August twentieth, two thousand twenty-five
《Staying Ahead of the Curve》
《(How to) Stay Ahead of Potential Price Moves》
Preface: Today’s article is somewhat long. I had originally planned to split it into two parts for Wednesday and Thursday, but since they cover the same theme, I decided to publish them together. If you cannot finish it or have little time, feel free to divide it over two days. There will be no Notes update tomorrow unless something unexpected happens that needs discussing, or there is something I want to talk about. The major assets are all moving as expected. It is a good time to make money, so just focus on making money; this is a moment of shared gains, This is a moment of shared gains.
Most assets are in a “holding pattern” (except the euro, which I will discuss later), waiting for the global central bank symposium on Friday. Some unusual price action recently has led me to a conjecture, as Soros discusses in his 《Staying Ahead of the Curve》,is Insecurity keeps us constantly alert and ready to correct our mistakes...
In fact, when asked how he stayed ahead (Ahead of the Curve) this is how he replied:
“As I have repeatedly emphasized, I always look for flaws in every investment thesis. Once I find one, I actually feel reassured. If I can see only the positive side, that is when I truly worry.”
This does not mean I would reject an investment thesis simply because I cannot see any negatives; I just remain vigilant.
On the contrary, I often place particular value on investment theses the market is reluctant to accept, because they are usually the most powerful. Remember the saying: “The market climbs on a wall of worry.”
The purpose of revamping the weekend publication was to share our basic analytical framework with our friends on Planet. This section presents our understanding and expectations, We will continually compare and check actual events as they unfold in real life against the path expectations established in advance. Usually, this view will not change, but we will never rule out potential scenarios in the opposite direction, or the flaws that could trigger such contrarian risks.
Chart: The first half of our outlook for the US Dollar Index has been validated
1. The baseline expectation is that Regardless of the outcome of Friday’s meeting, the US Dollar Index will continue to rebound first; even if rates are cut in September, it will not break below the lower boundary. The only potential trigger for a genuine decline is the actual data released in 10 or 11; no other event will change the current trend, The same goes for the dollar and US equities：
Chart: SPX
Chart: NDX
The expected level for this pullback in the US Dollar Index is in the latest WEEKLY WRAP; find it there.
At that point, the US-led expectation of deleveraging will initially bring a broad sell-off across global risk assets, potentially including gold. After that, it will truly be time for Chinese assets to chart an independent course..
Chart: Notes 250801 “The subject’s issues and forward-looking behavior (including a discussion of employment data)”
2. The above is our assessment of the “genuine decline,”But is there an extremely small, though not “impossible,” potential upward path, This has always remained within the scope of our consideration, because, from an even longer-term perspective, the dollar is indeed still within an extremely solid uptrend...
Chart: The ultra-long-term uptrend line since 08
In this regard, if DXY in 9 continues to edge higher at a measured pace on lighter trading volume, and the monthly candle ultimately closes above 98.50, then a false decline will be confirmed, meaning that buyers still control pricing within the range;After that, if it closes above 101 before year-end, further confirming this longer-term uptrend... then dollar strength will shake the markets...
This seems diametrically opposed to the consensus that rates will inevitably be cut by 25 basis points in 9, but it is indeed not impossible..We had already explained this concern in advance in Notes250801, “The Subject Problem and Forward-Looking Behavior (Including a Discussion of Employment Data)”:
Chart: Notes 250801 “The subject’s issues and forward-looking behavior (including a discussion of employment data)”
The transmission logic of participant behavior cannot be generalized. Beyond the fact that lagging behavior itself can potentially lead to contrarian pricing, this kind of unexpected outcome, when pricing is brought forward, becomes consistent, and is taken for granted(The market has currently priced in 2+ rate cuts this year)under these conditions, it often leads to more chains of contrarian reactions.
3. A more dangerous example is the euro... This also needs to be discussed, while explaining why we did not participate in this latest move back up:
Chart: We stayed long throughout the move between the two blue lines, identified the top, and exited near 1.18’s high; afterward, we did not re-enter during the section marked by the red line. Both updates were fully shared on Knowledge Planet, where you can review them yourself.
Some savvy traders are already watching the strange moves in EUR/JPY. In fact, no one understands why demand for the euro has been so resilient. And given the current circumstances, is Japan really that bad? It seems not entirely so..
Chart: EUR/JPY are at multi-year highs
Extreme price action, detached from reality and expectations for the future path...
One intuition is that this trend seems to be nearing its end...
In fact, we clearly explained the euro’s position in the current global foreign exchange market during the previous uptrend. A trade that is safe and can be held to the end must have a clear rationale; only a clear rationale can lead to a clear absence of rationale. See Notes250425, “The (Only) Reason to Sell Gold (and Every Trade)”:
Chart: Notes250425, “The (Only) Reason to Sell Gold (and Every Trade)”
For the euro, the clear and sole reason for its rise can be put very simply in one sentence: it is the most important core trade proxy for selling the US theme against the backdrop of the global situation at the time, driven by hedging and catalyzed by sentiment.
And this reason no longer exists:
Chart: WEEKLY WRAP 250817
Further reading: all Notes from this year with euro, hedging, and selling the US as keywords (there are quite a few; you can find them all by searching the keywords yourselves)
So, overall, with the euro near a four-year high today, we remain bearish on the euro through year-end, until it is actually validated by the data. The currency pairs against the US dollar and the Japanese yen in particular carry enormous tail-shock risk.
Finally, continuing the title, on gold, crude oil, and crypto:
Chart: CMX Gold
Gold trading volume and open interest are both dormant. In both the Asian and European sessions, no major order-flow trend has emerged, while the New York session is focused on Russia-Ukraine talks, leaving the overall market subdued and bearish，Friday’s meeting is also unlikely to have a substantial impact....So, one viable option is to price the immediate shock caused by the meeting (if any, though most likely there won’t be）make an intraday contrarian trade..
As we have said all along, the Fed’s influence over actual prices in the market is now negligible.
Chart: CTA Trigger Levels
The only developments before year-end may be unexpected geopolitical changes. Such events cannot be predicted; they can only be addressed reactively by watching key price levels, and the same applies to crude oil:
Chart: CTA Trigger Levels
For now, At present, the energy market has largely priced in the potential outcome of this stage of Russia–Ukraine negotiations to about the same extent as the September rate cut. One noteworthy additional development is that media have reported India has resumed buying Russian crude, receiving two cargoes yesterday, because Russia’s discounted prices are enough to offset the costs they incur from sanctions...
As mentioned earlier, the decline in oil prices is an ongoing process, not something that happens all at once. The initial target price may be difficult to reach directly 55; a move in pricing above 60 may bring it to a temporary end.
Chart: CTA Trigger Levels
Lastly, the crypto market:
Chart: Bitco
The current expectation is that it will return to a level near 125,000, and then we will choose to exit.
We ask our own trading room, Trader, to publish 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 to put in the corresponding small planets (we also include some of our own commentary, but we do anonymize it to some extent).
Interested readers can subscribe as needed (subscribe only if you need it; don’t waste your money):
U.S. stocks:https://www.meridianresearch.app/home?product=us-strategies(Xingzhi)
A-shares and Hong Kong stocks:https://www.meridianresearch.app/home?product=asia-strategies(Ganglong)
Commodities:https://www.meridianresearch.app/home?product=commodity-strategies(Dixin)
As for the level of detail, it will probably get down to the industry level. On the mainland, we’ll try to avoid crowding; if we write too specifically, some people will jump the gun. We may be able to be a bit more specific for U.S. stocks, but readers will still need to think things through and fill in the rest themselves, There are no trades you can follow directly!。
The overall win rate has been pretty good lately.
I don’t know whether everyone likes this new format for Notes. If you think there’s a better option, you can leave a like to let us know. We’ll decide whether to continue with this kind of content or return to the previous column format based on the feedback we receive.
Wishing you all the best.
2025.08.20
Note: All content in this article is for reference only. It does not constitute investment advice or serve as a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as the basis for their decisions.