April twenty-first, two thousand twenty-five to April twenty-second, two thousand twenty-five

I. Foundation

resistance to change and hence greater dependability for the results shown in the past.

II. Insights

Our Viewpoints and ideas on market.

Back to the foreign-exchange market and a key guiding question in FX trading (a brief answer to why technical analysis also requires understanding macroeconomics, and why charts are not drawn at random)

Questions about the U.S. dollar’s dominant position as the global reserve currency are becoming one of the central topics of current market discussion. Although the use of the dollar its share remains higher than that of all other major reserve currencies(including the Australian dollar, Canadian dollar, renminbi, euro, pound sterling, yen, and Swiss franc) combined, but alternatives represented by gold or baskets of multiple currencies are rising significantly.

This is another pivotal week, on the one hand, the market is nearing the limit of tolerance for intervention in major currencies, while the upcoming IMF meeting is expected to focus on concerns about U.S. Treasuries, including Federal Reserve independence, debates over government spending and taxes, the dollar’s valuation, and cross-border investors’ willingness to allocate capital to U.S. assets.

Last week, market focus shifted from fixed income to equities, partly because of Q1 earnings reports and Q2 outlook, but With trade negotiations with Japan and other countries coinciding with the IMF meeting, attention will return to the dollar and the global foreign-exchange market itself (gold trading is also foreign-exchange trading; it directly matches against sovereign fiat currencies worldwide, a point we have emphasized repeatedly in our community) (gold, sovereign fiat currencies/foreign exchange, and cryptocurrencies are essentially in the same trading pair).

For related reading: Notes250421The Divergence Between Bitco and Gold: Starting from Zoltan’s Viewpoint

Chart: Peter’s prediction from a week ago is coming true

Related reading: Weekly Wrap 250420

Finally, a brief additional point about FX trading Another key is understanding which currency in a pair is the dominant pricing currency, which is the essential starting point for analysis and is useful not only for macro strategy judgments, but may also help members of our community who are more comfortable using technical and chart analysis, which is also why we often bring up the question of why even if you’re a pure tech boy, you still need to understand some basic macro concepts before making a move...

Here is an example; I hope it helps:

The New Zealand dollar has just completed a classic but relatively rare broadening reversal pattern, This pattern almost always appears at a top, not a bottom (a very simple textbook technical-analysis principle: the same pattern can carry different meanings and probabilities in different trading ranges or at different locations; this is an additional note for readers who do not use technical analysis).

What we need to note here is that, in this currency pair, the U.S. dollar is the dominant currency, so if it is expressed and charted as USD/NZD, it actually corresponds to a top...which also means greater certainty...At such a time, charting is not a matter of forming a view first and then using a pattern to “find evidence” that you are right. Where it should be drawn is fixed!

This is also where technical analysis often goes wrong: the same setup,

if you want to draw a chart, you first need to know which panel to draw it on.

Then you can discuss the supposed pattern and the probabilities associated with its location.

2025.04.21

Why the U.S. stock-market decline is far from over

First, at least for now, the U.S. stock market is nowhere near a genuine bottom，Neither of the two key features—1) flush-out capitulation and 2) extreme excess buy flow—is present, so it is indeed far too early to say the decline is over., within our medium-term trading horizon, we will continue to maintain a structurally short position (specific real-time U.S. index-futures trades will also be posted in our in-depth community and managed by Sean/https://www.meridianresearch.app/home?product=vega-trading), anyone willing to take the other side of our trades, step forward.

This U.S. stock-market pullback is the fourth major correction of more than 15% since 2018, SPX The first three occurred on 2018/12/24, 2020/3/23, and 2022/10/11, and all three of these bottoms (including all previous market bottoms) shared the same trading characteristics:

Every genuine market bottom has gone through a sharp selloff + extreme net buying (flush-out capitulation + multi-sigma buy flow), rather than a “soft-landing” rebound driven by policy news. Everyone must keep this in mind!

Chart: A brief positioning update we previously posted in our U.S. equities community (https://www.meridianresearch.app/home?product=us-strategies）

It was made very clear, The market is at its pain threshold, and so are the so-called U.S. politicians; this means all the news will necessarily lean to the upside, so, There is no need to wait for the details of the news, because both the outcome and the way it is presented are predictable; once prices reach a certain range, the corresponding news will naturally follow.。

Either go long before the news and hold until it is released, or go short after the news has been priced in. Since this round of selling began, every swing has unfolded this way, without exception. You can review the market action for yourselves.

To quantify a market bottom, refer to how the market behaved at previous bottoms:1) a major selloff; 2) an intraday rebound of at least +5% after the selloff; 3) the rebound accompanied by extreme excess net inflows (2018 year 12 month 26 day: +840 hundred million dollars; 2020 year 3 month 24 day: +1450 hundred million dollars; 2022 year 10 month 13 day: +1440 hundred million dollars).

To emphasize once again: a flush-out selloff + extreme net buying.

A bottom is not triggered by positive news; it is necessarily the result of market participants running out of sellers.

The buying on 4 9, totaling 5370 hundred million dollars, was essentially low-quality capital briefly lured into the market by the “tariff delay” news, not value buying after a “panic flush-out.”The news may even have artificially drawn in speculative longs with little conviction and forced shorts to cover, making the current market structure more fragile. This is another reason we have greater confidence in our view of a larger medium-term decline.

Systematic strategy capital (CTA, Risk Parity, Risk Control..) was still among the first to sell in this cycle, but the real pain is only just beginning, The later exit of slow-moving capital is the real key to driving valuations down. Unwinds are now clearly less frequent and less intense than in previous rounds; the next phase may bring more concentrated passive deleveraging.

Retail investors still haven’t reached a genuine “panic” phase—the bottoms on 2018 12 26, 2020 3 24, and 2022 10 13 all showed clear “Buy the Dip” behavior, but So far, this round is still mainly characterized by buying the dip. As in the previous three rounds, a true bottom does not occur while retail investors are buying dips; it will only arrive once they begin to engage in concentrated “panic selling.”

Options data also show a typical flawed structure, reflecting a low-conviction long thesis based on “fear of missing out” rather than “willingness to withstand a pullback.”On top of that, the dollar index has -8.5% since the beginning of the year, so foreign capital will flow back into local-currency assets. Most of the funds that bought U.S. stocks ETF heavily last year are now sitting on losses—the simultaneous pressure on the dollar and U.S. equities is only just beginning.

Stay patient and wait for the flush-out; it certainly will not happen quickly, so do not be in a rush.

For now, we need at least a break below 4.7’s News pivot before discussing anything else, A breakdown is inevitable; the market will not panic unless it breaks down (just like you), so it will definitely break down.. If you are Mr. Market himself, how could you possibly defeat yourself?

That is all we will discuss today. Leave the time for reviewing and doing your homework. When there are no fish, get some rest and spend more time with your family.

2025.04.22

III. Market Pulse

Our latest Comments on the economic and market environment

Bitco and Gold’s Divergence: Starting with Zoltan’s View

Zoltan Pozsar’s latest views are quite interesting, so I’m sharing them with you at the start of this week. They may provide a useful perspective to help you understand, to some extent, this divergence between BTC and gold.

He believes that the Bitcoin legislation Trump has repeatedly brought up is actually a clever, indirect way to drive up the price of gold without drawing the bond market’s attention.In other words, legislation related to Bitcoin (such as allowing BTC into the reserve system, tax exemptions, pricing and settlement, and so on),On the surface, it is intended to support crypto assets; in reality, it may be quietly creating legitimacy for a rise in gold prices.

Why call it “quietly”? Because if the government openly bought gold or pushed up its price, the bond market would react immediately, meaning: 1) inflation expectations would rise; 2) real interest rates would fall; 3) U.S. Treasury prices would come under pressure and financing costs would rise;

This would disrupt overall financial stability and would not be worthwhile, especially for a highly indebted government.

Gold is an anchor for long-term real interest rates and a boundary for the credit system. When government credit is overextended and inflation pressures are hard to control, gold often becomes the anchor for repricing the monetary system.But if the market realizes that gold is being officially “repriced”: 1) the bond market will anticipate more monetary easing or a weakening of confidence in the dollar; 2) it will sell U.S. Treasuries in advance, pushing yields higher; 3) ultimately, this will undermine the government’s ability to finance itself.

In one sentence, Zoltan’s central point is: don’t be misled by appearances.Whether it is packaged as “Trump supporters like BTC” or as politicians courting votes, its real policy consequence is to pave the way for legitimizing and repricing gold.

Bitcoin legislation is not simply about supporting BTC; it clears the way for gold to be repriced through Bitcoin—and doing so will not alert the U.S. Treasury market. It is a “structural strategic tool” for bypassing the traditional financial market reaction mechanism.

That is also why the two have followed an unusual pricing divergence even as debate over the bill has intensified.

Chart: The day gold broke upward was exactly the day BTC broke downward(The bill debate instead shorted BTC and went long gold)

Understanding it from this perspective, then a confirmed rebound in BTC could bring a simultaneous peak in gold, likewise, a surge in gold could also bring a relatively sharp short-term downside risk for BTC, and the two are consistent with each other.

This is just a perspective to watch; keep an eye on this chart going forward—it could be quite interesting. Be careful if the two converge.