Daily Analysis: Stock Volatility Collapses as Traders Await the FED

Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2448 0.82%
DAX 12229 1.35%
WTI Crude Oil 47.89 0.76%
GOLD 1290.00 -0.51%
Bitcoin 4007 -0.55%
EUR/USD 1.1749 -0.57%

Global stock markets are having a great day, especially the US indices as the major benchmarks all bounced off their lows once again, as volatility dropped sharply while trading volumes remained very low. The summer environment and the looming Jackson Hole symposium favored a mean-reversion move, and sure enough, early bears got caught cold feet, even as the internal weakness of the indices still suggests a deeper correction in the coming weeks. That said, the NASDAQ, the S&P 500, and the DOW are not far off their all-time highs, even as only the 55% of stocks are trading above the 200-day Moving Average. The strong outperformance of large caps is usually a warning sign, but the short-term uptrends are still intact in the US, while the European benchmarks are already trending, lower.

DOW 30, 4-Hour Chart Analysis

Currencies, at least the Dollar, remained relatively active as the Greenback bounced back after Monday’s drop, and choppy conditions are expected to continue throughout the week, as the Federal Reserve related moves will intensify. The Dollar’s bounce and the decline in volatility dragged Gold lower today, but the precious metal remains in a favorable position just below $1300, consolidating its recent gains. Oil is still acting weak, trading near the $47.50 per barrel level, while industrial metals are still strong despite the deteriorating Chinese-US trade relations and, as the positive news regarding Trumps planned tax reforms pushed industrial assets higher.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

Ripple is following in the footsteps of Monero and Dash, being the next major coin to move higher on huge volume. The bull market’s buying wave hit the currency in earnest, and it’s now surpassed the $0.16, $0.18, and $0.22 resistance levels thanks to the strong momentum move. The all-time highs of the coin are still way above the current price, and a test of the $0.30 level is likely in the coming period. Bitcoin fell strongly in early trading, dragging most of the majors lower, before recovering to the $4000 level that has been in focus for several days now. Ethereum retraced yesterday’s bullish move as it dipped lower together with BTC but the token remains in an uptrend. Monero is trading just below its recent highs, while Dash is stuck below $300 for now after its break-out, as the broad bullish trend continues in the segment.

XRP/USDT, 4-Hour Chart Analysis

Technical Picture

The DAX worked its way through last week’s broad weakness without technical damage, and the German index still looks poised to break-out from the current downtrend and re-test the 12,500 level. The Euro might put the benchmark’s relative strength in danger, if it resumes its uptrend against the Dollar, but for now the common currency is well off its highs, helping European equities. Resistance is ahead below 12,500 at 12,375, while support is found at 12,000 and slightly above 11,900.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Tuesday

Time, CET Country Release Actual Expected Previous
10:30 UK Public Credit -0.8 bill 0.0 bill 6.3 bill
11:00 GERMANY ZEW Economic Sentiment 10.0 14.8 17.5
14:30 CANADA Core Retail Sales 0.7% 0.0% -0.1%

Key Economic Releases on Wednesday

Time, CET Country Release Expected Previous
9:00 EUROZONE ECB President Draghi Speaks
9:30 GERMANY Manufacturing PMI 57.8 58.1
9:30 GERMANY Services PMI 53.3 53.1
10:00 EUROZONE Services PMI 55.4 55.4
10:00 EUROZONE Manufacturing PMI 56.3 56.6
16:00 US New Home Sales 615,000 610,000
16:30 US Crude Oil Inventories -8.9 mill

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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.