To The Moon

With the Federal Reserve’s September rate hike now underway, there is no turning back once the arrow has left the bow. The tightening cycle is unlikely to end in the near term; it may not reverse until a major economic event emerges—such as a recession or a substantial equity-market decline. Accordingly, trading during this period should become more cautious. Should the pace of tightening accelerate, market volatility is likely to increase as well.

Over the weekend, I held an in-person discussion with Tiger users in Hong Kong. Based on my U.S. dollar cycle model, this round of Fed tightening is a landmark event signaling that the dollar cycle has entered a new phase. Given widening interest-rate differentials, we may subsequently face an environment of accelerated U.S. dollar appreciation. Under such conditions, maintaining a bullish stance on commodities could become difficult, and investors should take note.

According to the latest CME FedWatch Tool data, the implied probability of another rate hike in October remains close to 60%. This is clearly inconsistent with the “dovish hike” narrative currently being promoted by the market. If October nonfarm payroll data remain strong, the market impact of three rate hikes this year should not be underestimated. Investors should remain vigilant.

U.S. Equity Indices Remain Strong—Could This Be the Final Near-Term Rally?

In fact, shorting U.S. equity indices ahead of the midterm elections is not particularly appropriate. However, investors should also recognize the nature of this rally: it could easily represent the market’s final advance for the year. Positions may be managed using the 20-week moving average as a reference level for either taking profits or setting stop-losses, but investors should not stubbornly hold on to positions regardless of market conditions.

Following the recent divergence among U.S. equity indices, the Dow Jones Industrial Average and the Russell index appear to have set their interim highs in August—an important timing window for U.S. equities. October is now approaching. Will the Nasdaq and the S&P 500 establish their highs for the year in October, another important timing window for U.S. equities? We will have to wait and see.

The trading approach is straightforward: short-term tactical trades or short-dated short put strategies only. These are all short-term trades. Long-term investors should likewise consider taking profits to avoid being adversely affected by sharp market volatility.$標普500(.SPX)$ $納斯達克(.IXIC)$ $道瓊斯(.DJI)$ $SP500指數主連 2612(ESmain)$ $NQ100指數主連 2612(NQmain)$ $道瓊斯指數主連 2612(YMmain)$

Trading Opportunities in FX Markets

Shorting euro futures on expectations of euro depreciation during a U.S. rate-hiking cycle has been the strategy I have consistently highlighted and implemented. It has begun to play out. Investors who are already positioned may consider waiting for a rebound before re-entering or adding to positions.

As for the renminbi exchange rate, I also discussed its cyclical characteristics during the in-person session. It has now reached a critical juncture. My view remains unchanged: further U.S. dollar appreciation could lead to renminbi depreciation. That said, the renminbi is more of a medium- to long-term trade, and its movements are not as rapid as those of the euro. Investors should therefore make their own assessments and monitor developments accordingly.

In addition, charts related to the renminbi are relatively sensitive, so they are not suitable for public online release. I will continue to track the situation for everyone.$歐元主連 2612(EURmain)$ $歐元ETF-ProShares兩倍做空(EUO)$ $HK人民幣主連 2612(CNHmain)$ $小型HK人民幣主連 2612(MCNHmain)$ $SG人民幣主連 2612(UCmain)$ $小型SG人民幣主連 2612(MUCmain)$

Commodities: Avoid Chasing Further Upside and Wait for the Major Opportunity After Dollar Strength Peaks

During the Fed tightening phase, I am not constructive on commodities in the short term. However, given the current debt burden of the U.S. government, a high-interest-rate environment may not be sustainable for an extended period. Once this U.S. dollar tightening cycle has run its course, commodities are likely to present the next major bullish trading opportunity.

For now, investors should remain patient and look for commodities to reach lower levels during the dollar rate-hiking cycle. Among different commodities, crude oil may be the last to decline; it can therefore serve as a useful market barometer. Gold and silver should be traded tactically and only over the short term—expectations should not be set too high.