Daily Analysis: Another Risk-Off Day on Wall Street amid Crypto-Plunge

Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2755 -0.64%
DAX 12,237 0.14%
WTI Crude Oil 60.95 0.07%
GOLD 1325.00 -0.15%
Bitcoin 8,150 -10.68%
EUR/USD 1.2368 -0.19%

Despite the overnight bounce and the relatively good reaction to the retail sales miss, stocks continued to drift lower throughout the session, finishing the day just off the intraday lows. Volatility inched higher again, although the Volatility Index (VIX) stayed below the key 20 level as the major indices finished mixed, with the relatively strong Nasdaq closing just a tad lower, while the Dow losing exactly 1% during the day, still being the weakest US benchmark.

Nasdaq, 4-Hour Chart Analysis

The risk-off sentiment was much less pronounced than yesterday on a global scale, as the early optimism, which was sparked by the better than expected Chinese industrial production data helped several asset classes in staying above yesterday’s lows.

DAX, 4-Hour Chart Analysis

The EuroStoxx 50 and the DAX closed in the green on a US closing basis, helped by the Euro weakness, while the Nikkei continued to struggle as the Yen remained strong. The reshuffling of Trump’s administration was still making headlines, while the rising tensions between the UK and Russia, together with the renewed trade war fears also weighed on sentiment.

The overall picture still shows a broad “rolling over” pattern, with only the large-cap US tech segment looking clearly bullish from a technical standpoint, while on a positive note, small caps also continue to hold up well.

Mixed Day for Currencies and Commodities as Early Optimism Fades

USD/JPY, 4-Hour Chart Analysis

The Japanese Yen seems to be resuming its uptrend against the Dollar and the major risk-on currencies amid the risk-off shift, and the USD/JPY pair is inching closer to the 106 level again after the bounce of the last couple of weeks.

The Dollar’s gains were limited against the risk complex as Treasury yields fell on all maturities, while the collapse of the Yield resumed, as long-dated Treasuries outperformed heavily, with the effects of Friday’s bullish employment report fading away.

The Aussie reversed a large chunk of its early gains as we expected, while the EUR/USD pair drifted sideways in Wall Street trading, closing at 1.2365, near the mid-point of its trading range.

Gold, 4-Hour Chart Analysis

The WTI crude contract remained above the $60 level following the US inventories release, finishing virtually unchanged, while gold continued to hover around $1325 amid the conflicting pressures of the Dollar bounce and the stock weakness.

Cryptocurrencies

The major coins broke below short-term support levels towards the end of a bearish session that was dominated by another wave of regulatory worries. Google announced a ban of crypto-related ads, the SEC is reportedly ramping up its regulatory march, and US regulation in a subcommittee hearing.

BTC/USD, 4-Hour Chart Analysis

Almost all of the largest coins are down by double digits after the US close, as volatility and correlations are very high again, and the short-term trend switched from neutral to bearish thanks to break-down. Most of the coins are still clear of the February lows, still leaving the recovery intact, but now only Litecoin is showing clear technical strength amid the broad decline.

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.