. That is we4:16have effectively the calm before the4:19storm. No freak out in the banking4:20sector, but a huge freakout starting to4:23happen in tech. And remember, who is4:25currently borrowing? Well, of course,4:27it's the technology stocks. Everybody is4:30just talking about capex spend and AI.4:32And if you actually strip the US economy4:34back, well, we already know what it4:36looks like. It's not so good underneath4:38the hood in most Western nations once4:40you take the AI growth out of it. The4:42big thing here though is, of course, if4:44this continues, who's right? Is it the4:47tech side and the risk that's being put4:49on there, or is it the market not4:51concerned about the bonds? Cuz remember4:53during a let's say crash or an4:56expectation of a financial crisis, you4:59generally see banks pick up. Just look5:02here at 2020. We went from calm before5:04the storm and then suddenly the banks5:06freaked out. But do remember the one5:08thing about this period of time is it's5:10not like the bonds market in this5:12particular read saw that coming because5:13see how it was the calm before the storm5:15until something got serious. What do you5:18guys think in the comments down below?5:19Do you think that the tech sector is5:21correct and there's a real risk out5:23there or is it the bank sector and it's5:26more to do about nothing? Another little5:28chart here from Chi Girl over on X and5:31also of course Bloomberg Intelligence5:33shows that 60-day auto loan5:36delinquencies now that has been on the5:39rise in recent times. And this is5:41important because when you're talking5:43about a proper crash that is not just a5:46normalized market crash, which is that 55:48to 8, maybe even 15% pullback, one of5:50those horrible ones like a 40 or 50%.5:53You usually need a lot of different5:54markets to already be showing strain.5:56Well, since 22, we've seen delinquencies5:59rising up. And although this is not a6:01good read for timing, it is still part6:03of the puzzle. And we're seeing the same6:05thing in credit cards. People are6:06spending above their means. People are6:08borrowing more and more and more. And6:10we've seen that in your comments down6:11below. A lot of you mentioned that, you6:13know, that people are starting to just6:15spend completely outside of the box6:17trying to keep up with the Joneses, as6:19of course the saying goes. I also6:21thought this was a really interesting6:22one posted by a whole bunch of people6:24differently on X. This one here is from6:27Elanm6:31and this is the Economist latest paper.6:33Now, we've been seeing a lot of6:35different economist papers and in6:38general magazine covers having some6:40pretty interesting stuff about AI. I6:42like this one, The Sorcerer of Silicon.6:43I got to say, that looks like kind of6:44like one of those magic cards. Kind of6:46cool cover, but [laughter]6:48people always say that these types of6:50covers, they can equal a period in time6:53where we're getting closer to a topping6:55pattern. And that is because everybody6:58becomes hyped on it. I got to say, I do7:00like that cover though. Now Ray Delio7:02has been sounding that alarm and you7:03might say well Tom Ray Delio has sounded7:05the alarm many times over the years and7:07admittedly he has said this several7:09times but he's come out and he had a7:11couple of statements I think were7:12interesting. One was particularly about7:14his allocation thoughts into gold and7:17bitcoin and other things. You can go7:18check that out if you're interested in7:19the line. But effectively he's saying7:21that there is a concern here in bonds7:24and he doesn't see them to be as good as7:26they once were. Well I think we've7:28already seen a huge fall. I mean, if you7:30thought to most people and you talked to7:32them pre2020 and you said, "Guys, the7:35treasuries market is going to be down7:3650%." And we're not going to be in7:39market crash, they would say, "You're7:40crazy. You're insane. You're stupid."7:42But that's exactly what happened. So, it7:44does happen time and time again. And7:46here's where the story takes a twist.7:48Norway's $2.3 trillion sovereign wealth7:51fund just said that they are thinking of7:54taking their waiting on bonds from 70 to7:5750% which is a pretty sizable reduction7:59of course in US Treasury exposure. It's8:02not just there though. China's also8:03planning on getting rid of their US8:05Treasury bonds over the next 10 to 158:08years. And this can cause a bit of8:10liquidity crisis because as you guys8:12know and you're already aware and we've8:13reported on the new capex spend that is8:17all these tech companies that are8:18offering high interest rate payments are8:20taking liquidity from US treasuries and8:23they're actually meaningfully really8:26creating a bit of a dry spell in8:28treasuries. Is it time to panic? No,8:30because the market hasn't panicked8:31itself. We don't see the panic yet. Is8:33it time to pay attention? More so than8:35any point in the last couple of years. I8:37think it's becoming important for us to8:39watch these pairs because it's been more8:41to do about nothing. We've talked about8:43that for years now, but starting to get8:45a bit more serious with huge8:47interventions from several central banks8:49when they start doing stuff. I mean,8:51just the last 24 hours, we saw reports8:53coming out that China also has been8:55intervening to help stop gap some8:58potential, I guess you would say, bonds9:00issues and debt issues in their own9:03country. So there are things going on9:04here which make you start to raise an9:07eyebrow and say what exactly is going9:08on. Also I thought this is an9:10interesting observation by blue kurdic9:12market insights over on X. Give him a9:13follow guys. Basically shows here that9:16the dip by that is you know buy the dip9:19what everyone's been doing for the last9:20couple of years actually has weakened in9:232026 notably from where it's been in9:26previous years. And that also goes to9:28show I think that this market is really9:30kangarooey. that is it's up, it's down,9:33it's all around. That's good if you know9:35what you're doing. It's good if you look9:36at stock selections and you look at of9:38course sectors and those types of9:40things. It's probably bad if you're just9:41an index watcher. And we've talked about9:43that now for I don't know 6 to9 months9:46since we started to see the Russell,9:47remember the Russell start to outperform9:49after that rate cut, guys. What does9:51that tell us? Well, it gives us a point9:53of potential late cycle. So, this is9:55pretty normal in a late cycle market9:57which can last one to two years,9:59sometimes even three. Now, another10:01disturbing thing, this one here from app10:03bar chart over on X, which is a Google10:05search. And the Google search is can't10:07afford a home. Imagine having to search10:10that. That's not cool. So, we see this10:12particular search. And look at it10:14accelerating here. Now, last time it10:16accelerated was actually the 201810:19period. And I think this was during the10:22debt crisis that we had there. We had10:24like a banking issue and of course then10:26we went into a bit of a uh a trade war10:28kind of concept. But over here, we've10:31got a increase in can't afford a home.10:34And I think that's because, of course,10:35we've got a big differential between10:37people locked into those 30-year loans10:39where they're like, "Nah, it's okay. I10:41can pay for this, but they're not10:42selling. And at the same time, people10:44trying to get into the market can't10:46buy." And we're seeing this out on the10:48UK markets as well. Supposedly there,10:50and you guys can confirm in the comments10:52down below, people just aren't selling10:54and they're just kind of sitting on10:55their properties. And even though10:56there's a lot available, many of them10:59aren't actually being reduced. So, it's11:01kind of like that that tipping point.11:02Who's going to blink first? Is it going11:04to be more debt and more deregulation11:06allowing people to take on more more11:09overall loans, or is it going to be, you11:11know what, just a supply GL come online11:13and everyone's going to say, you know11:14what, I'm not paying you these11:15ridiculous millions of dollars for some11:17of these houses. Let's take a look at11:18the S&P 500's closest match so far,11:21which is the 1970s to now. We're11:23currently sitting at around here. Hm. If11:26it was to follow this, then that would11:28be pretty similar to a standard midterm11:30election year. That is a drop followed11:32by a rally. Now, if it was this big, you11:35can see here that it kind of comes in at11:37around a 15% drop or 14%. And you might11:41notice a few people have been talking11:43about this is their kind of11:44expectations. The reason why overlaying11:46some of the other previous histories of11:48structure and I am a big fan of11:49structure, but that is just a crystal11:51ball. Remember, it's only one part of11:54the puzzle. It doesn't tell you exactly11:56which way it's going to go. Let's have a11:57look now at sentiment surveys. Now,11:59sentiment's been flipping all over the12:01place. Just like the interest rate12:02expectations, 37.6% of people are12:05bearish as of last week. 39.7 are12:08bullish. So, there's actually more bulls12:09in the market over the last week. Now,12:11the question is the price of12:12intelligence. Now, this chart here from12:14a6z.news.12:16So, go check them out guys. You can see12:18here shows the price of intelligence is12:20falling quickly. And we already know12:23this. I mean, you can see it all over12:24the place, but basically it's a race to12:26the bottom. Now, there is a paradox12:29here, which we'll talk about in the12:30future, and a few of you will already12:31know this. So, I wouldn't take this12:34chart as, oh wow, it's all over for LLMs12:36and everything, but there is a paradox12:38here for how much AI is going to be used12:41and whether we actually go into that12:43paradox will be an interesting point.12:45What about Bitcoin? It's pressuring, of12:48course, those resistances. We talked12:49about this last week and we already12:52started to see a bit of a squeeze12:54occurring. Since then, it's remained12:56rangebound. So, we're basically in this12:59area. If you're interested in, by the13:01way, finding out more about that paradox13:02is Jevrons, which you can go read on13:05before we explain it here on the show,13:06which you should subscribe to cuz it' be13:08awesome to uh go through that with you.13:10Now, if you're interested in finding out13:11a little bit more as well about what FX13:13Trading Academy does, check out the13:14links in the description and pin comment13:16down below. We've got a live session13:17coming up in just 4 days where I'll13:20actually be going through some tips and13:21tricks that I've learned over my 1713:23years of experience in markets and you13:25can sign up down below. There's a couple13:27of spots left. So, if you're interested,13:29check it out. Links in the description.13:30Be great to see you there. It's13:31completely free to attend those events,13:33by the way. Now, let's go into the13:35charts that matter. The first one here13:37is to do with mortgage wholesale13:39broking. And the reason I'm bringing13:41that up is because, of course, they13:42can't afford a home. So that could13:45either tell us that people are just not13:46taking on loans, which is also a bad13:49sign for property, but at the same time13:51that the stock market and the bonds13:53market and generally everybody else is13:55starting to say, "Well, I don't know if13:56I like these mortgage debts as much as I13:59used to." Well, take a look here at UWM.14:01Now, this is sometimes number one,14:03sometimes number two against Rocket. It14:04has been dropping off a cliff over 2026.14:08You can see just new lows on lows on14:10lows on lows. And if we make this a14:11monthly chart, you can see it's not14:13really exactly the trend that uh you've14:16got to like here. Now, if you go to14:17maybe rocket companies, has it been14:19doing something similar? Not as bad, but14:21it has been declining. And I have spoken14:23to a few people around the industry for14:26this. And at least here in Australia and14:28even the US, I'm seeing people say14:30depending on where you are, there is a14:32notable decline in overall mortgages14:34being written. And remember, this is all14:36part of the same symbiotic thing. These14:38markets are connected together in more14:40ways than it may seem. Now, if you want14:42to track out your New York Stock14:44Exchange composite, you can see this is14:46the code that you should do with. And14:48notice here, guys, that this trend line14:50is pretty serious business. Higher14:51highs, higher lows, higher highs, higher14:53lows. If that makes a lower high and14:55then breaks below, plus we have advanced14:57decline line dropping through. Well,14:59that is a sign of a real weakening15:01market. At this point, we haven't got15:03that. US 10year, that's still staying15:06above the previous periods. Remember the15:07weekly close was all important. It15:09managed to close at a new high which15:11suggests that maybe yields are not done15:13yet. And if that's true, then we could15:16see some pressure come under, of course,15:18the corporate markets. Now, speaking of15:20corporate markets, have a look here at15:22corporate grade bonds. They are getting15:24pressured because of the high interest15:26rate. But at the same time, if you're15:28usually seeing them freaking out15:30completely, then we would see junk freak15:33out completely. and junk and high yield15:35junk in general. It just hasn't been15:37moving in the same way. So, I'd say like15:39the bonds market is a real calm before15:41the storm and you can really see that15:42highlighted when you look at the ICE BA15:45US or Bank of America US high yield15:49index option adjusted spreads. Last time15:51we were here before the tariff kind of15:54situation where that spiked it up. We're15:56in the calm before the storm, guys.15:582007, 1998 kind of period. 97, the areas16:03of a later cycle market where everyone's16:05like, "It's all good. She'll be right."16:07As they say in Australia, she'll be16:08right. It's all good. Put a shrimp on16:09the barbie, guys. And uh you'll be fine.16:12Just go out and wrangle some crocodiles.16:14But at this point, it's not what's been16:17happening. You know, we have a market16:19that is starting to show, you know, real16:22complacency. And I always say whenever16:24complacency comes in, you've got to be16:26paying attention. Do you want to be16:27freaked out? Look at the evidence at16:29hand. You know, one of the ways to look16:31at evidence XLY as XLP, do we see16:34consumer discretionary stocks falling16:35off a cliff? Not yet. Do we see16:37financials falling off a cliff? Not yet.16:40But when you look at the lesser quality16:42financials, well, they've been coming16:44under some pressure, but still not yet.16:46So, it's really important to check out16:48these markets because everyone compares16:50to the 98s, the 2000s, the dotcom in16:54general or of course the GFC. But if we16:56don't have the banks also freaking out,16:58then it's very difficult to see the17:00markets totally freak out as well. Words17:02uh to look at as well anyway in those17:04markets. Now, let's talk about the17:06elephant in the room and that's got to17:07be crack. Now, we talk about17:08opportunity, we talk about abundance in17:10these markets. Weeks ago, we discussed17:12crack. We've obviously talked about oil17:14since pretty much what was it September17:16October last year and funnily enough it17:19went bang bang bang bang bang bang bang17:21in so many different areas started to17:23float along but crack has been the last17:25couple of weeks diesel price now this is17:28really starting to impact of course food17:30we've seen it in restaurants already17:31rise rising their costs we are seeing17:34significant pressure here from crack17:37hitting over 100 a barrel on diesel for17:39the first time ever and take a look it17:41doesn't seem to be to accelerating. So17:43at the moment, everyone now knows about17:45this as about 2 3 weeks ago and it has17:48continued to push up. Now remember17:50markets can stay pretty crazy for a17:52while. So if we see movements like US17:55oil breaks up here, closes above at the17:57moment it's coming in higher highs,17:59higher lows. If we see further18:01escalation of oil uh barrel costs then18:04we could be at 110 just like that guys18:06and all of a sudden that is an excuse18:08potentially for the markets to sell off18:10because it's a pretty significant input.18:12It goes into everything and we are18:15starting to see you know all of those18:17depletions of the world reserves as18:19well. When we have a look at agriculture18:21it also had a closure the previous week18:24above the previous closures. Now that's18:26not to say agriculture isn't risky. It's18:28a totally different ballgame to the18:30standard stocks out there, but they're18:32all going up. And what's happening is18:34this is really putting a lot of pressure18:35on the PPI and CPI reads this particular18:38Friday and Thursday. Let's have a look18:40at semiconductors. Bit of an improvement18:42here. We saw hardware pick up. And if we18:45have a look here at SanDisk, which I18:46guess was the poster child of the18:49previous rallies. Uh if we go and we18:51grab a anchored VWAP here together, we18:53pop it off the lows, you'll notice it18:55comes down close to those levels. a lot18:57of these did and then they've rallied19:01back up. So, we're also seeing it here19:03on Nvidia. Nvidia ended up closing its19:07strongest weekly close19:09well ever. So, pretty strong stuff and19:12it doesn't exactly look weak. I mean,19:14you can't say when you're looking at a19:16technical chart, is that making a series19:18of higher highs and higher lows? And the19:20answer at the moment is yes. Coming off19:22the double bottom we talked off this19:24area. So it does look like19:25semiconductors at least with the Nvidia19:28position are still improving. And19:30another argument is of course Nvidia19:32versus SPY because if you take a look19:34here at Nvidia versus SPY since August19:36of 25, what's it done? Nothing. It has19:39not improved above the S&P. It's been in19:43line with it. So this is the best stock19:45in the world. What people considered the19:46number one and it started to do nothing.19:48If that closes above, then again it19:51could show further strength. So it's19:52kind of like a crossroads. you know the19:54Cosby, the hardware stocks, they all got19:57destroyed in recent times. They've19:59started to play make some gains. You can20:02see resistances here coming into these20:04markets as well and even SanDisk has20:06tried to pick up as at that same point.20:09Now that's completely contrast to maybe20:11some of the other areas of the market20:12which have slowed. So interesting to see20:14what tech does here leading into this20:16week in particular shorter trading week.20:19Hangen still stuck within range. So20:21that's the Chinese market of course all20:23sorts of information coming out about I20:26guess you would say you know governments20:27kind of saving some of the areas and20:30stuff but another one has been gold now20:32of course Ray Delio likes gold you know20:35gold is considered the oldest currency20:37in the world so it's very very long time20:41of history we have behind this and gold20:43stocks have been on a decade low kind of20:47accumulation so are we starting to see a20:50break up in gold across the board.20:52Here's GLD from the options market20:54perspective, you can see that we are20:56currently above the major kind of20:59supports and we are basically sitting in21:02the kind of, you know, nowhere land21:04there on GLD. But when you start looking21:06at something like gold itself and we go21:09to the 4hour chart, like we talked about21:12last week, we made a slightly higher21:14high here. We had a supply and we've21:17managed to go to this hidden demand over21:20here and then rally up. So, it makes21:22sense if gold is going to try to buy21:24here. If it goes through here, people21:26will like that a lot more. And of21:28course, the risks are to the downside21:30through 4280. Now, if we get through21:33that area, you're really starting to21:34say, well, this doesn't count anymore.21:36And then all of a sudden, you're talking21:37about the next levels of equilibrium.21:39So, gold has improved, but silver has21:41also improved. And people will be21:43looking at this as an inverse head and21:45shoulders. So you can see here left21:46shoulder head right shoulder neckline.21:49If that breaks then people will take the21:51distance and see whether that can that21:53might line up with the previous high. So21:54you know there's a lot at stake here for21:56gold for silver for these kinds of21:58markets. And it's still touch and go but22:01yeah very interesting stuff. And people22:02consider that sometimes a hedge against22:04some of the problems we have going right22:06now. What about the US 500? Is it really22:09weak or really strong? A lot of people22:11drawing flags on this particular chart.22:13Uh we've at the resistance. You could22:14make a case for being bearish shortterm22:17still although did certainly weaken on22:20Thursday, Friday, last week towards22:21that. 7500 remains the major put support22:25and we are kind of trapped in a22:26kangarooey market leading into a22:29kangarooy time. And a lot of people are22:31saying 8,810022:33for their kind of reads. And I think the22:35reason that most are doing this is22:36because they're trying to take these22:38extrapolations out and saying, well, you22:41know, worst case scenario, we do22:42something like this and we get an 8,000.22:44We do something like a break, we get22:45like 8140. So they're they're using22:48technicals along with just their overall22:50mandate kind of positions. Now, is that22:52going to happen? Well, let's have a look22:54here at the cues. These are the options22:56levels for the day, guys. Notice 73,22:58730, and 700. Nothing really changes.23:01net expirations here, net expirations23:03here, calls and puts. So, what are we23:05doing? We're trapped on the indices for23:08now. So, uh coming into these, of23:10course, the markets have been generally23:12bullish, but we're looking for big23:13transactions, more evidence, uh before23:16really seeing anything particular. And23:18then, of course, there's Bitcoin, which23:19is currently pretty pretty strong as it23:23stabilizes at the resistance. So, is23:25this a pit of some kind? That's what a23:27lot of people are asking. And if it23:28breaks through here, at least based on23:30IBIT, which has a bit of options in it,23:32we could be looking at what we call a23:34positive gamma kind of read there on23:36markets. Please be warned, guys. Please23:38remember Thursday PPI, Friday CPI this23:42week. It's been an absolute pleasure23:45bringing you this today's video. I hope23:46you enjoyed it. And if you're interested23:48in finding out a little bit more about23:49some of the things we do, then of23:51course, jump on over links in the23:53description down below for our live23:54sessions uh that we've got one in 423:57days. So, make sure to sign up for that.23:58Be great to see you there. In summary,24:01today's market, you know, it is one of24:03those ones where you've got to be on24:04your toes and things are certainly not24:06as good as they once were. US dollar24:08yen, bonds, everything else, they're24:11starting to wake up and it's kind of24:12like the Kraken. When you piss it off,24:14though, it might come and take your24:16ship. So, we got to be careful, guys.24:18Bye for now.
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