Japanese stock index fell about 7% from last month's high as investors load up on the yen causing further dissension in the carry trade. The start of the month is not suggesting anything bullish, but investors still want to look for a reason for higher stock prices around the world.

Cooler jobs data is more of a confirmation for a rate cut from the Fed, and NIKKEI is mostly correlated to the US stock market. Investors also are uncertain as to whether a 25 or 50 point cut is going to cause any relief to the labor market. -Frank

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Since July 2022, the yield curve (2 year crossed with the 10 year bond yield) was inverted. Last night, the curve returned to normal which means that the 10 year bond now yields more interest than the 2 year. This is considered normal as longer term notes are supposed to offer more interest than short term rates.

However, every time we have seen this curve invert and return to normal, a recession imminently followed. This happened in 2007, 2000, 1980s and a few other times. When I say imminent, I mean in the sense of months after. It's not an instantaneous reaction, but it has historically alerted a market crash not long after the reversion. -Frank

A safe bet on playing the Fed's monetary cycle is by trading the bond market. Since everyone expect yields to come down for the next several quarters, bond prices will rise as a result. TLT is an ETF that tracks the 20 year bond price. Price has now returned to the highs from the beginning of this year.

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Gold Daily Chart:

Here is my gameplan for gold tomorrow, in regards to the jobs report!

If we see weak NFP data, I will be looking for a breakout through all time highs. Gold in this case would likely breakout on uncertainty that the fed can keep things under control, and the diminished probability of a "soft landing". More rate cuts coming at a faster pace would be very bullish for gold. On any break & retest of structure, I'd be willing to add to my existing long position in this scenario.

If we see a strong NFP report, gold would likely drop on job market stability concerns being offset. In this case, I will stay long on gold unless we break support as shown in the image attached.

All updates & positions will be shared in our VIP signals room.

- Nick

ITS UP: https://www.youtube.com/watch?v=UeR7D1ScvsU

Retail is very bullish dollar, mixed indices. Small caps, DAX and NIKKEI are among a several long positions.

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USDJPY price plotted with retail and COT data is close to inverting. Smart money sentiment has declined while retail is picking up on their long positions. Individual traders are trying to catch a reversal on the dollar yen trade, but institutions are slowly getting out.

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We are now seeing a stronger bearish reading on the NIKKEI as COT continues to pull away from Japanese stocks and pours into to yen. Long retail and short COT creates a nice divergence between these to assets to suggest that the index may continue to move lower in the future.

NIKKEI is a sensitive instrument to the US stock market as well, and it seems that any sell off in the US results in a greater one over in Japan. The put/call ration is still climbing each day despite a positive seasonality score.

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Oil prices drop ahead of the election in November. Production is at a high point in the US, but it seems to be weaker as a result of poorer economic data in the US. Price is currently testing a double bottom on the 1D timeframe around $67 per barrel.
- Frank

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One important metal to watch is gold as we get closer to Wednesday. As price nears $2,500, the market remains unsteady. This is because CPI could come in stagnant or lower which would likely cause weakness in the metal.

However, if we get signs of rising inflation, gold may be the best trade to the long side. Stagflation is an incredibly bearish signal for stocks and the dollar. This makes gold a good hedge against that kind of scenario. A higher CPI could result in retesting the highs while a lower CPI could bring gold down to the rising trend line on the 1D timeframe.

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Retail is now long NASDAQ, RUSSELL, USOIL. Mixed positions are NIKKEI, GOLD, USDJPY, and SPX500. The crowd seems to be either long or neutral on the US indices.

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COT data showed another week of buying for every currency. This will likely result in a lot of neutral readings on the EdgeFinder. The top sells this week were commodities. NIKKEI saw a slight dip and the yen was in the top three most bought.

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Looking at US inflation data right now, there has not been much movement for the past year. At least not to the degree in which we saw CPI drop in 2022 to early 2023. The likely outcome for Wednesday is a small move either direction in CPI. Anything higher than expectations, however, could bring back the stagflation issue.

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Gold up today with the stock market as we start off the day with no news for the USD. The metal is moving higher like inflation is going to be higher even though the forecasts are 0.2% lower than last month. The 2 year yield is down the same amount that gold is up of 0.30%. Today may be a continuation of yesterday since there is no news and all the anticipation revolves around tomorrow’s report.
-Frank

Gold Daily Chart:

With CPI & PPI data coming out tomorrow and Thursday, it's possible we may finally see price break this range we've been stuck in.

I am currently long, and have been in the trade for 10+ days.

If we can close above resistance, I will look to trail my stop into profit in VIP.

- Nick

The stock markets rebound in the US with the anticipation of a lower CPI of 2.6%, from 2.9%. It seems to be an aggressive expectation of a drop this month and if it happens, it could be a very bullish sign for stocks. This week’s CPI data could likely help us determine if we are going to get a dovish or hawkish cut this month. We need to watch all CPI metrics tomorrow for any hints of a stagnant inflation level or cooling prices.
-Frank

Something that not many people seem to be talking about is the reversion of the yield curve this month. This chart plots the 10 year bond yield against the 2 year. When inverted, the 2 year yields more than the 10 year. And when the yields revert, the 10 year yields more than the 2 year. This is considered the number 1 recession indicator. Although it has been nearly perfect in calling market crashes, it doesn’t mean that one is going to happen today or this week, etc. They usually occur within a few months after the curve reverts to normal levels. We saw a record number of days below the inversion line, so investors are speculating whether this is going to mean anything for a long time.
-Frank