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  • #141
  • Jul 24, 2019 7:17pm Jul 24, 2019 7:17pm
Quoting EventsTrader
{quote} The ECB rate cut and signaling more to come, along with the rate expectations for the FOMC being too skewed towards 50bp, you're making a strong case for shorting the eur/usd.
I've shorted EUR/USD way back in January, I expected ECB to make a rate cut in 2019... then the markets started going up despite negative data and that reinforced my decision, i've added 15% more capital to my position in June. If it happens tomorrow or in September, i should still be able to get some nice profit by the end of the year from that trade.

This whole FED rate cut thing came as a surprise to me, but hasn't changed my stance regarding that trade... It's running risk free anyway, so not much harm can be done... except losing potential profit.
Through the light of enlightenment, darkness unveils the path of truth.
  • #142
  • Jul 24, 2019 9:22pm Jul 24, 2019 9:22pm
Quoting Vorenzd
it's clear that ECB needs to provide heavy stimulus to keep the EU from going into a recession.
I don't think there's enough they can do. They might temporarily succeed with added accommodation, but what happens when the US dips into recession next year? I see the barometer falling and really don't know how they're going to weather this storm.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #143
  • Jul 24, 2019 10:57pm Jul 24, 2019 10:57pm
US Advance GDP - July Preview

  1. US Advance GDP q/q

Notes:

  1. Advance GDP is an annualized figure and is the first of three GDP numbers released by the Bureau of Economic Analysis.
  2. The other two monthly GDP figures are prelim and final.
  3. Prelim is mostly a revision of Advance GDP, and the Final number is basically a revision of the prelim. Therefore, Advance GDP carries the most potential impact due to the uncertainty about what to expect.
  4. The consensus estimate for Friday's GDP data is 1.8%.
  5. The range of forecasts is relatively wide. Not counting outliers the forecasts range from 1.4% to 2.3%. Within that range though, not many economists surveyed think we will see GDP exceed 2.0%.
  6. 2.0% is the mode forecast, 1.8% is the median, and the average forecast of all economists surveyed is about 1.85%.
  7. The average of 1.85% could be misleading. While the mode was 2.0%, most other economists think GDP will come in at between 1.7% and 1.8%.
  8. Again, there's a lot of varying forecasts. The probability of a surprise seems high.
  9. There's a lot of focus on this data. The Fed entered the blackout period with the market split on where rates are headed July 31st, when the FOMC meets.
  10. There is risk in traders pricing in or out a 50bp rate cut, depending on this data.
  11. If we see a stronger than expected number, it could be the trigger the market needs to make the shift over to the 25bp expectation.
  12. If the data comes in weaker than expected, it'll add reasoning to the minority of the market participants who believe the Fed will cut rates by 50 basis points.
  13. Depending on how far the actual deviates from the forecast, the USD will move higher on stronger data, and lower on a weaker reading. Gold would normally move inverse to the USD.
  14. There's the potential for the market to take a direction if sentiment related to the upcoming Fed rate cut changes in either direction. The more likely scenario is that a stronger reading would send the USD in rally mode, as traders align expectations and price out a deeper rate cut. This scenario would be bearish for gold.

Recent GDP impacts:
Below I've included the past two Advance GDP releases and displayed the impact to Gold, EUR/USD, and USD/JPY. I excluded any further back as I feel October is too far back to include, since the Fed was tightening at that time and market conditions were very different.

The charts are 5M candles, and the vertical line represents release time.

April

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Gold
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EUR/USD
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USD/JPY
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February
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Gold
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EUR/USD
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USD/JPY
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Conclusion:
This is one of those rare events that might shift interest rate expectations. Since the Fed didn't communicate well enough in providing guidance on the extent of the upcoming rate cut, the markets are looking to this data as a possible factor that will be used in setting policy.

I have pretty strong conviction that the Fed will cut by 25 basis points, regardless of this GDP figure. That means I will be looking for a stronger than expected actual, hopefully deviating significantly from the 1.8% forecast. In that scenario the US dollar would probably see a strong Friday, and could rally significantly as the market prices out the deeper rate cut. Gold prices would come down as well. Remember we are still in the Fed's blackout period, so there isn't a chance of Fed members coming across the wires to calm markets. Here's where rate expectations currently are for July 31:
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A weaker than expected number shouldn't be ignored, as that scenario could trigger selling in the USD as possibly rate expectations shift towards 50bp. Gold would appreciate if the dollar heads lower. While I believe there's a limit on how much the market can shift their expectations towards the 50 basis point rate cut, remember that a much weaker reading might impact probabilities for further rate cuts in September and October.

I believe there is potential for a significant rally or sell off in the USD and to a somewhat lesser extent gold. It will all depend on if and by how much the actual release deviates from the forecast. My advice is to be ready in case the market takes a direction. That's where the profit potential with the lowest risk exists.

As always, caution is advised. Good luck fellow traders!
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  • #144
  • Jul 25, 2019 4:13am Jul 25, 2019 4:13am
Quoting Ef5
{quote} I don't think there's enough they can do. They might temporarily succeed with added accommodation, but what happens when the US dips into recession next year? I see the barometer falling and really don't know how they're going to weather this storm.
I agree, I don't think there will be anything they can do. I'd even go so far to say that even if the US doesn't go into a recession EZ might.
Did you watch the movie "Margin Call" (it's great, i recommend it)... i hear there is an European version in the works .
Through the light of enlightenment, darkness unveils the path of truth.
  • #145
  • Edited 8:29am Jul 25, 2019 7:01am | Edited 8:29am
Durable Goods Orders • Thursday 25.7.2019.

Sorry for posting this in the last moment, I was busy and had no time to write it and i didn't want to make a low quality post with a bad forecast.

Given the Fed’s mounting concerns, including slowing global growth and its impact on the manufacturing sector, today’s release(in 30 minutes) of advance durable goods orders will be highly anticipated by the markets and policy watchers.

Total durable goods orders fell 1.3% month-over-month in May, as civilian aircraft orders plunged for the second straight month amid Boeing’s struggles. 737 MAX model cancellations have led to roughly 30% declines in nondefense aircraft orders over the past two months. Excluding defense and aircraft, core capital goods orders held up better and suggest firms are not fully retrenching as they await clarity on trade policy. That said, the factory sector remains under pressure and incoming business sentiment measures continue to point to further weakness in Q3.

Previous: -1.3%

Personal opinion: 1.1%

Consensus: 0.8%


Be careful if you are buying/ planning to buy gold on ECB data, if this USD data comes in stronger then expected (which i believe it should), gold should be dragged down a bit as the USD grows stronger.
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  • #146
  • Jul 25, 2019 1:55pm Jul 25, 2019 1:55pm
Quoting Vorenzd
Sorry for posting this in the last moment, I was busy and had no time to write it and i didn't want to make a low quality post with a bad forecast. Given the Fed’s mounting concerns, including slowing global growth and its impact on the manufacturing sector, today’s release(in 30 minutes) of advance durable goods orders will be highly anticipated by the markets and policy watchers.
Total durable goods orders fell 1.3% month-over-month in May, as civilian aircraft orders plunged for the second straight month amid Boeing’s struggles. 737 MAX model...
Great analysis here. As long as it's before release time it's very valuable, especially since we hadn't previewed it.

Quoting Vorenzd
Be careful if you are buying/ planning to buy gold on ECB data, if this USD data comes in stronger then expected (which i believe it should), gold should be dragged down a bit as the USD grows stronger.
You nailed it. The stronger than expected data was reported, as you predicted. Gold subsequently sold off. Very impressive call.
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  • #147
  • Edited 3:41pm Jul 25, 2019 3:12pm | Edited 3:41pm
GDP • Friday 26.7.2019.

The first look at real GDP growth during the second quarter is released tomorrow and will also be closely scrutinized ahead of the July 30-31 FOMC meeting.
First quarter GDP growth surprised to the upside, running at a 3.1% annualized rate and in line with last year’s strong pace. That said, outsized strength from inventories and trade masked marked softness in consumer spending. For the second quarter, I look for these trends to reverse.

Consumer spending is poised to bounce back. Ongoing labor market strength, combined with little detrimental impact associated from the U.S.-China trade war, have kept consumers’ attitudes and spending habits on a healthy path.

Business investment growth, however, has slowed noticeably–weighed down by softer business spending, slowing global demand and concerns over trade tensions. I'm looking for the longest running U.S. economic expansion to continue in the period ahead, albeit at a decelerating pace.

I've provided you with a chart and a graph of forecast evolution of the Atlanta FED's GDPnow.

My personal forecast agrees with that forecast and I'm of the opinion that the GDP data will come weaker then expected at around 1.5% and provide a solid buy for gold quoted in USD.

Explanation of term "blue chip consensus": "Blue Chip Economic Indicators is the market-leading collection of macroeconomic consensus forecasts for the United States. "


Previous: 3.1%

Personal opinion: 1.5%

Consensus: 1.8%
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Through the light of enlightenment, darkness unveils the path of truth.
  • #148
  • Jul 25, 2019 3:30pm Jul 25, 2019 3:30pm
Quoting Vorenzd
Just look at these charts compared to the PMI chart... PMI is (in theory) a good indicator of economic health, and when you have a PMI under 50 since the start of 2019 and the stock market is rising, then you also add all the other negative EU data and it's clear that ECB needs to provide heavy stimulus to keep the EU from going into a recession. DE30 (Left) and FRANCE 40 (right) {image} {image} {image}
Wow, and confirmed today that further QE is on the way. Do you think we will be seeing a global recession, or is this more of a light easing cycle? It seems like we are in unprecendented times form a monpol standpoint.
  • #149
  • Jul 25, 2019 3:51pm Jul 25, 2019 3:51pm
Quoting Vorenzd
My personal forecast agrees with that forecast and I'm of the opinion that the GDP data will come weaker then expected at around 1.5% and provide a solid buy for gold quoted in USD.

Previous: 3.1%

Personal opinion: 1.5%

Consensus: 1.8%
Thanks for the insights. Very interesting that you think GDP is going to come in weaker than expected. I tend to agree with you. While the average and median consensus are right around 1.8%, economists that were surveyed had a considerable skew towards lower than 1.8%. If it comes in weaker than expected, you're right about gold having some upside potential. The USD will have some downward pressure. I think what I'll be looking at after the release, if it comes out weaker than expected is rate expectations shifting for the September and October meetings. That might give us a good idea as to the extent of any rally in gold/sell off in the USD.

As I mentioned in another post, a stronger than expected number would probably mean rate expectations for the upcoming July meeting will likely be shifting and would also cause a directional move with follow through.

In either case, the extent of how prices are impacted will depend heavily on how much the actual deviates from the forecast.
We must learn who is gold, and who is gold plated
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  • #150
  • Edited 4:41pm Jul 25, 2019 4:27pm | Edited 4:41pm
Quoting bigtx
{quote} Wow, and confirmed today that further QE is on the way. Do you think we will be seeing a global recession, or is this more of a light easing cycle? It seems like we are in unprecendented times form a monpol standpoint.
It's hard to tell right now, at the moment, most central banks still have the tools to fend off a recession, but they are slowly running out those tools. And that's the biggest problem. I believe if we continue going into neutral/negative rates and QE territory we'll enter a recession far worse then that a decade ago.

Also I believe that most stocks are way too overvalued... Like Apple for example, a company with declining sales got an evaluation of 1T$ when it launched a phone that was more expensive then the competition yet it provided less and maintained the same design as last year(that matters a lot to the average consumer)... and priced it at a 1000$ in US and over 1500$ in Europe. Their stocks ROSE onthe release of this device, then proceeded to fall over 25%. Then another rally started(again, driven by NOTHING but hope and wish to earn a quick buck). Then we come to the case of UBER, a company with no net profits with an IPO of 100B$... just crazy. These are just 2 examples... there are many more. (if you want to know about more, send me a message and i'll gladly list over 20 companies).

Stocks are even more overvalued then people think, both american and European. I don't know the situation in the Chinese stock market as i don't really follow it so i'd rather not comment on it.

So yes, I do believe that a spectacular market crash will come, but i don't think it'll come as a surprise. But i don't know when, this can go on for a while, the longer it goes on the harder it will fall. Every market crashes eventually, every expansion ends, but i don't know if stocks have ever been as overvalued as they are today.
Maybe only during the Tulip Mania in the 17th century...



Quoting EventsTrader
{quote} As I mentioned in another post, a stronger than expected number would probably mean rate expectations for the upcoming July meeting will likely be shifting and would also cause a directional move with follow through. In either case, the extent of how prices are impacted will depend heavily on how much the actual deviates from the forecast.
Yeah, there is a chance of it coming in stronger, however i'm of the opinion that it wont have as much of an impact on the market if it comes stronger. If it comes stronger, it'll surely shift rate expectations, but they are already 78.6% for a 25bps and 21.4% for a 50bps so i think in this scenario the expectations for a 25bps should go to around 90%, but that's still not a dramatic increase, sure, we'll be able to earn some short term cash and it'll be a nice movement. (mostly on USD) And if we look at Gold/USD, USD will be the one" doing most of the movement".

But in the other scenario(that i believe is more likely) where the GDP comes in weaker then expected we'll have a larger short term move as we'll have both Gold going up and USD going down, unlike in the first scenario where it'll mostly be USD going down. But on top of that we will also have a longer term oprotunity as that will change the rate outlook for the following meetings in October and December.

On top of that people who don't really understand economics or care about it much(average people) are mostly looking to buy gold (According to a survey by ipso) so a sudden move up might make them feel like they are missing out and they might join the rally, increasing our profits even more.
Through the light of enlightenment, darkness unveils the path of truth.
  • #151
  • Jul 25, 2019 5:12pm Jul 25, 2019 5:12pm
Quoting Vorenzd
Also I believe that most stocks are way too overvalued... Like Apple for example, a company with declining sales got an evaluation of 1T$ when it launched a phone that was more expensive then the competition yet it provided less and maintained the same design as last year(that matters a lot to the average consumer)... and priced it at a 1000$ in US and over 1500$ in Europe. Their stocks ROSE onthe release of this device, then proceeded to fall over 25%. Then another rally started(again, driven by NOTHING but hope and wish to earn a quick buck)....
My long-term model is about half-way bearish for stocks now. I'm still long, but will be looking to exit once a few more bearish items on the checklist are met. It could come in 3 months or another 2 years, can't make a call on that yet.

I don't know about you, but I'm looking forward to making a lot of money on the way down and buying back cheap. I'll never forget what it was like in 2009 with stocks absurdly depressed. It was an incredible opportunity, and I can't wait for another time like that.

Quoting Vorenzd
Maybe only during the Tulip Mania in the 17th century...
Just a sidenote, I think Tulip Mania's reputation is slightly unwarranted. Charles MacKay is probably responsible for this due to his characterization of it in his book Extraordinary popular delusions and the madness of crowds. My understanding is that when you hear about how a tulip could buy a home in Amsterdam it was really referring to special varieties. Tulips are a national symbol so it's understandable people would want to collect them. If you liken rare varieties of tulips to rare art, it's easy to see how a Picasso could buy a home in Amsterdam now. Given the context, the bubble then seems a bit less absurd.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #152
  • Jul 25, 2019 5:37pm Jul 25, 2019 5:37pm
Quoting Ef5
My long-term model is about half-way bearish for stocks now. I'm still long, but will be looking to exit once a few more bearish items on the checklist are met. It could come in 3 months or another 2 years, can't make a call on that yet. I don't know about you, but I'm looking forward to making a lot of money on the way down and buying back cheap. I'll never forget what it was like in 2009 with stocks absurdly depressed. It was an incredible opportunity, and I can't wait for another time like that.
I'd have to agree on you with that, I'm also long on many stocks across the globe... just not the most popular ones, i see potential in many companies, but for S&P 500 index, i prefer to stay away from that and similar stuff for now. I wouldn't go short at this moment, but i certainly wouldn't go long either.

The stock markets horrible month of December seems a distant memory if we look at their performance over the past quarter. To be honest, I did not expect this, because it was and is not in line with the fundamental development of the global economy. The only thing that changed drastically last quarter is the policy stance of the major central banks: a real dovish turn. This only means that it got better before it eventually will get worse.

If we isolate ourselves from the erratic and irrational behaviour of the market, then we can profit of it, taking advantage of the butterfly effect, we only need to sail with a small gust of wind before it potentially turns into a gale.

Quoting Ef5
Just a sidenote, I think Tulip Mania's reputation is slightly unwarranted. Charles MacKay is probably responsible for this due to his characterization of it in his book Extraordinary popular delusions and the madness of crowds. My understanding is that when you hear about how a tulip could buy a home in Amsterdam it was really referring to special varieties. Tulips are a national symbol so it's understandable people would want to collect them. If you liken rare varieties of tulips to rare art, it's easy to see how a Picasso could buy a home in Amsterdam...
Thanks for that information, that does make sense, i've never looked at it the same way we look at art today, it's a better perspective. I've read that book and most of my Tulip mania knowledge comes from there. I never researched it personally.


...but i'd still argue that it was an apsurd bubble because so many people came into the business hoping to earn a lot of money (just like people come into investing/trading today).

I think the problem is that it's hard for most people to asses the true value of something, i mean who doesn't like to dream big and overestimate something in order to be able to capture a dream of being rich or financially free? That's why most scams work, that's why most "trading gurus" sell their "buy when RSI crosses 20" "strategies" and that's why there is so much stigma around trading and why most traders lose. When you give people a glimpse of what they want to have but can't, that clouds their judgment and they make irrational decisions. I think the same thing is happening in the stock market, but on a much larger scale.
Through the light of enlightenment, darkness unveils the path of truth.
  • #153
  • Jul 25, 2019 11:01pm Jul 25, 2019 11:01pm
Quoting Vorenzd
{quote} Considering the string of negative EU new data that missed most forecasts and the negative revisions of previous data as well as some news this week... i'd say that the situation got complicated really fast. I'd put the chances of a rate cut for tomorrow's meeting at about 47,5% for a rate cut tomorrow. Just for reference, my forecast last week was 25% chance of a rate cut... So let me quickly explain why the 22,5% change in chronological order: 1. BOJ GOV KURODA hinted at additional monetary easing steps in japan - New outlook: 30% chance...
Thanks for answering my question yesterday Vorenzd. Regardless of already being at zero I think there is decent risk of a rate cut by the ECB too, and it looks like they are trying to signal one soon.
careful not to step in a pile of it
  • #154
  • Jul 26, 2019 7:11am Jul 26, 2019 7:11am
Please be careful, even if GDP comes in stronger/weaker, we should be looking at personal consumption change within the report as it accounts for 70% of GDP.

As you can see from EventsTrader's analysis, on the previous GDP release the data was much stronger then expected, but the US dollar weakened, the opposite should have happened if we just look at the data.

The reason why this happened is that personal consumption fell from 2.5% to 1.2%.

GDP is a very lagging economic indicator and should be treated as such. It's also often revised, so bring your focus to the report itself, and not just the number.
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Through the light of enlightenment, darkness unveils the path of truth.
  • #155
  • Jul 26, 2019 7:51am Jul 26, 2019 7:51am
The GDP report is not as good as the number represents. I highly advise against selling gold quoted in USD.

https://www.bea.gov/system/files/201...dp2q19_adv.pdf
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Through the light of enlightenment, darkness unveils the path of truth.
  • #156
  • Jul 26, 2019 8:51am Jul 26, 2019 8:51am
Quoting Vorenzd
The GDP report is not as good as the number represents. I highly advise against selling gold quoted in USD. https://www.bea.gov/system/files/201...dp2q19_adv.pdf {image} {image}
You was right good analysis
  • #157
  • Jul 26, 2019 3:42pm Jul 26, 2019 3:42pm
Quoting Ra7
{quote} You was right good analysis
There is a lot good analysis in this thread! I'm just along for the ride but have learned a ton in this thread.
  • #158
  • Jul 26, 2019 5:07pm Jul 26, 2019 5:07pm
Quoting bigtx
{quote} There is a lot good analysis in this thread! I'm just along for the ride but have learned a ton in this thread.
I completely agree,
@xxxx§|[::::::::::::::::>
  • #159
  • Jul 28, 2019 7:51pm Jul 28, 2019 7:51pm
Quoting Vorenzd
The GDP report is not as good as the number represents. I highly advise against selling gold quoted in USD. https://www.bea.gov/system/files/201...dp2q19_adv.pdf {image} {image}
GDP beat expectation, strong PCE, but negative business investment may drag things forward. USD may lose its momentum until this Wed fed rate decision. Gold may bound in range 1417 1423.
  • #160
  • Edited 7:40am Jul 29, 2019 4:47am | Edited 7:40am
Quoting benlong
{quote} GDP beat expectation
Both I and the market disagree.

Only the number beat expectations, the report failed expectations and showed us very worrying signs about the US economy. As i always say don't focus on the number itself, but rather on the report.

The GDP was mostly driven by strong personal consumption, however gross private domestic investments went down 5.5%, the worse in 4 years and spending on structures fell 10.6%.

Inventories also significantly fell.

A weakening manufacturing economy is much more worrying then a strong consumer base.

The general numbers do show an improvement at first glance, but when you go into the report it's clear to see the report was negative . That's why the US dollar didn't become stronger after the report... that's why it became weaker.

The reason why the US dollar became stronger later during the day is not the GDP report, it's Trump. Trump said (via his representative) that he does not want a weaker dollar, thus sending USD into a rally.
Through the light of enlightenment, darkness unveils the path of truth.
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