Fed to sit back
Fear is the other guys problem
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Relatively quiet week given the scope of the past 2 weeks. Earnings from NVIDIA after market Wednesday will put the focus on Thursday session.
Jumping straight into it, I see equities under pressure now that data is showing that the economy is not in any trouble, therefore a December Fed 25 bps cut is moving off the table. Starting out last week at a 90~% probability, this got cut to 50% by the end of the week. Reasoning for this was that inflation readings came out quite mixed and initial jobless was a miss.I have no doubt the overall up trend is still holding, we have simply started pulling back. How deep could it be? Who knows, 10% off highs? 20% off highs? Or only 5% and we rally.
ES
The Quarterly has been really great in monitoring the breakdown of average prices over last week. I dont see this changing this week. Look for ops shorting off a retest of Q+1 from below. I wont be selling into QVWAP, moreso looking to sell a bounce from there.
A cut below QVWAP will then offer up best options to sell a pop and ride the market down to Q-PVAH $5695 where buyers should be waiting to then maintaining the uptrend and this might be the starting point for the Santa rally.
Gold
The magnificent trend up in gold has been broken. We have multiple daily closes now below Y+1.
Trump's appointment coupled with somewhat conquered inflation has been a clear signal that risk assets ie. Equities are a go go! For me, to trade Gold is to trade the DXY and Bonds. You have to be 100% mindful of the real yield. If bonds get crushed, Gold will feel it too. If DXY gets expensive, Gold will hurt….which it has.
However I make money from aiming at where the ball is going to be, not where it is. Looking out across the week ahead, I see Gold capable of a pullback up to MPVAL $2660, then selling down towards $2400. I'll be playing shorts and selling pops in that area.
The alternative to selling from the higher MPVAL $2660 is that we get caught by QPVAH as resistance $2611. The behaviour I would like to monitor for here would be sideways consolidation for at least 4 hours with DXY in a position where it has been sold down a little and is getting ready to rally for new highs on the week. However as I see Bonds have already found good support as of Thursday and Friday last week, I think bonds will try to rally all through this week and this may help gold break above Q-PVAH.
OIL
The imbalance down on oil is overwhelming. Hedge funds were getting a lot less bearish/ a lot more bullish and we saw that from COT data compiled ans shred by John Kemp, market participants increased long positions as of last Friday. I got this info on Monday and tweeted at the time.
Here is the chart I posted last Sunday.
here is what happened.
THIS WEEK, i don't see there being any material change to the contextual balance of prices in oil. Added to this, the US Government has now run out of funds to re-buy crude for the SPR. So there is a major support/ buyer out of the market for now. Its up to our lord and saviour, the perma-tanned Trump, to refill the SPR caverns.
Please have a look at the weekly bar chart on oil as below.
The pull factor of the $61.71 is all too much. I think we trade there over the next 7 trading sessions.
Here is the daily bars and QVWAP. I will be trading short off of the March 2021 hi $67.98s or off of the adjusted Q-PVAL $69.99/$70 handle. Shoud the macro risk picture shift, this will change.
