US Treasury Bond Purchases: Gold Surges, Dollar Plunges—But Is a Bull Market Really Here?
Last night, I shared my latest assessment of gold, equity indices, crypto assets, and the US dollar in the futures livestream room on the Tiger Brokers platform following the release of news regarding US Treasury purchases of government bonds. The central focus of the livestream was how to determine whether the market had shifted from a consolidation phase into a new trending phase by analyzing correlations among different asset classes. For those who were unable to attend, the replay of the video course is available below:
I will now categorize and summarize the key information and trading-related insights from the course, so that those who did not have time to attend can quickly understand my current market view. I will begin with a brief personal introduction.
Since entering the financial markets in 2007, I have accumulated more than 15 years of experience in live margin trading, with a particular focus on foreign exchange, gold, and futures. I previously served as General Manager and Content Director of Wallstreetcn’s Gold Headlines. I am currently a special lecturer for the Chicago Mercantile Exchange (CME) and a member of the expert network of Gerson Lehrman Group.
The core views presented in this course are as follows:
$NQ100指数主连 2609(NQmain)$ $纳斯达克(.IXIC)$ $纳指100ETF(QQQ)$ $道琼斯(.DJI)$ $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$ $标普500(.SPX)$ $标普500ETF(SPY)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $标普500波动率指数(VIX)$ $波动率短期期货指数ETF(VIXY)$ $1.5倍做多短期期货恐慌指数ETF-Proshares(UVXY)$
My central view is that although different risk assets may begin to move at different times and rise at different speeds, their broader directional trends are often aligned. Once a leading asset has completed a breakout, relatively lagging assets will typically have opportunities to catch up. Crypto assets previously underwent approximately one to two months of sideways consolidation before breaking higher. The strengthening of Bitcoin and Ethereum, as leading indicators of risk appetite, suggests that the market may no longer be in a purely range-bound phase in the short term and may instead be entering a new trending phase.
Accordingly, over the next one to two months, trading should primarily follow the prevailing trend. For strong-performing assets, priority should be given to buying on pullbacks. Assets that have risen too rapidly should be monitored for opportunities after their pace of appreciation moderates.
Precious Metals, Primarily Gold
Spot gold formed a large bullish reversal-engulfing candlestick yesterday and completed an upside breakout. The short-term target is above 4,700, while a move toward the 5,000 level in the near term cannot be ruled out.
Gold has not yet separated itself from its characteristics as a risk asset. The conditions for a bull market are not yet in place, and there is currently no sufficient basis for gold to establish new highs over the medium to long term.
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Equities and Crypto Assets
The leading role of crypto assets: Crypto assets, particularly Bitcoin and Ethereum, are the leading indicators for this market move. After consolidating for approximately one and a half to two months, they broke out to the upside. A decline below 60,000 would constitute a signal that the market is weakening.
From the perspective of equity indices, whether the Nikkei 225 can establish a new high is the key indicator for assessing the market’s further upside potential. The South Korean stock market has confirmed a top and is unlikely to establish a new high unless the bull market continues into next year. The Nasdaq is highly likely to experience a catch-up rally subsequently.$罗素2000指数ETF(IWM)$ $罗素1000指数ETF-iShares(IWB)$ $标普500(.SPX)$
In terms of relative asset strength, different risk assets differ primarily in the speed and rhythm of their advances. Crypto assets, having risen rapidly, may subsequently enter a sideways phase, while slower-moving assets may complete their gains by exchanging time for price appreciation.
Foreign Exchange Market
Japanese Yen
Central-bank intervention is unlikely to alter long-term foreign-exchange trends. The traditional safe-haven and carry-trade rationale for the Japanese yen has completely lost its effectiveness. After any subsequent rebound reaches an appropriate level, the yen will become a key short-selling candidate.
US Dollar
The US dollar’s medium- to long-term downtrend is clear. A rebound above 100 or 101 would provide a relatively favorable level for establishing short positions. A major downward move is highly likely to occur in the fourth quarter.
Euro Futures
Euro futures are exhibiting a broadly inverse, mirror-image pattern relative to the US dollar, with bullish forces controlling the market.$欧元主连 2609(EURmain)$
Non-US Currencies and the Renminbi
Non-US currencies are generally moving in the opposite direction to the US dollar and therefore do not require separate analysis. A decline in USD/CNY toward the 6.4–6.2 range would signal that the renminbi is stabilizing.
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Specific Trading Strategies
Short Term
Yesterday’s price action confirmed the launch of a new upward trend. At present, priority should be given to adopting a buy-on-pullbacks strategy in strong-performing assets. With gold trading around 4,200, there are currently no attractively priced long positions available. Short-selling opportunities should instead be considered after prices reach relatively elevated levels.
Medium Term
Over the next one to two months, trend-following strategies may be maintained. From late October through the period after the Chinese New Year, the overall approach should be to take profits progressively while reducing exposure.
The current market expectation is that the Federal Reserve will leave interest rates unchanged in September, while the probability of a rate hike in December is approximately 63%. This expectation has not yet undergone any significant change as a result of the news regarding Treasury bond purchases.
Long Term
Positions should be established primarily in accordance with long-term trends, while countertrend trading should be avoided as much as possible. The gains from a single trade aligned with the dominant trend may equal those from ten countertrend trades. Most instruments will experience rebound movements, and traders may wait for clear signals before entering positions.
Practical Trading Execution Guidelines
Premise of the Strategy Discussion
The trading content updated each week represents a weekly-report-level strategy and cannot cover short-term trading opportunities or trades driven by real-time news. The corresponding strategies deliberately reduce trading frequency and generally involve relatively long holding periods. Previous positions in instruments such as the euro and crude oil reflected these characteristics.
When high-quality trading opportunities or relevant statistical data emerge in the future, the associated updates will be communicated promptly to users who follow this content.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
