Here are my discretionary thoughts on forex and commodities. I only trade the S&P 500.
Go to the homepage for my latest thoughts on forex and commodities.
- Oil rig count needs to rise if oil prices are to fall
- The USD’s price action is very bearish.
- EURUSD is the most bullish forex pair
4 pm: Oil rig count continues to fall, despite rising oil prices.
This is remarkable. The U.S. oil rig count continues to fall despite rising oil prices (-5 this week to 742). If oil prices are to fall, then the U.S. oil rig count must rise. Otherwise oil will at most make a pullback under such medium-term overbought conditions.
6 am: the U.S. dollar’s price action is very bearish.
There are a million reasons for the U.S. dollar to bounce right now. Here are the main ones.
- “Smart money” commercial hedgers are extremely long the dollar.
- Merkel is at risk. If Merkel cannot form a government, the Euro will fall and the USD will rise. (Merkel’s strength and negotiation skills saved the EU in 2010 and 2012).
- The USD is at its final multi-year support. There are no supports below this level.
- The U.S.-Germany interest rate differential is at its peak. (Conventional wisdom: capital flows to countries with higher interest rates).
- The Fed continues to hike interest rates. (Conventional wisdom: rate hikes = bullish for a country’s currency).
Instead, the USD can barely bounce off of this support level. When a market has a million good reasons to bounce but doesn’t, there is something very wrong. This is VERY bearish price action for the medium and long term.
6 am: EURUSD is the most bullish pair.
Traders should always buy the asset that is the strongest. Traders should always buy the leader and avoid the laggard. There is usually a solid fundamental reason why laggards are laggards.
The Euro is the strongest out of all the non-U.S. currencies. Here’s EURUSD.
Here’s USDJPY. Notice that USDJPY hasn’t even approached its mid-2016 low yet (while EURUSD has vastly exceeded its mid-2016 high).
The Australian dollar is stronger than the Yen, but weaker than the Euro. It is on the verge of a massive breakout from multi-year resistance.
The Canadian dollar’s price action is weaker than the Euro. USDCAD and oil move inversely. As you can see, oil has surged while USDCAD hasn’t fallen significantly.
I only trade stocks. These are just my thoughts/outlook on other markets.
- Gold and silver will remain within their wide range during the first half of 2018. Then gold and silver will rally strongly in the second half of 2018.
- The USD Index will remain within this range (i.e. 90-96) during the first half of 2018. Then the USD will crater below this range in the second half of 2018. Revision: Perhaps the USD will break down sooner than I expected.
- The best traders I know are still bullish on Bitcoin in the short and long term. I agree with them only to the extent that this bubble has a few months left. See “the pigs are flying” in this post.