July twenty-ninth, two thousand twenty-five
《No Change》
《Volatility Convergence》
First, Market pricing for July is remarkably unanimous:
It seems there is no suspense, The more activity there is, the more fully prices reflect it, and volatility naturally declines.
Chart: July pricing
Second, the dollar continues to strengthen sharply, and the drivers behind it are simple:
Chart: Since we closed our position at the low, the dollar has rebounded sharply to 99
1. The U.S.–EU trade agreement once again reminds the market that, having lost its footing on the Ukraine issue, the EU has lost the initiative in the arena of political maneuvering. It has no advantage at the negotiating table and can only appeal to the United States.
2. Tariffs have always been a positive factor for the dollar. The earlier period of dollar weakness was itself an abnormal path, reflecting the market’s extended judgment about the chain of causality. Once expectations that the U.S. economy would underperform relative to others disappear, the longer the causal chain, the faster it will break down. After we exited, many committed bears continued to hold on to their positions. Now, a month later, the dollar has completed a bottoming process...
Chart: Looking back, 1.18 was the highest point in this trade
Third, contracting volatility reflects a market waiting for major information or an event to break the deadlock.
Today’s crude oil and gold markets illustrate this point very clearly. Although the world is changing dramatically—politically, economically, and geopolitically—price action does not seem to reflect these changes...If we exclude extreme short-term spikes and crashes(Short-term crashes and spikes are not the result of capital voting; they are caused only by pressure during periods when prices lack liquidity and should not be taken into account in market assessments.)the overall price trend appears to lack direction or market depth.
Prices without trading participation are not real prices because they do not genuinely reflect market consensus or risk pricing.
In other words, If market prices are not the result of a large volume of genuine transactions, but are instead sustained more by low liquidity or passive capital, then their credibility is open to question.
Chart: Volatility convergence in the oil market
As I said yesterday, we have started looking at intraday charts again for oil trading. The market is in the volatility-contraction phase discussed earlier, and at this point The expected decisive breakdown will occur at the beginning of 8, with a downside target above 55.
The direct reason for the oil price recovery is that Trump said he would shorten the “50-day grace period” for Putin to 10 days. This heightened market concerns about an escalation in geopolitical conflict. But the rise caused by sanctions and threats is essentially a sentiment-driven, event-driven premium, highly similar to a war premium, and fundamentally does not change supply, demand, or other fundamentals.More ironically, every rise in international oil prices directly increases Russia’s revenue from oil exports, which is a peculiar kind of humor in the context of sanctions.
More importantly, Trump is effectively using pressure on Russia to secure a U.S.–EU deal. As noted earlier, after losing its footing on the Ukraine issue, the EU has lost the initiative in the arena of political maneuvering.
Chart: Volatility convergence in the gold market
The gold market shows the same contraction. After gold failed to break above 3450 dollars last week, open interest fell by 3 ten thousand contracts. It is reasonable to conclude that most, and perhaps all, of the long positions accumulated during the prior rally have exited. Overall open interest has returned to the levels seen after arbitrage delivery was completed in 2 and 4 EFP.
Chart: The narrowing volatility range means gold is becoming a liquidity blood bag for global assets...
There is another issue here: gold in COMEX warehouses is usually hedged with futures, which means that about 30 ten thousand short open-interest contracts in the market are passive, inert hedging positions.
And These hedging positions will provide no liquidity in the other potential direction—that is, in an equally possible downturn. If longs decide to keep selling and shorts cannot provide the counterparty, who will take the other side?Perhaps China, but recently China has shown almost no interest in continuing to make large gold purchases in the short term.
This is a question that almost no one is willing to consider, but it is a real issue.
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As for the level of detail, we’ll probably get down to the industry level. For mainland China, we’ll try to avoid crowded trades; if we write too specifically, someone may front-run us. U.S. stocks may allow us to be a bit more specific, though readers will still need to think things through and fill in the details themselves, There are no trades to copy directly!。
The overall win rate has been pretty good lately.
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Wishing you all the best.
2025.07.29
Note: All content in this article is for reference only, does not constitute investment advice, and is not a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for decision-making.