July twenty-seventh, two thousand twenty-five (250721-250727)
Starting 250720, the weekly review will try further align our understanding of the logic behind global assets, including the core guiding frameworks for different assets, the reasoning process, and preferences regarding price direction and trends.None of the content constitutes investment advice; price direction is provided for reference only. We do not predict the market; we only examine risk-reward ratios under different possible probabilities.We’ll continue completing this framework gradually each week; it’s a bit too much to finish all at once... This will include adding asset classes and refining and updating the logic within each asset class.
What level of familiarity should you have with the material?
Our basic requirements for our traders are: 1) be able to sketch from memory the weekly price trends of the assets discussed, in other words, see an unmarked price chart and 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 discussed, which also means that, when hearing any price level (without looking at charts or news, just hearing the number), they can immediately identify the asset, its latest price, and the corresponding position; 3) when reading relevant materials and content, immediately connect them to the guiding framework and logic, which also means that, when encountering any new event, news item, or analysis, they can identify its place in the logical chain, make additions, replacements, and updates, and assess how replacing this node’s content would affect the outcome...
I.U.S. Dollar Index
Chart: As expected, it broke above the downtrend line and turned sideways
This week’s commentary update: Since we closed our position shorting the U.S. Dollar Index with the euro at the low, the dollar has moved sideways as expected.. Relatively speaking, Several potential catalysts that could lead to further dollar depreciation include, as expected,: a) FOMC signals rate cuts in 9; b) U.S.-China negotiations—see Notes 250725, “The Great Reversal”; and c) potentially weaker U.S. labor-market data. See the previous series of discussions on U.S. employment data for this part.
1) This part’s Guiding framework is, the Fed’s repricing capacity * (the intensity of U.S. policy uncertainty * the difficulty of deficit financing * the pace at which growth slows relative to other economies), which determines short-term fluctuations in the dollar’s trajectory under long-term structural pressure.
2) The latter three factors are reflected directly in U.S. stock prices (for further reading, see the previous Notes on the K-shaped economy).
3) Before the tariff impact data from 10 to 11 are released, short-term rates (the front end) are the main driver; in other words, the key to how the FX market responds to inflation still depends on the path of the monetary policy response.
4) Tariffs being delayed until 8 means the actual data will not allow a formal assessment of the inflationary effects of tariffs and a weaker dollar until 10/11. Before then, goods that were front-loaded will remain in the supply chain for longer... We do not expect rate cuts before 9, so the dollar Sideways trading is currently expected to continue at least until 9。
5) The tail risk to Powell and the Fed’s independence is extremely low, There may be little trading around the shock.
6）97 It is a key control point (that is, a high-volume node) for the spot dollar index over the past 20 years. The significance of a high-volume area is that, at this price, counterparties that are insensitive to short-term shocks are willing to absorb trades in any size. The bullish and bearish trends around this price also more clearly represent the views of the capital currently active in the market.....
And given the current situation, It seems that the market still is not willing to let the dollar slide smoothly all the way down, even though dollar shorts will indeed remain a core macro-trade conviction for a long time.
7) When returning to dollar shorts, there are four paths, a) redoing European currencies, b) trading EM currencies, c) trading commodity indices or currencies/assets of commodity-exporting countries
Two, The yen, Japanese government bonds, and Nikkei futures
Chart: USD/JPY rebounds as expected
This week’s commentary update: The yen and Japanese government bonds have continued to follow our expected paths. This week, the main addition is a discussion of the Nikkei index, which broke out early (see Notes 250723 “Japan in Turmoil: From the Trade Deal to Ishiba”)...
Chart: Nikkei futures holding steady in the breakout zone
The price rise triggered by the event broke through the 40500 level we had been watching for a long time earlier than expected. Sometimes an earlier-than-expected move is not necessarily a good thing. However, if the post-event rebound holds above 40500, it will be a new bullish signal for the Nikkei index; the floor below is at 38800.After breaking out of a narrow consolidation, the uptrend is resuming. The breakout gives the Nikkei a new bullish signal, and the former resistance has turned into new support.
Additionally, The stronger the selloff in the long end of Japanese government bonds, the sooner the yen will strengthen after weakening. Keep that in mind.
1) This part’s Guiding framework is, under political volatility, fiscal dominance is driving the direction of Japanese government bonds and the yen.
2) Structurally, yen trades along the dollar-short path have lost their appeal. On the one hand, Japanese institutions have yet to deliver the capital repatriation the market expected in April and May (a rotation from U.S. Treasuries to Japanese government bonds), and the renewed trade in domestic assets has become a joke. On the other hand, the interest-rate differential structure also makes shorting USDJPY very costly.
3) The larger 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, meaning USD/JPY will move higher。This is the direction currently expected by the market: a loss for the ruling party.
4) However, If the selloff in Japanese government bond yields becomes disorderly, the long-end yield trend will spread to global yields, once the market shifts to this trading pattern, USD/JPY will instead turn lower, meaning the yen will strengthen after weakening.The stronger the selloff in the long end of Japanese government bonds, the sooner the yen will strengthen after weakening.
Chart: The bond and FX logic under fiscal dominance also applies to the dollar
5）After the fiscal event is realized, macro fundamentals will again become the main driver of pricing driver; that is, after 9 and through 10, 11, the yen itself will have greater potential to strengthen on a relative basis and will return to the long-term path of dollar shorts.
6) The trading range for a weaker yen is 140-162，For a strong-yen trade, we need to wait for the price to break below 140; we will discuss it then.
Chart: The yen is expected to weaken first, then strengthen
Chart: Notes 250714 “From Fiscal Policy to the Bond Market: A Reassessment of Value”
7）The Nikkei index’s directionless trading range is between 38800 and 40500; a breakout would be the corresponding entry point，Relatively speaking, an upside breakout has a higher probability of occurring.
8) For Japan, the only thing we can confirm is that the balance of power between the ruling and opposition parties is changing (see Notes 250723 “Japan in Turmoil: From the Trade Deal to Ishiba”),The shift means a struggle for influence over economic policy, and it also means Fiscal policy is bound to be pushed in a more expansionary direction...
Three. Commodity indices
Chart: BCI, still waiting for an upside breakout
This week’s commentary update: As it approaches a key level, The trading range is narrowing...
1) This part’s Guiding framework It is:Tariff pass-through + fiscal expansion = clear inflation risk
2) Inflation risk and the rate-cut debate are two key factors in commodity markets, with different scenarios producing different price responses. In general, rising inflation expectations lift the overall level of commodity prices (This means the breakout in BCI may also be delayed until year-end), while bets on the interest-rate path are a powerful catalyst for directional opportunities.
3) Different price responses are often reflected in the composition of commodity markets. A relatively 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 often more sensitive to real interest rates, and gold and white precious metals are the trading proxies for this segment. This means that moderate-inflation trades that do not bring a prospect of higher rates, as well as behavioral bets on the interest-rate path, will both be favorable catalysts.
Industrial commodities such as copper, oil, and iron are more sensitive to growth expectations, In inflation trades involving an economic slowdown driven by weaker demand, cyclical commodities are often held back, except in cost-push inflation trades, because in that kind of inflation trade, industrial commodities themselves are often what rise.
4) The commodity index has been hovering in a low range, while As of today, a potential breakout may be taking shape..
5) Key level 22
Four. Oil
Chart: Returning to fundamentals
This week’s commentary update: Likewise, as it approaches a key level, the trading range is narrowing, An opportunity may emerge in early 8... A decisive break below 65 would bring natural downward momentum, so we can start watching the intraday charts.
1) This part’s Guiding framework It is: Notes 250522 Reasons to Remain Short on Oil + Notes 250527 Reasons to Remain Short on Oil (Continued) + Notes 250620 Rereading The Origins of Oil
2) We have discussed oil fundamentals and the supply glut many times before; these are also the basis for our previous short positions (see Notes 250523 Reasons to Remain Short on Oil + Notes 250527 Reasons to Remain Short on Oil (Continued)). This part is “basically unchanged” apart from geopolitical shocks: a) OPEC + ample supply, b) sluggish demand growth, c) inventories have risen for several consecutive months, and, as things stand, inventories are likely to keep growing over the next 18 months.
3) However, structurally, Before the greater-probability downside trade back toward fundamentals, what is more likely to appear first is a calming environment with lower volatility.
4）Prices may subsequently form a range at 55-65, with the upper end a potentially viable level for shorting.
5) Given risks and volatility outside the market, 63 is the safer downside level.
Five. White precious metals (silver, platinum)
Chart: Silver makes a new high using other proxies
Chart: Platinum makes a new high using other proxies, but is nearing the stop-loss level
This week’s commentary update: Platinum is nearing its stop-loss line, and this position will probably be closed earlier than silver. Choosing to use other proxies to trade for new highs gave us the possibility of staying involved longer at our holding cost, but this trade will most likely fail.
Silver also saw significant profit-taking by speculative positions in the latter half of this week, More specifically, we have set our exit at 37.5, while most other counterparties in the market will probably place their exits near 36.8. This means that if the price falls below 36.8, it could trigger stop-loss cascades across many strategies and cause a short-term liquidation-style price drop. We will avoid the crowd’s exit levels.
Platinum and silver are among the most worthwhile things to review this year, and may also prove to be the biggest regret of the entire year.
We positioned ourselves for an upside breakout before it first occurred, and the system correctly calculated the turning point. But by exiting too early, we gave up nearly half of the gains from the rise. This mistake affected our subsequent judgment to some extent and, in fact, also violated our trading principle of not repeatedly re-entering shortly after closing out a position...
Essentially, our experience trading white precious metals was still immature. The previous episode of volatility was 17 years ago. Countless reviews, scenarios, and deductions on paper still cannot compare with experiencing it once in a career. When the next opportunity comes, we will respond with greater maturity.
This is something that calls for serious reflection. I will print this case out and put it on my desk as a warning.
1) For the renewed breakout in silver and platinum, we use other trading proxies (ETF + an individual-stock basket)re-entered; the rationale is in item four below.
2) For commodities such as silver and platinum, volatility becomes 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 trading them calls for more patience than trading other categories.
3) In terms of risk control side, using a smaller position size would be more appropriate, because the stop-loss distance associated with large swings is also far greater than in normal commodity trading。
4) White precious metals are also the category best suited to trading through proxies in other markets, because, compared with oil and gold, whose prices are constrained by fundamentals, the large swings and speculative drivers of white precious metals mean their prices are reflected more broadly in other markets (gold and gold-mining stocks do not always move in tandem and sometimes even follow opposite price paths, whereas this consistency is stronger 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
This week’s commentary update: Continue waiting for a new high
1）Volatility is broadly flat, macro-fund participation is declining, and trades with higher Sharpe ratios in the market are gradually eating away at enthusiasm for gold. It is currently difficult to see a catalyst for gold prices to break above 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 in the year, when some funds cannot afford to wait.)
2) For gold, A new high in prices may have to wait until 10 11, that is, after the actual data are released; this is also the expected timing we previously discussed for XAU/SPX in gold the expected timing for the gold and dollar-index pair trade to move higher (the phase of long gold and short dollar index)。
Seven. Crypto markets
Chart: The rally is slowing
This week’s commentary update: The spot long position has a small unrealized gain, but this trade is already mentally prepared to exit at breakeven.
1) Inflation risk and the rate-cut debate are two key factors in crypto markets, with different scenarios producing different price responses.Relatively speaking, moderate inflation + an accommodative policy environment are most favorable to crypto markets, whereas the tightening of rates brought on by extreme inflation is unfavorable; the market tends to use real interest rates as its trading benchmark..
2) A bias toward softer growth and softer data before 10 and 11 has led us to the idea of trying to bet further on new highs after 9 weeks, however, this trade will also have a tighter stop-loss, and we will use spot only for the bet.
3) Although there was a short squeeze in ETH, Bitco reacted mildly to the passage of stablecoin legislation. As expectations and news on this front approach their end, there may be a point-in-time capital flow that buys the rumor and sells the fact, and if this happens, the price may return to around 110500, The worst-case outcome for this trade is breakeven.
Eight. Dollar index
Chart: SPX
Chart: RTY, continuing its expected catch-up rally
Chart: DJI, likewise continuing its expected catch-up rally
This week’s commentary update: The dollar index is moving as expected, and the catch-up trades in RTY and DJI are still ongoing. Another thing we focused on this week was AI Capex. Based on what has been disclosed so far, companies have all raised their capital expenditure guidance for 25 and 26, which is also a positive factor for catch-up trades.
1) In an environment of uncertainty around the conditions for the final decision, micro-level trading will dominate the U.S. equity market: with the data continually being pushed back, the resulting gap in data, combined with the arrival of earnings season, The U.S. equity market will shed the burden of macro shocks and linger longer near the highs; in the short term, the only remaining path to the smooth decline we expected is for a batch of “earnings results far below expectations” to emerge rapidly at the micro level.
2) Before the release of actual assessment data for 10 and 11, the market will engage in more intense debate and positioning around this year’s rate-cut path and the terminal rate, which means volatility on data-release days will rise again—after nearly half a year of quiet.
3) The process of the U.S. equity market hovering near the highs is the process of indices such as RTY catching up the process, DJI is expected to complete a false breakout, and this part is already unfolding as expected.
Nine. Chinese assets
Chart: Continuing higher
This week’s commentary update: The weekly chart for the Shanghai Composite 50 continued higher as expected after breaking through 2760, which we had been waiting for (see Weekly Wrap 250720). A new window for going long Chinese assets has officially opened, and we have re-entered and begun building positions. We wrote a lot about this area this week; if you have not read it yet, you can catch up on your own.
1) As discussed in Notes 250710 “From Brazil to China: A Market Tour,” compared with other indices in the market, the price of the Shanghai Composite 50 is more important to us. A stable weekly close above 2760 is the primary condition for subsequent entry.Once it holds firmly, Chinese assets are likely to see a catch-up rally in the coming weeks.
2) Although it is not strong, it is tradable. We are starting to go long Chinese assets, and from next week there will be more domestic-market coverage.
Ten. Emerging markets, Brazilian equity index
Chart: EEM
This week’s commentary update: Previously, we had only anticipated one path: continually making new highs. However, the difficulty of adding to positions has now emerged (see Notes 250724 “EM’s Re-Entry Dilemma”), so There are actually two possibilities... a) a strong breakout above 50, meaning we continue along the path previously expected and emerging markets remain the core relative outperformers; b) consolidation at the index level, fluctuating between 50 and 47.
1）As a general theme for this year, we are more focused on emerging markets.From the global-asset lows of 20 to the present, emerging-market indices have underperformed on a relative basis. However, At this stage, going long EM offers greater return potential. The upper boundary of the EEM trend channel is near 50 and could be the target for the next phase of gains. If risk-asset appetite persists, the uptrend may accelerate and outperform on a relative basis.
2) Slower-moving institutional mandate funds are caught in a difficult dilemma over adding to positions. On the one hand, market prices have already largely priced in their potential buying, so entering now means missing out on cheap positions. On the other hand, at present, EM assets really are, relatively speaking, among the better allocations in the beauty contest.The difficulty of adding to positions means EM assets may undergo a period of index-level consolidation, although further gains remain the expected path.
Chart: Brazilian equity index
1) A longer trading cycle, an unchanged expected path, there is quite a lot here, and the background information is unfamiliar to most readers. I recommend reading the full text directly; see Notes250710 “From Brazil to China”.
A quick plug: we ask the traders in our trading room to produce a single-market note roughly every 2 days, covering U.S. stocks, A-share/HK markets, and commodities. We pick some of the better ones to post in the corresponding small planets,
Those interested 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
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Commodities:https://www.meridianresearch.app/home?product=commodity-strategies
As for the level of detail, we will probably be specific down to the industry level. Onshore, we will try to avoid crowded trades; if we write too specifically, someone may front-run us. We may be able to be more specific about U.S. stocks, but readers will still need to think through and fill in the details themselves.
The overall hit rate has been pretty good lately...
Note: All content in this text 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 their decisions.