Unbelievable

Bring the noise

Things have become a tad cacophonous here as anyone trading the Trade War in 2017 is probably having flashbacks to the barrage of nonsensical and contradictory policy headlines of that era. One would be forgiven for expecting the next headline to be something like:

*IRAN TO BUY SOYBEANS AND BOEING JETS IN AGREEMENT TO END WAR

Foreign policy is being announced in all caps on America’s 24^th largest social media platform. An unreal timeline. It’s hard to remain pragmatic and unemotional in the face of these whipsaws, and to be honest I am not sure whether anything has changed this morning. Did the U.S. really talk to Iran? Probably not. Is the Strait of Hormuz going to be reopened soon? Probably not.

One of the best pieces of advice I read early in this war was: Ignore everything the U.S., Israel, and Iran say. Watch what they do. Talk is cheap and propaganda is always a weapon of war. All this is easy to say, but hard to risk manage.

For now, I am sticking with the idea that the old “TACO” concept does not apply here because Iran has leverage, too. Iranian TV is now running a headline: “US President Retreats After Iran’s Decisive Threats” and saying there have been no talks with Washington.

*IRAN’S FARS: THERE’S NO DIRECT, INDIRECT CONTACT WITH TRUMP

I don’t believe the U.S. and I don’t believe Iran.

I think flat is completely reasonable here, and long isn’t crazy, and short makes some sense, as well. The key I suppose is:

1. Take a view, or don’t. But ignore the propaganda.
2. Override your priors and change your view if new information on military activity or transit through the Strait of Hormuz emerges, experts you trust change their views, or oil takes out certain levels. But don’t change your view in response to propaganda.
3. Establish risk management parameters assuming you are wrong and assuming absurdly large moves could happen at any second.
4. Place stops wide enough to weather random intraday headline vol.

Thinking about oil specifically…

A few things stand out.

1. $95 was the Friday close before the monster Sunday move to $119.50 and it was the low today.
2. $119.50 double top.

Those are the two big levels in Brent crude. If you believe that crude is leading everything else, you might consider those two levels as reassessment triggers. If $120 breaks, peace bets are off. If $95 breaks, war bets are off.

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Gold

This month’s move lower in gold after the start of the war is one of the greatest “good news / bad price” episodes in my 30 years of trading. Not hindsight. The meme that central banks will just keep buying it every day and it will never stop going up is dead as a retail bubble in precious metals followed by liquidity-related selling to raise cash has created far more supply than demand since the February peak of 5600 and the post-War peak of 5400. Now, it’s probably time to start to think about the outline of a concept of a plan to buy. I probably don’t need to tell you how oversold gold is, but I am going to do it anyway.

First, I pulled up a weekly chart of gold with its deviation from the 100-week MA. Oops, gold is still overbought, not oversold. I am not kidding around here. I was looking for a chart showing gold is oversold and first thing I got was this chart. That’s obviously not my time horizon, so I don’t really care about that chart. I include it only because it’s a bit eye-opening to realize that even here, gold is nearly record overbought on the weekly chart.

Here’s the daily.

You can see in this chart that anything more than 20% away from the 100-day tends to be a mega extreme. That said, we went 29% above it a few weeks ago. If you take the current moving average (4626) and calculate the 20% move from there, you get 3701.

Zooming in one more fractal to the hourly chart. The big support is $3890. That was the breakout through the all-time highs in October 2025, and we pulled back to that level, retested it and then went to the moon. All this suggests to me that there is not yet any huge rush to buy gold. It’s oversold short-term but still overbought medium-term. I will look to buy when spot gold is around 3950 and stop out below 3500.The rough equivalent on the GCM6 chart would be to buy at 4000 with a stop below 3600. Obviously that’s a crazy wide stop, but crazy wide stops are needed right now! I will put that trade idea in the sidebar in case gold continues to go mad.

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Final Thoughts

1. The war is bullish USD until it isn’t. The current FX conundrum perfectly summed up by Ben Hunt:

“A paradox is emerging in which the war simultaneously strengthens the dollar’s short-term position through traditional crisis demand while eroding the institutional foundations that support its long-term dominance. Treasuries are not functioning as a safe haven, fiscal deficits are expanding under wartime and stimulus pressures, and the media language that once argued forcefully that there is no alternative to US largecap growth is fading. The convergence of rising inflation expectations, weakening growth signals, and retreating confidence in dollar-denominated assets points to a market caught between competing time horizons—seeking dollar safety now while quietly pricing that the post-war world may look structurally different.”

2. Positioning report, big strikes, and trading calendar below.
3. Purdue seems like good value at 15:1 to win the tournament?

I hope you taste the rainbow this week.

Hi. Welcome to this week’s report. USD longs are at extremes rarely seen as large hedging and CTA selling of EUR, GBP, and JPY dominate. The kindling is here for a mega USD-negative reversal. But perhaps not yet. Here’s how to trade the positioning report: https://www.spectramarkets.com/amfx/sfxpm-explainer/

Trading calendar for this week

https://www.reddit.com/r/dataisbeautiful/comments/1s0hots/no_two_packs_of_skittles_are_the_same_except_some/

good luck ⇅ be nimble