Chinese Bite Back, As Both Sides Dig In

May 23, 2019 - 7:35pm

 by Gary Wagner

Although it’s been over a week, with both China and the United States moving farther away from an agreement and resolution to the current trade war. 
The additional tariffs That Trump initiated by raising the current tariffs from 15% to 25% was huge, and the blacklisting this week of the tech company Huawei, also fueled the strong response by the Chinese. 
The moves on the part of the United States has had a dramatic impact on the Chinese economy. The intention by the administration was obviously to have the Chinese be more flexible, the truth is it has created a scenario where both sides are digging in more deeply.
While it is extremely obvious that the South China Post absolutely has a 100% bias, statements made by that publication over the last two days are extremely alarming.
According to the South China Post Beijing is “vowing to fight to the end” and the U.S. preparing to place a 25% tariff on a further $300 billion of Chinese imports, China may have “no choice but to sell” its U.S. Treasury holdings, according to some analysts and reports widely distributed on China’s social media.
This publication also stated that a meeting between Chinese President Xi Jinping and U.S. President Donald Trump at the G20 summit in Japan next month is still up in the air.  “Current conditions” are not right, a Chinese state researcher said, “Given the current conditions, what can really come out of the G20?” said Zhang Yansheng, the chief research fellow at the state-backed China Centre for International Economic Exchanges think tank.
Also reported was that an official at the Xinhua News Agency on Monday claimed that “bullying by the US side” was the cause of the failed trade talks. 
“The People’s Republic [of China] has been standing tall in the East for the last 70 years, it has never lowered its head and it has never feared anyone,” Xinhua said. “History will prove again that bullying and threats by the US will not work.”
It is quite obvious that these quotes from Chinese officials and publications are clearly stating that they have dug in deeper and will continue to take a hard line which clearly will extend the current trade war. In fact, they are now calling this a “Technology Cold War” rather than a trade war.
These collective statements over the last few days have risen to a degree that have greatly alarmed the investing public which to express their concerns in their holdings as U.S. equities selloff and gold shines with its safe haven component.
However, it was today that investors chose to react as equities plunged. The Dow Jones industrial average was down over 400 points to close down 280 points which is a decline of 1.11%. The tech heavy NASDAQ composite lost 1.58%, and the S&P 500 lost 1.19%. Gold futures reacted sharply trading to the upside with a net gain of $8.80 and is currently fixed at $1283. It traded to a high today of $1287 which definitely changes the overall market sentiment for the precious yellow metal.
The only question remains is whether or not market participants will see these deep chasms as having a long-term effect which would take equities dramatically lower and take gold prices dramatically higher.
 
Wishing you, as always, good trading,
 

 

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action

Although we are flat with no active trades today's strong upside move certainly is a game changer in terms of market sentiment both in gold and equities. As we spoke about on the show the real question is whether these concerns will remain or grow for an extended period of time, or be a flash in the pan where that concern lessons in a short time. If in fact we are seeing extended concern about the current trade war this would certainly move gold to higher pricing and what we want to watch or look for is a break above current resistance.

Gold Market Forecast

Today's video report will detail our current thoughts on the shift in market sentiment today and how long that might last. Because that is the key to whether or not we see an extended rally in gold and a correction in US equities. Let's see if we get a continued reaction on Friday which I believe we will, will indicater byi  breaking above  the current resistance.That would trigger a by signal for gold, and a sell signal for the S&P 500.

Sentiment Indicator:
Gold -> Bullish
Silver -> Neutral
S&P 500 -> Bearish
Bitcoin -> Bullish
Bitcoin fundamentals by Joseph M. Wagner II:

 Trading the Gaps

One noticeable pattern in recent activity of the CME’s five coin Bitcoin futures contract (BTC #F) is noticeable gaps between the closing price on Friday and the opening price on Monday. This of course is most notable during the last two weeks of trading as well as June and July of last year. This is caused by the fact that Bitcoin is traded 24 hours a day seven days a week, while the futures markets are closed during weekends.

What we can gleam from these gaps whether they be the recent gaps on the way up to $8500, or last summer’s gaps on the way down to $6000, is that these gaps occur at times of high volatility and are usually followed by a spike in volume, which makes these gaps more likely to become a break away gap like the one witnessed two weeks ago on May 12th, rather than an exhaustion gap were there usually is no spike in volume like the one witnessed last week on May 17th . Although it is only Thursday BTC #F seem to be gearing up for another weekend gap. I believe this gap will be witnessed again and will either take pricing closer to its support level at $6500 or testing and possibly trading above resistance at $8500.

Looking at recent activity I believe that if the gap is once again formed it will continue in a bullish direction and could break through resistance creating a new high for the year. However if no gap is formed it would signal that volatility has lessened and prices are consolidating between $7500 and $8500. With one more trading day in the week we will have to see how it acts on Friday in order to make a better forecast for traders wanting to take advantage of this interesting market behavior.