Short Term Trading Weekend Lounge: 7-9 Dec, page-10

Reiterating from my post a couple of weeks ago (25/11/18) about a couple of calls that I made on Gold stocks and US Treasury Bonds.
https://hotcopper.com.au/posts/36630161/single


I posted this on DCN's forum this morning but thought it worth a mention as it's following my thinking on Gold stocks not performing well until the Fed signifies that they 'may' start cutting interest rates.
https://hotcopper.com.au/posts/36779945/single


"My concern is that AXGD has been trending down whilst Gold Price has been trending up...?
This tells me that under the current market conditions, investors will reluctantly buy Gold but not Gold stocks...

I haven't really seen any Gold stocks making new highs and there have even been some Gold producers like DCN trending lower...
This comes even though the POG has been going higher...?

What will happen to Gold stocks if Gold goes back down to around $1,200 levels..?
Not saying it will and not trying to down ramp, just trying to look at it from this prospective.

There still doesn't seem to be a major 'flight to safety' buy in Gold yet, although it seems to be getting closer..
I'm still under the impression that Gold and Gold stocks won't perform well until the Fed signals that they may start cutting interest rates. (Q2 2019)."


AXGD - Daily Chart (Purple line is Gold futures price)

Gold - Making Higher highs.
AXGD - Making lower lows...





US 10 yr Treasury Bonds

US 10 yr Treasury Bonds broke out decisively this week.
This was a strong confirming signal that there's now a big move away from risk/equities and into the safest of safe havens.

Last night there was an expected retracement/profit taking from this big move down.
Today has been an opportunity to the 'buy the dip' before the release of more economic data tonight.


US 10 yr Treasury yields

26/11/18 is circled




US 10 yr Treasury Bonds





There are 2 big economic indicator that are being released tonight in the US.
They will both have a large impact on US Treasury Bonds.
The economic indicators are, the "Nonfarm Payrolls" and the "Unemployment Rate".

These 2 economic data points will likely move the markets as well as bonds.
- A higher than expected Nonfarm Payrolls will signal a strong economy and should be bullish for stocks (short-lived) and bearish for Bonds (very short lived).

- The Unemployment Rate can be taken both ways....
A low or lower Unemployment Rate would signify a very strong economy in the way of a very tight labour market but would also give reason for the Fed to be more hawkish in their future rate hikes...
A Higher than expected unemployment rate would signify that the economy is already in slow down and that job cuts are already starting to appear..
This indicator is probably bearish either way you look at it...

The economic indicators are due out at 8:30am US EST.
Expect a lot of volatility when they are released.
If Nonfarm payrolls (jobs) come in higher than expected then it would be probably the last 'buy the dip' chance before a further move to the downside on US Treasury Bonds.

Last night we had the 'ADP Employment Change' economic indicator which came in at 179k, below the consensus forecast of 225k.
The ADP Employment Change indicator can be used as a 'rough' gauge for the Nonfarm Payrolls.

As you can see below they aren't a perfect match but show an underlying theme that is they're both declining.

Will the Nonfarm's be below forecast too..?
This would be a very bullish signal for buying Long term US Bonds.






This strategy is for those who believe,

- December may be the last rate hike.
- A slowdown in global growth is accelerating.
- A bigger decline in markets is likely ahead.