Daily Analysis: Choppy Consolidation on Wall Street as Yield Curve Collapse Continues

Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2608 -0.30%
DAX 11,940 0.43%
WTI Crude Oil 64.68 0.02%
GOLD 1324.00 -1.32%
Bitcoin 7,910 -1.45%
EUR/USD 1.2308 -0.81%

It has been a very choppy and difficult session for day-traders, as we expected, as the bearish technical setup and the still extremely negative sentiment provided conflicting catalysts for stocks. It seems that weak bulls are all already out of the market, so with limited supply left, the bearish momentum wasn’t enough to push the major indices to meaningful new short-term lows.

S&P 500 Futures, 4-Hour Chart Analysis

That said, we still expect new correction lows in the majority of equities, and the fact that the main benchmarks couldn’t leave the vicinity of yesterday’s low is a warning sign for short-term bulls. The Nasdaq edged closer to its February minimum during the day, as the tech benchmark is still further away from the crash-low compared to the Dow and the S&P 500, which outperformed the Nasdaq today during today’s flat session.

Tesla (TSLA), Daily Chart Analysis

Tech stocks were under pressure due to several factors besides technicals, as Amazon took a hit thanks to a report that hints at a possible regulatory crackdown, while Tesla’s reality check also weighed on sentiment, as the car manufacturer’s bonds nosedived.

Donald Trump wants to “go after” Amazon according to the report, as he sees the giant as a threat to small businesses. Tesla’s historic cash burn and high leverage finally started to matter too, and the stock slumped by almost 20% in a week, and by 8% just today, as the company’s debt got monkey-hammered.

Dollar Rebounds Together  with Yields

2-year US Treasury Yield, 4-Hour Chart Analysis

On a rather neutral day for stock, bond and currency markets were much more active, as the better than expected final US GDP print (2.9% vs. 2.5%) pushed Treasury yields higher after yesterday’s broad decline. Short-term rates rose more than the longer end of the curve, so the yield curve flattened rather strongly yet again, to another more than 10-year low.

Because of the unprecedented central bank policies that still distort yields, we still wouldn’t jump to the usual “looming recession” conclusion, but what’s sure, is that the market still believes in the tightening moves of the next couple of years, while not buying the longer-term growth story, despite today’s GDP figure.

The Dollar advanced across the board, boosted by rising yields, with especially the Yen falling losing ground to the Greenback throughout the session, extending its recent pullback, despite the persistent risk-off sentiment.

EUR/USD, 4-Hour Chart Analysis

The Euro, which is still trading in a broad range that developed in January, fell back to 1.23 after nearing 1.25 just yesterday, while the Aussie and the Canadian Dollar finished near their session lows as commodities were broadly lower.

Cryptocurrencies

LTC/USD, 4-Hour Chart Analysis

The major coins had another bearish session, despite another weak intraday bounce, as most of the majors are sporting small losses, with the largest altcoins still underperforming Bitcoin. Litecoin led the way lower, together with Bitcoin Cash and Dash, with Ethereum also remaining under pressure. EOS and Monero were relatively strong again, beside BTC, and NEO, IOTA, and Cardano also held up well on the relatively quiet day left the technical setup virtually unchanged in the segment.

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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.