August third, two thousand twenty-five (250728-250803)
My wrist has been hurting lately and can barely bend; it seems to be getting worse. I went to have it checked, and it is TFCC, a wrist condition called a triangular fibrocartilage complex injury. I’m gradually understanding authors who have to type year-round: when it hurts, you really don’t want to move. Everyone should also get plenty of rest; if something is wrong, get it checked promptly. Health is still the most important thing.
The weekly review starting from 250720 will try further synchronize our understanding of the logic behind global assets, including the core guiding frameworks, reasoning processes, and directional price-movement biases for different assets.None of the content constitutes investment advice. Price direction is provided for reference only; we do not forecast the market, but assess risk-reward ratios under different possible probabilities.We will gradually complete this framework in the weekly reviews that follow; it is a bit too much to write all at once.. This includes adding asset classes and refining and updating the internal logic for each asset.
What would make you consider that you are familiar with the material?
Our basic requirements for our traders are: 1) be able to sketch from memory the weekly price movements of the assets discussed in the article—in other words, when shown an unmarked price chart, immediately identify the asset and the period in which that price action occurred; 2) be able to write down from memory the key prices for all assets in the article—in other words, when seeing any numerical price level (without looking at a chart or the news, just hearing the number), immediately identify the asset, its latest price, and where that price stands; 3) when reading related materials, immediately connect them to the guiding framework and logic—in other words, when encountering any new event, news item, or analysis, identify where it fits in the logical chain, make additions, substitutions, and updates, and assess how changing that node affects the outcome..
First, US Dollar Index
Chart: Broke above the downtrend line as expected and shifted to sideways movement
This week’s commentary update: when last weekend’s edition was published, the US Dollar Index had just bounced back above the trendline, at 97.6. Despite this week’s employment data shock, it has actually continued moving higher. A few investment banks have resurfaced to say they want to “reaffirm” their bearish-dollar view...
If you haven’t followed them for long, you might think they are emphasizing their existing view. In fact, a quick look back shows that just last week they said they were going long. I won’t name names here; some views are best taken with a grain of salt.
Our basic view is unchanged. If there is a genuine breakdown, it will have to wait until at least 10 or 11; before then, a return to 100 remains the more likely scenario. The decline cannot start yet, so don’t rush.
Since we closed our EUR short position in the US Dollar Index at the low, the dollar has moved sideways as expected.. Relatively speaking, several potential catalysts that could be expected to drive further dollar depreciation include: a) FOMC signaling a rate cut in 9, b) US-China negotiations, see Notes 250725 “The Great Reversal,” and c) potentially weaker US labor-market data; see our previous discussions on US employment data for this part.
1) This section’s guiding framework is, The Fed’s room to reprice * (degree of US policy uncertainty * difficulty of deficit financing * pace at which growth slows relative to other economies), determines short-term fluctuations in the dollar’s trajectory under long-term structural pressure.
2) The latter three factors will be reflected directly in US stock prices (for additional reading, see our previous Notes on the K-shaped economy).
3) Before tariff impact data from 10 to 11 are released, short-term rates (the front end) are the main driver; in other words, the foreign exchange market’s response to inflation still depends primarily on the monetary policy response path.
4) Tariffs being delayed until 8 means the actual data will not be available until 10/11 to formally assess the inflationary effects of tariffs and dollar weakness. Until then, goods shipped ahead of schedule will remain in the supply chain longer... We do not expect rate cuts before 9, therefore The dollar Sideways movement is currently expected to continue at least until 9。
5) The tail risk to Powell and Federal Reserve independence is extremely low, shock-driven trades may be limited.
6）97 This is a key control point (that is, a high-volume node) for the spot US Dollar Index over the past 20 years. The significance of a high-volume area is that, at this price, counterparties insensitive to short-term shocks are willing to absorb trades in any quantity. The long and short trends around this price also represent the views of the capital currently flowing through the market more clearly.....
And looking at the situation now, People still seem unwilling to let the dollar fall smoothly all the way down, even though shorting the dollar will indeed remain a core macro-trading conviction for a long time.
7) When returning to a short-dollar position, there are four routes, a) revisit European currencies, b) trade EM currencies, c) trade commodity indices or currencies/assets of commodity-exporting countries
Second, Yen, Japanese government bonds, Nikkei futures
Chart: USD/JPY rebounds as expected
This week’s commentary update: likewise, the data shock drove prices down but did not break the level, so our view is unchanged.
Chart: Nikkei futures have fallen
Last week we noted that the Nikkei’s event-driven rise broke above the 40500 level we had been watching for a long time earlier than expected. An early break is not necessarily a good thing: if the post-event rebound does not break 40500, it will be a new long signal for the Nikkei Index, with the floor below at 38800.
Clearly, the breakout came too early and failed...
During periods of macroeconomic turmoil, the failure rate of breakout trades often rises significantly because external factors interfere with chart patterns and repeatedly generate destructive false signals, causing even patterns traditionally considered highly reliable to fail again and again.
This is happening simultaneously across multiple timeframes in many markets, both among broad asset classes and in individual stocks within specific markets. This means:
1) either give up some profit and delay acting on the signal in exchange for greater certainty
2) or choose to take on greater risk by increasing position tolerance horizontally (time) or vertically (volatility), so as not to miss sudden volatile moves
This is especially important today, and everyone needs to think it through carefully and make a choice.
The more intense the selloff in long-dated Japanese government bonds, the sooner the yen will turn stronger after weakening. Take note.
1) This section’s guiding framework is, Under political volatility, fiscal dominance is driving the direction of Japanese government bonds and the yen.
2) Structurally, yen trades as a route to short the dollar have lost their appeal. On one hand, Japanese institutions have yet to deliver the capital repatriation expected by the market in April and May (a rotation from US Treasuries to Japanese government bonds), making the reallocation into domestic assets look like a joke. On the other hand, the interest-rate differential structure has also made shorting USDJPY very costly.
3) The greater the ruling party’s seat losses in the Japanese election, the more likely the authorities are to introduce fiscal stimulus, triggering a selloff in long-dated Japanese government bonds and further yen weakness—that is, USD/JPY will rise further。This is the direction the market currently expects: a loss for the ruling party.
4) However, If the selloff in Japanese government bond yields becomes disorderly, the trend in long-end yields will spread to global yields, once the market moves into this trading pattern, USD/JPY will instead turn lower; in other words, the yen will strengthen after weakening.The more intense the selloff at the long end of Japanese government bonds, the sooner the yen will strengthen after weakening.
Chart: The bond and currency market dynamics under fiscal dominance also apply to the dollar
5）After the fiscal event plays out, macro fundamentals will once again become the main driver of pricing driver, meaning that after 9 and through 10 and 11, the yen itself will have greater potential to strengthen on a relative basis and return to its long-term path of dollar shorts.
6) The trading range for a weak yen is 140-162，For a strong-yen trade, wait for the price to break below 140; we’ll discuss it then.
Chart: The yen is expected to weaken first and strengthen later
Chart: Notes250714 “From Fiscal Policy to the Bond Market: Reconsidering Value”
7）The Nikkei Index is moving without direction in a range between 38800 and 40500; a breakout would be the corresponding entry point，Relatively speaking, an upside breakout is more likely.
8) For Japan, the only thing we can confirm is that the balance of power between the ruling and opposition parties is shifting (see Notes250723 “Japan in Turmoil: From the Trade Deal to Ishiba”),The shift means a contest for influence over economic policy, and it also means fiscal policy is bound to be pushed in a more expansionary direction...
Three. Commodity Index
Chart: BCI; continue waiting for an upside breakout
This week’s commentary update: Recently, as I’ve visited some friends, stagflation has been brought up with increasing frequency each day.
1) This section’s guiding framework is:Tariff pass-through + fiscal expansion = clear inflation risk
2) Inflation risk and rate-cut expectations are two key factors in commodity markets, producing different price responses in different scenarios. In general, rising inflation expectations lift the overall level of commodity prices (This means that the breakout in BCI may also be delayed until year-end), while bets on the rate path are a strong catalyst for directional opportunities.
3) In commodity markets, these different price responses are often reflected in the composition of performance across products. A simple distinction is to divide commodities into precious metals and industrial commodities:This section also connects to the silver, platinum, gold, oil, and copper discussed below...
Precious metals are generally more sensitive to real interest rates. Gold and the white precious metals are trading proxies for this segment, which means that moderate-inflation trades that do not bring the prospect of higher rates, and behavioral bets on the rate path, can both act as positive catalysts.
Industrial commodities such as copper, oil, and iron are more sensitive to growth expectations, in inflation trades involving a demand-driven slowdown in economic growth, cyclical commodities are often suppressed with the exception of cost-push inflation trades, because in those inflation trades, industrial commodities are often the source of the rise itself.
4) The commodity index has been languishing in a low range, while As of today, a potential breakout may be taking shape..
5) Key levels 22
Four. Oil
Chart: Returning to fundamentals
This week’s commentary update: Fundamentals will continue to weigh on the upside; bulls have no option but to bet on man-made sudden events and count drilling rigs.
An opportunity may emerge in early 8...
A decisive break below 65 would bring natural downward momentum, and we can start watching the intraday charts.
1) This section’s guiding framework is: Notes250522 Reasons to Keep Shorting Oil + Notes250527 Reasons to Short Oil (Continued) + Notes250620 Rereading The Origins of Oil
2) On the supply glut, we have discussed oil fundamentals many times before; they are also the basis for our previous short positions (see Notes250523 Reasons to Short Oil + Notes250527 Reasons to Short Oil (Continued)). This is “basically unchanged” apart from geopolitical shocks: a) OPEC + ample supply, b) weak demand growth, and c) inventories have risen for several consecutive months and, based on what we can see now, will continue to grow over the next 18 months.
3) However, structurally, Before the downside trade returns to fundamentals, a period of relief with a decline in volatility is more likely to come first.
4）Price may subsequently form a range at 55-65, with the upper boundary being a potentially viable point to sell short.
5) Given the risk volatility outside the market, 63 is a safer downside point.
Five. White Precious Metals (Silver and Platinum)
Chart: Silver, position closed
Chart: Platinum, position closed
This week’s commentary update: Controlling drawdowns is key to surviving in the market over the long term.
Platinum and silver are among the things most worth reviewing this year, and may also turn out to be the biggest regret of the year as a whole.
We positioned ourselves for an upside breakout before the initial move, and our system correctly calculated the turning point, but we exited too early and lost nearly half of the gains from the rise. This mistake affected our subsequent judgment to some extent and also violated our trading principle of not repeatedly re-entering soon after closing a position...
In essence, it was still due to our lack of experience trading white precious metals. The last time this kind of volatility occurred was 17 years ago. Countless paper reviews, scenarios, and deductions still cannot compare with experiencing it firsthand once in a career. When the next opportunity comes, we will handle it with greater maturity.
This is something that calls for serious reflection. I will print this case and put it on my desk as a warning.
1) For the renewed breakouts in silver and platinum, we use other trading proxies (ETF + an individual-stock basket)re-enter; the reasons are given in point four below.
2) For commodities such as silver and platinum, volatility is especially high once they break free of their long-term trading ranges. This means, on the one hand, that their price potential should not be underestimated, and, on the other, that they require more patience to trade than other categories.
3) In terms of risk management is better to use a smaller position size, because the stop-loss distance associated with large swings is also much greater than in normal commodity trades。
4) White precious metals are also the category best suited to trading through proxies in other markets; compared with oil and gold, whose prices are constrained by fundamentals, their large swings and speculative drivers mean their prices are reflected more broadly in other markets (gold and gold-mining stocks do not always move together and sometimes even follow opposite price paths, whereas this relationship is much more consistent for white precious metals).
5) The high volatility and speculative drivers of white metals also mean that views may change at any time; a flexible stance is not a bad thing.
Six. Gold
Chart: If gold breaks to a new all-time high again, we will choose to re-enter
Chart: Notes250729 “Volatility Convergence”
This week’s commentary update: I wonder whether everyone has found their own answer to last week’s question,
All in all, the situation really is not encouraging after this week.
We will take no further action on gold unless it makes a new high.
1）Volatility is broadly flat, macro-fund participation is declining, and trades with higher Sharpe ratios in the market are gradually eroding interest in gold. At present, it is difficult to see a catalyst that could push gold prices beyond their current level, and this may be the condition needed to force many macro funds to close their long positions, especially at this halfway point of the year, when some funds cannot afford to wait.)
2) As for gold, A new high in price may have to wait until 10 and 11, that is, after the release of the actual data; this is also the gold trade we previously discussed as XAU/SPX the expected timing for the paired trade against the U.S. Dollar Index to move higher (the long-gold, short-dollar-index phase)。
Seven. Crypto Markets
Chart: The rally is slowing
This week’s commentary update: The spot long position is showing a small unrealized profit, but this trade is mentally prepared to exit at breakeven.
1) Inflation risk and rate-cut expectations are two key factors in crypto markets, and they produce different price responses under different scenarios.Relatively speaking, a moderate-inflation and accommodative-policy environment is most favorable to crypto markets, whereas rate tightening in response to extreme inflation is instead unfavorable; the market is more inclined to use real interest rates as its trading benchmark..
2) The bias toward softer growth and the tendency for softer data before 10 and 11 have led us to the idea of making another attempt to bet on a new high after 9 weeks, however, this trade will also have a relatively tight stop-loss, and we will use spot only for the position.
3) Although a short squeeze occurred in ETH, Bitco reacted mildly to the passage of stablecoin legislation; as expectations and news on this topic wind down, there may be a point-in-time “buy the rumor, sell the fact” flow of funds, and if that happens, the price may return to around 110500, The worst-case outcome for this trade is breakeven.
Eight. U.S. Dollar Index
Chart: SPX monthly
Chart: SPX daily
This week’s commentary update: Echoing Sean’s commentary in the deep dive, ES accelerated downward as we expected. Keep in mind that all the tariff and trade news BS don’t mean much compared with the lifetime resistance line, which will eventually break the market in an unforgettable way!
Specifically:
Chart: NDX
It will still be difficult to see a large downside move before 10. Take NDX as an example: if it moves lower, it will first return to the price of 22120.
1) In an environment of uncertainty about the conditions for final decisions, micro-driven trading will dominate the U.S. stock market: the continuing delay of data releases, combined with the arrival of earnings season, With the burden of macro shocks lifted, the U.S. stock market will linger longer near the top. In the short term, there is only one remaining possibility for the smooth decline we expect: a wave of “earnings results far below expectations” appearing one after another at the micro level.
2) Before the actual assessment data for 10 and 11 are released, the market will engage in more intense debate and positioning around the rate-cut path for the rest of the year and the terminal rate. This means volatility on data release days will rise again—after nearly half a year of silence.
2）The process of the U.S. stock market hovering near the top is RTY and other indices catching up the process, DJI is expected to complete a false breakout, and this part is already unfolding as expected.
Ten. U.S. Treasuries
Chart: Bottoming volatility
This week’s commentary update: Allocation
1) If extreme conditions arise in the market, bonds will offer very attractive value
2) There may be someone aggressively buying to build a position; judging by the overall performance of U.S. stocks, this possibility is increasing
Nine. Chinese Assets
Chart: Pullback near 2760
This week’s commentary update: The 000016 axis has pulled back to 2760; see the commentary on the Nikkei section above.
For a period of time, price movements in the major indices will create the trading backdrop for individual assets in the market. A strong index breakout means a higher probability of success for right-side trades. Over the past week, the breakout-pattern success rate monitored by our model has diverged from index prices; this is closely related to the fact that the breakout above 2760 two weeks ago was not particularly strong.
A pullback to 2760 means the prime time for broad-based right-side trading has not yet arrived, so we cannot fully let go and make big moves;
manage risk properly.
1) As discussed in Notes250710 “From Brazil to China: A Market Tour,” compared with other indices in the market, the price of the Shanghai Composite 50 matters more to us. A stable weekly close above 2760 is the primary condition for entering later.Once it holds firmly, Chinese assets are likely to see a catch-up rally over the coming weeks.
2) Although it is not particularly strong, it is tradable; we are starting to go long Chinese assets, and starting next week there will be more domestic-market content.
Ten. Emerging Markets and the Brazilian Stock Index
Chart: EEM
This week’s commentary update: The key judgment has been validated; the high was 49.96, and we are now following scenario b under the add-on dilemma.
1) Previously, we had only anticipated one path: continuous new highs. However, the add-on dilemma has now emerged (see Notes250724 “EM’s Re-Entry Dilemma”), so there are actually two possibilities now... a) A strong breakout above 50, continuing along our previous expectation, with emerging markets remaining the main relative outperformers; b) consolidation at the index level, oscillating between 50 and 47.
2) As a general theme this year, we are more focused on emerging markets.Since the global-asset lows of 20, emerging-market indices have underperformed on a relative basis, but At this stage, going long EM offers greater return potential. The upper boundary of the EEM trend channel is around 50 and could be the target for the next phase of gains. If risk-asset appetite persists, the uptrend could accelerate and outperform on a relative basis.
3) Slower-moving institutional managed funds face a difficult add-on dilemma. On the one hand, market prices have already reflected to a large extent the expectation that they might buy, so entering now means missing out on cheaper holdings. On the other hand, at present, EM assets really are relatively among the better allocation choices in the beauty contest.The add-on dilemma means that EM assets may enter a consolidation phase at the index level, although further gains remain the expected path.
Chart: Brazilian Stock Index
This week’s commentary update: There is no such thing as a stop loss on an allocation position.
1) A longer trading horizon, but an unchanged expected path, there is quite a lot in this section, and most readers may be unfamiliar with the background, so I recommend reading the full text directly; see Notes250710 “From Brazil to China”.
As a bit of promotion, we ask the traders in our trading room to produce roughly one single-market note every 2 days, covering U.S. stocks, A-shares and Hong Kong stocks, and commodities. We select the better ones and post them in the corresponding small community,
Interested readers can subscribe as needed (subscribe only if you need it; don’t waste money)
U.S. stocks:https://www.meridianresearch.app/home?product=us-strategies(Xingzhi)
Hong Kong stocks:https://www.meridianresearch.app/home?product=asia-strategies(Ganglong)
Commodities:https://www.meridianresearch.app/home?product=commodity-strategies(Dixin)
The level of detail will probably go down to industries. For mainland China, we’ll try to avoid crowding; if we write too specifically, someone may front-run the trades. U.S. stocks could perhaps be covered in more detail, though readers will still need to think through and fill in the process themselves.
The overall win rate has been quite good lately...
Note: Everything in this article is for reference only and does not constitute investment advice or serve as a basis for any laws, regulations, or regulatory policies. Investors should not use this information as the basis for decisions or rely on it.