GoldOilCrypto

Gold, Crude, Crypto - it's all the talk on the floors

Chris Weston
Chris Weston
Head of Research
May 17, 2021
All the news has been in Crypto, it's deafening and notably around Musk’s ability to move an asset around so liberally with a tweet.

Whether the project has lost its prominent leader was the question on many minds last week, but this has morphed into whether that leader is now an enemy. As denoted by a new coin, I won’t recite the name.

The interesting aspect is that the moves were felt through many of the major coins, but as I look down perhaps Ripple (XRPUSD) – a coin we recently rolled out – that's finding all the love and eyeing a move into 1.6375 – it seems Ripple is the greener coin and some saying XRP could replace Bitcoin as a method of purchase for Tesla vehicles.

Our flow has been centred in BTC and ETH, with price in the BTC underlying finding solid buying of 42,000, and on the daily chart, we see clear indecision in the price action. Looking at the short BTC and Long ETH ratio it seems this may re-establish the bear trend - just another trade and I will revisit this. Given the way XRP has been trading, perhaps short BTC and long XRP could be the ‘Green trade’.

(BTC 30 min chart)

18_05_2021_D1.png

(Source: Tradingview)

The 200-day MA in BTC (39,551) would be the target for the bears, although if we look on the 4 hour or daily on BTC, which is clearly too high a timeframe to really trade BTC at present, we're seeing buyers of weakness, so the order book hasn’t completely given up on the bid side just yet.

Gold daily

18_05_2021_D2.png

(Source: Tradingview)

Gold has been well traded and the daily chart needs little explanation. It has found its mojo and is trending like a dream. Price has ripped through the 1844 – 1810 consolidation zone and through the 200-day MA and pullbacks are defined by the 5-day EMA, which is rising. $1880 was my target and $1900 may come into play, but we’ve seen US real yields down smalls, as has been the USD - so the true driver of Gold is flow and the light positioning that traders are now building on. Silver also looks strong.

(WTI daily)

18_05_2021_D3.png

(Source: Tradingview)

WTI crude looks bullish too and should be on the high watch list, and we focus back on the 5 May high of 66.73, but we can see the supply ceiling and a closing break could get traders pretty excited about a resumption of a bull trend. Oil names naturally like what they see and the XLE ETF is up 2.35% and eyeing new highs in this run – energy is hot. Financials remain the other side of the barbell strategy, so long energy and long financials seem the play du jour at the moment.

What's not so hot is Tesla – make or break for the big EV

Tesla is the poster child of the low and no earnings equity movement that has worked incredibly well as markets saw ever-increasing central bank liquidity through 2020. When Tesla moves, it can become a momentum and trend juggernaut. That time is over, at least for now it seems and in a world where market participants are debating the timing around a reduction in the Federal Reserve’s bond-buying (QE) program and other central banks (such as the Bank of Canada) are already tapering theirs, the market has moved from high growth stocks to value.

We’ve also seen a barrage of negative news flow, specifically around halting production plans in Shanghai, Chinese social media protests, and a decline in deliveries in April (month-on-month). Sentiment is poor.

Having closed below the long-term uptrend on 7 May, much of the momentum crowd took profits and some increased short exposures. That’s a factor that Michael Burry is banking on as he detailed a huge put position.

Price has also closed below the 200-day moving average, although it's not convincing (yet) and one questions if we see a similar situation as we did in March 2020, where this average was the platform for a sizeable rally. If we do see the buyers kick in, especially on volume, I would use that to build exposures for a move into $630/40. Strength begets strength.

As the macro picture evolves though and funds question inflation (and liquidity) and want exposure to financials and energy, and not high growth names that trade on 90x 2022 earnings - Is this time different? If the 200-day MA goes, the move lower could be powerful as nothing good happens below the 200-day MA. A move through $560 and $460 is on and shorts would clearly be the way in my opinion.

I stay long GBPJPY and this seems to be working for now.

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