The encouraging directional signal from cryptocurrencies during FOMC week did not last long. Although the Nasdaq reached a new all-time high, most risk assets did not confirm the move. Worse still, long-term bond yields also hit new highs, clearly conflicting with the fundamental reasoning behind our earlier expectations. Judging by the credibility of these breakouts, the bond market may prove the more reliable signal if there is no outside intervention. That means we need to be more cautious about the possibility that the turning point could arrive sooner than expected.
$CME比特币主连 2610(BTCmain)$ $BlackRock Multi-Sector Income Tr(BIT)$ $以太币ETF-Fidelity(FETH)$ $以太坊ETF-iShares(ETHA)$ $微型10年美债收益率主连 2609(10Ymain)$ $30年美债主连 2612(ZBmain)$ $10年美债主连 2612(ZNmain)$ $微型30年美债收益率主连 2610(30Ymain)$
In last week’s outlook, we identified stability in the bond market as an important fundamental condition for markets to continue improving. The 10-year U.S. Treasury yield quickly proved us wrong: it not only reached a new high but also held firmly above the key 5% level. On the one hand, this has completely offset the effect of this month’s rate hike; on the other, pressure from higher borrowing costs is spreading to other parts of the economy. The question now is whether the Trump administration will take short-term action to intervene before the midterm elections. The U.S. Treasury Department’s last intervention proved ineffective, however, so we cannot rule out the possibility that the administration simply lets conditions deteriorate until a broader reset becomes unavoidable. In any case, the bond market’s moves have already affected existing positions and the logic behind future trades. If other leading indicators subsequently move into alignment, we will need to reduce our exposure to risk assets further.
Gold broke below its previous weekly low early this week. After forming an inside-bar pattern, it broke to the downside, significantly increasing the risk that precious metals will remain bearish in the short term—or even weak over the medium term. Bitcoin is another key indicator. Although it is still hovering near its recent highs, its high volatility means a reversal cannot be ruled out. We can use 83,000 as an initial reference level, with the more important turning point at 74,925. A break below the latter would signal the start of a new downtrend. Over the longer term, the more likely path for crypto assets remains a choppy decline to new lows once their rebound ends. That said, the overall resilience of U.S. equities remains difficult to shake at this stage. They are unlikely to face real pressure until other, relatively weaker assets have fallen to some extent.$黄金主连 2612(GCmain)$ $黄金ETF-SPDR(GLD)$ $微黄金主连 2612(MGCmain)$ $1盎司黄金主连 2612(1OZmain)$ $白银主连 2612(SImain)$ $Silver Miners Etf(SIL)$ $微白银主连 2612(SILmain)$ $100盎司白银主连 2612(SICmain)$
The yen is the final asset worth monitoring closely. After several unilateral and coordinated interventions, its weakness has eased somewhat, but the underlying macroeconomic factors have not changed. Over the past quarter, weakness in the yen and in U.S. Treasuries has also appeared increasingly linked. In other words, unless the yen’s decline is addressed, the upward pressure on U.S. Treasury yields cannot be resolved at its source. If the yen continues toward new lows, both the bond market and other markets will be directly affected. Over the long term, however, the downward trends in both the yen and the U.S. dollar will not be easily reversed. From a purely technical perspective, a break below 0.0(0)64 would send the yen toward its historic low. If it unexpectedly rises above its September high, it could test 0.0(0)72, but the prospects for further gains beyond that are slim. Overall, we can wait for a sharp rebound in the yen to look for opportunities to short it at higher levels. Comments from government officials, or intervention by the Bank of Japan or by Japan and the United States jointly, could all create short-term trading opportunities.$日元主连 2612(JPYmain)$ $日元ETF-CurrencyShares(FXY)$
For this week’s strategy, our long euro position has been filled at an average price of 1.1472. The stop-loss is set at 1.1360, with a target of 1.18.$欧元主连 2612(EURmain)$ $欧元ETF-ProShares两倍做空(EUO)$
Our long gold position was filled at 4,340 last week and stopped out at 4,270 early this week. As noted above, with that attempt unsuccessful, gold now faces greater downside risk. We will not consider another long entry for the time being. As for a short position, our intended entry price is now too far from the market, so we have canceled the pending order for now and will wait for subsequent price action.$黄金主连 2612(GCmain)$ $黄金ETF-SPDR(GLD)$ $微黄金主连 2612(MGCmain)$ $1盎司黄金主连 2612(1OZmain)$
In crude oil, our long position entered at an average price of 75 previously reached its first target of 95, where we took profit on half the position. This week, we have raised the stop-loss further to 88. The next target is 115, where we will close the remaining position.$美国原油ETF(USO)$ $WTI原油主连 2611(CLmain)$ $小原油主连 2611(QMmain)$ $微型WTI原油主连 2611(MCLmain)$
If the protective stop on the long oil position is triggered, we will place new buy orders: limit buys at 83 and 75, a stop-loss below 67, and a target of 115. The orders will be good till canceled (GTC).
P.S. If a trade reaches its first target, its stop-loss will automatically be moved to the entry price. Any adjustments after an order is filled will be covered in subsequent articles.
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