Forex & commodities on December 26, 2017: thoughts & outlook


Here are my discretionary thoughts on forex and commodities (oil, gold, silver, etc). I only trade the S&P 500.
Go to the homepage for my latest thoughts on forex and commodities.

Thoughts

  1. USDCAD: a bullish sign for the USD Index
  2. Gold and silver are killing both longs and shorts
  3. If Bitcoin has already topped, where will its major bounce be?
  4. Bitcoin’s seasonality in early-2018.

*I do not trade Bitcoin because I think it is an insane bubble. These are just some thoughts.
4 pm: USDCAD is a bullish sign for the USD Index
There is an inverse correlation between USDCAD and oil because Canada’s export economy is driven by oil.
Oil spiked today and made a new high.

USDCAD fell a little bit today, but did not make a new low.

This is a bullish price action on the USDCAD’s part. Traders frequently regard the USDCAD to be a leading indicator for the USD Index. So this is a small bullish sign for the USD Index as well.
4 pm: Gold and silver are killing both longs and shorts.
I did not expect gold and silver to rally in the second half of December 2017. I expected them to make lower lows before bottoming at the end of December. This discretionary outlook was wrong.
From a price action perspective, precious metals are killing both longs and shorts.

  1. When the gold/silver went down, their price action was very bearish. Gold/silver reacted in a bearish way to every single correlation.
  2. But now that gold/silver are going up, their price action is very bullish. Gold/silver are reacting in a bullish way to every singe correlation.

When gold and silver fall the way they did in early December, they typically make a divergence before bottoming. There was no divergence this time.


Precious metals’ current rally has triggered the stops of a lot of traders who were going short gold/silver into year-end.
This market is killing both longs and shorts. The best course of action is to wait. Gold and silver are being compressed into a tiny range, and the next breakout / breakdown will be huge.


5 am: Where will Bitcoin’s major bounce occur?
Bitcoin is in a bubble that has nothing to do with fundamentals. Bitcoin was 240% above its 200 daily moving average, which makes it the fastest bubble in history.
Bitcoin’s first big support was $10,000. This is a massive round # and is also close to the 50% retracement level.

Bitcoin is dominated by speculators and traders. As a result, Bitcoin’s bounce on the 50% retracement was front-run (too many traders were looking to buy here). So if Bitcoin continues to go down, then there will not be another big bounce at $10,000.
 
Instead, the 61.8% retracement support is where most traders have drawn their “final line in the sand”. This is where a lot of profesisonal Bitcoin traders that I know will go heavily long ($7600). Traders in all markets frequently regard the 61.8% retracement as the final bull-bear fight. If the market doesn’t break below the 61.8% retracement, then the bull market can resume. But if the market breaks below the 61.8% retracement, then the bull market is dead and the bubble is dead.
The next few days will be key for Bitcoin. Bear market rallies frequently retrace 38.2%-61.8% of the decline. Bitcoin has already retraced 50% after bouncing off its 50 daily moving average.

So if Bitcoin’s bubble is indeed over, then it should not bounce above $16400.
5 am: Bitcoin’s seasonality in early-2018.
Bitcoin’s history is short. However, Bitcoin tends to perform poorly in January. Bitcoin went down during the first few weeks of each year from 2011-2017. 2013 is the only year in which Bitcoin did not selloff at the beginning of the year.
This is a small and relatively unimportant factor that could extend Bitcoin’s decline.

2 comments add yours

    • Yea. I’m not sure what’s more fun. Going to Vegas, or sitting behind a computer screen in my bathrobe and trading crypto. At least I guess with crypto, you make money while the party lasts.

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