Meet A1 Analyst- Frank Cabibi
Frank has been Nick's right hand man for more than half a decade, and has experience trading everything from stocks, to crypto, to forex. Frank also focuses on the fundamentals and technical analysis, but engages in mid to longer term swing trading.
Frank shares trades on:
Gold / XAUUSD
S&P / SPX500
NASDAQ / NAS100
Currency pairs (GBPJPY, GBPUSD, EURUSD, USDJPY)
Cryptos
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Staying long! SPX500
The S&P500 has broken new highs recently, with the cool inflation data this week.
While I remain cautious about how much upside I think there is left, I continue to hold my long position.
I have also sold covered calls against my position to capture a bit of extra premium, and hedge a bit in case the market pulls back.
SPX500 position was shared inside of our VIP room. - Nick
Smart money is also decreasing its long stake in the S&P 500 as with retail. This mass exiting of the stock market could signify lower volume in the summer months, but it could also suggest that we are running out of buyers.
Data from the A1 EdgeFinder
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Regardless, the NAS is still a bullish signal on the EdgeFinder. This is because higher NFP and lower CPI are bullish scores. But we have to keep in mind that the unemployment rate is still on the rise, at 4%. JOLTS has been on a steady decline for a year. If the trend of our labor market continues to decline and interest rates won't budge, it's only going to hurt the bulls more when the market corrects.
I'm not certain of the magnitude of this looming correction, but I know the market is due to give back some of its gains thus far. Earnings season is done in the US, the hype is over with, and we are left with only one expected rate cut this year. The projected rates were revised from 3 cuts to 1. So who's to say that it won't be revised again to zero cuts this year?
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Stocks may run out of steam...
I have reason to believe that the Fed will not cut at all this year due to our sticky inflationary environment. Rates should remain elevated until CPI can dip under 3% and we see a promising trend lower to 2%. If they continue to stay above 3%, rates should stay above 5%.
This will continue to put pressure on earnings, jobs, mortgage rates, spending, etc. And eventually, something will crack. The US is in the middle of a race to see which cracks first: inflation or the economy. Large pools of money are already exiting the market while the US indices remain at all time highs. I don't think this is sustainable, and that the price of stocks should not be this high. The market may continue to run for now, but higher rates are going to catch up to us. And you don't want to be on the top floor when the building collapses. -Frank
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Yields seem to be capped now that we are looking for that September rate cut to happen. Lower CPI is a good indication that today's FOMC will lean dovish as higher rate fears are subsiding. Despite a slowing job market, a cooler inflation number is what investors are looking for. In other words, as long as CPI is coming down with labor, it's a good sign. Stagflation is not a concern right now. -Frank
Читать полностью…Cooler CPI numbers across the board... probably going to be weaker dollar with strong indices and gold
Читать полностью…Gold
Gold rises at the market open as stocks fall. Investors are still trying to figure out which asset would work best against the dollar as we expect lower inflation data tomorrow. Regardless of why the Fed may cut rates this year, it will still be a bullish sign for gold as it means a weaker dollar. However, if CPI runs hotter than expected, rates will have to stay higher for longer which could hurt gold’s price over time.
-Frank
The reason for this confusion couples with the fact that COT is also short this week on the indices. US30 and SPX are the largest changes to the short side. This may suggest that no one knows where the market is heading for now. This week will definitely provide a clearer picture on smart money sentiment, but there is so much uncertainty that it is hard for me to guess where I think indices, gold and dollar are headed in the short term.
-Frank
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Adding to the overall market indecisiveness, retail is strongly short biased against the S&P at over 70% short. NAS is also majority short, and Dow Jones is mixed.
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The demand for gold remained mostly unchanged from last week's COT. Price crumbled on Friday on better than expected NFP. However, with an uptick in unemployment to 4%, the US has not seen this level for a few years. Once we hit this threshold, finding a job becomes increasingly harder for women and minorities.
Price hit support and may be trying to bounce from the lows after a 3% drop Friday. For this week, we are going to need to see worse economic projections from FOMC and lower CPI. The reason lower inflation is bullish is because it can prompt the Fed to cut. Higher or sticky inflation will only delay the rate cut and continue to put pressure on the metal's demand. -Frank
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Friday
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Last June was 3% inflation. Since then, we've been up and down elevated above 3. If you look at this chart, you can see that we really haven't moved anywhere or seen any progression to lower CPI. People want to see the Fed cut so bad, but they don't realize the damage that could cause to what's already looking like a problem in the US economy.
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For once, retail might actually have it right. Not being bullish on stocks at all time highs is generally a good rule of thumb as they are probably waiting for a pullback. However, they could be too early in the trade, and stocks could continue to defy gravity.
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One reason that CPI did not really give us a clear indication of decline is because we are pretty much at the same spot we were in last year in June. Inflation has remained elevated above 3% for a year. This should be enough to tell us that cuts are not necessary and could actually cause more damage if we see one this year.
Gold is still bullish despite a steady jobs market. Keeping rates higher for longer is not a good sign for gold either, but the metal may be a hedge against the market and the dollar. The good news is the Fed will have to cut at some point, and either way, the dollar will weaken. Which is why gold remains strong.
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The Fed's latest dot plot suggests lower interest rates by next year. However, we are expecting to be at 5.1% this first year. The problem still lies with the Fed's lack of confidence towards their inflation goal to justify three rate cuts. When comparing the Fed's initial projections in March, we have seen a shift to higher interest rates for longer based on this image. We are still expecting one cut this year, but that's far different from the three we thought was going to happen. So, the question remains as to whether the Fed will actually cut this year, or will it get re-forecasted to no cuts this year. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240612.pdf
https://finance.yahoo.com/news/fed-dot-plot-suggests-central-bank-will-cut-interest-rates-one-time-in-2024-down-from-three-cuts-in-march-180721564.html
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Gold is still a bullish score on the EdgeFinder and for good reason. CPI numbers came in cooler across the board which will signify a rate cut at some point this year. The September rate cut confidence is looking more probable now that the inflation concerns show a further trend lower. Gold is up against a strong upward trend line on the 1D timeframe. The metal is likely to see some upside from here now that concerns have subsided.
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EUR/USD
After the ECB’s rate cut, the euro might be much weaker than the dollar now. This is because the US still fears that we might not get a cut this year while Europe’s monetary policy becomes looser. The pair is now on support on a falling trend line and may have to test the lows again. If CPI is higher, we might be looking at a bearish EU pair.
-Frank
S&P500
Although the market has hit a consolidation zone and technicals point to being overbought, we can’t pull a continuation of the rally off the table quite yet. Unlike most assets, the stock market tends to trend upward until a fundamental crack in the economy’s infrastructure. With CPI tomorrow and the Fed’s forecasted projection of the economy and interest rates, we have to consider another melt up if inflation numbers come in cooler. There is also long term support on the rising trend line on the 1D timeframe should price retrace. -Frank
EURUSD is no longer a strong bullish score on the EdgeFinder and is now hovering around neutral. The US economy is performing better than the EU, and ECB cut their interest rate out of concern for the economy.
Depending on the CPI data, FOMC may take a more hawkish stance if inflation remains sticky. If CPI moves lower, investors may become very excited for a rate cut in September. So, a lower CPI could be bullish EURUSD and a higher CPI may be bearish. -Frank
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The 10 year treasury bond is bullish at +7, our most bullish asset on the EdgeFinder. The reason bond prices are in demand is due to the expectations of lower bond yields in the future. Lower yields means higher prices.
Investors are not expecting rates to go higher now that the Fed talks more about cutting than hiking. The next likely move from the Fed will be to lower interest rates, thus propelling bond prices. If we want to see a more expensive 10 year bond, we probably want to see lower inflation.
-Frank
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Gold reacted negatively to the labor data this morning possibly due to the fact that NFP was higher. Maybe gold traders are not confident in a rate cut after seeing a "resilient" jobs market. The two year yield is higher today which also indicates a lack of confidence on the rate cuts. Gold is now on support on the 1D timeframe and is looking to possibly test back under the $2,300 level on support. -Frank
Читать полностью…