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Daily Analysis: Stocks Build Rally but Divergences Persist

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Monday Market Recap

Asset Current Value Daily Change
S&P 500 2652 1.29%
DAX 12,282 1.45%
WTI Crude Oil 59.37 0.29%
GOLD 1325.00 0.71%
Bitcoin 8580 3.48%
EUR/USD 1.2290 0.31%

US stocks extended the gains of the late-Friday buying frenzy today, but a closer look reveals that most of the advance came from the overnight session, and the major indices are not out of the woods yet. The volatility crisis might have ended, but the technical damage could result in longer correction.

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For now, until a break above last week’s bounce high, the short-term picture remains bearish in US equities, even if one doesn’t look at other markets.

S&P 500 Futures, 4-Hour Chart Analysis

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The previously weak European and Asian exchanges continue to lag their US peers, and that points to further selling pressure in the coming weeks. With valuations still being hostile, the only speculative merit in stocks remains the ongoing long-term uptrend that very rarely ends with a bang, as market tops are usually grueling, lengthy affairs.

With that in mind, more all-time highs are possible, with a “feel good” recovery being very likely after the correction runs its course, even in the face of the monetary tightening cycle

DAX, 4-Hour Chart Analysis

Currency markets were in bounce-mode together with stocks, as the Dollar gave back some of its recent gains, partly helped by the reveal of a less-than-modest US budget plan, while risk-on currencies recovered losses across the board.

It’s no surprise that the safe-haven Yen also drifted lower, but the Dollar managed to underperform the Japanese currency despite the improving sentiment, and that could set up further losses in the USD/JPY that is already trading near its 16-month low.

USD/JPY, Daily Chart Analysis

Commodities joined the risk rally, but industrial metals and crude oil didn’t manage more than a minor bounce, and gold is also still stuck in its overbought correction. Oil’s weakness is especially significant as it comes after a strong rally that was fueled by the more and more troublesome Middle East situation, and it could signal a larger-scale change in risk appetite.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment had a mixed but generally positive day, as the most valuable coins ended higher with a few negative outliers, most notably Ripple, Cardano, and Stellar, and one major outperformer, Ethereum Classic. With no major changes in the technical setup, traders are still waiting for a rally to confirm that last Monday marked the end of the latest severe correction in the volatile sector.

BTC/USD, Daily Chart Analysis

Bitcoin saw a bullish cross in the long-term MACD in oversold territory recently and that is a very reliable technical signal, which adds to the already present encouraging signs.

As the last leg lower in BTC and most of the majors coincided with the sudden crash in stocks, today’s calm day on Wall Street helped cryptocurrencies, even as usually the correlation with traditional assets is tiny. The next few days could be crucial for the segment, as a push to new rally highs would confirm a short-term uptrend, while a less likely failure and a re-surge in volatility would warn of a possible test of the lows.

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Analysis

Daily Analysis: No Questions Answered

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Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2718 0.97%
DAX 12,468 0.31%
WTI Crude Oil 62.61 2.02%
GOLD 1332.00 0.52%
Bitcoin 9780 -8.00%
EUR/USD 1.2324 0.26%

It was a strange day indeed in equity markets, with mixed signals popping up across the board after yesterday’s crazy quasi-FED day. An ugly overnight session, followed by a strong pre-market rally, an early-day pump, and a late-day dump. That is the summary of the day, but under the surface, there is a real struggle between market forces, with still an edge for bears in the battle for control.

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NASDAQ 100 Futures, 4-Hour Chart Analysis

It seems that the Nasdaq is still the key, as the relative strength of the tech benchmark is the most reliable gauge of the market direction, at least regarding the intraday trends. That said, at the end of the day, the Nasdaq closed in the red 4 times in a row, at least as far as the normal trading day is concerned, and still, the major indices are trading not far off last Friday’s top, despite the downward drift.

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Forex Markets and Commodities

Adding to the confusion, the Dollar corrected lower after a positive period, and with Treasury yields trading all over the place, investors were left scratching their heads yet again. The Japanese Yen was the clear winner of the day among currencies, as the primary safe-haven got bid heavily during the Asian session, and it remained throughout the up-and-downs of the day, despite the strong bounce in stocks and risk-on currencies.

USD/JPY, 4-Hour Chart Analysis

The EUR/USD pair had a very active and volatile session, but the common currency remained above the lows from two weeks ago, while also halting below yesterday’s highs, so all-in-all, no technical conclusion to draw. As in stocks, the next clear directional day will be crucial, as the tug of war is getting tenser and tenser.

EUR/USD, 4-Hour Chart Analysis

The Canadian Dollar plummeted during the day, thanks to the dismal Retail Sales figures, but it finished well off its lows, boosted by the stock recovery and the jump in the price of crude oil. The Black Gold was pushed higher by the surprisingly bullish US inventory data, and the WTI contract closed back above $62.50 per barrel.

USD/CAD, 4-Hour Chart Analysis

Gold continued to follow the Euro, finishing the day slightly higher, but the precious metal showed notable relative strength during the Asian session, and that could be the precursor of a move to new rally highs, should the bearish scenario play out in equities.

Cryptocurrencies

The segment had another bearish session, and the bleeding continued after the US session, with BTC leading the way lower this time around after a long period of relative strength. A crucial test might be ahead of the most valuable coin, as the $9000-$9200 support zone would be a perfect target for the current correction, to keep the uptrend going. That said, that zone is still almost 50% above the prior low, leaving plenty of room for the coin to bottom out.

BTC/USDT, 4-Hour Chart Analysis

With all of the major altcoins also sporting significant losses, bulls would like to see more of the early relative strength that some coins have been showing, to establish a leadership that can guide the segment out of the plunge. For now, the crash lows are way below the current levels, and the bullish long-term scenario remains intact.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 109 rated postsTrader 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.




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Analysis

Technical Analysis: Correction Continues but Coins Remain Stable

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It’s been another mixed session for cryptocurrency investors as judging by only the price action, the segment suffered losses across the board, but comparing the current sell-off to the January plunge reveals that the majors are much more resilient this time around.

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The largest digital currencies are holding on to most of the gains of the recent weeks, and the price action near the crucial support zones is also encouraging. With all that said, the correction is not over yet, and further losses are still in the cards, but barring a substantial change in price action, the coins will likely continue the rally.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin has been trading around the key $10,000 level all day long, and, so far, a clear break-down has been averted. The short-term momentum indicators are now in neutral territory regarding the most valuable coin, and that could mean that a bottom is close, and investors should already add to their holdings here. Further strong support is found between $9000 and $9200, while targets are ahead at $11,300, $13,000, and $14,250.

XMR/USDT, 4-Hour Chart Analysis

Correlation between the majors has increased during the sell-off, but there are still clear outperformers and laggards, adding to the bullish case. Monero remains among the strongest coins from a technical perspective, trading right at the lower boundary of the bullish consolidation pattern, with the $280 price level holding up for now. The coin faces strong resistance near $300 and $335, but we expect the uptrend to continue with the next target being ahead at $400, while further support is found at $240.

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Pre-Market: Bulls Try to Fight Back after Ugly Overnight Session

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Following the steep late-day downturn on Wednesday, which followed the not-to-hawkish FED meeting minutes, Asian markets and US equity futures continued lower with a vengeance. The very active overnight trading is another sign of the regime change in traditional financial markets that we have been monitoring for the last two weeks, ever since the “Black Monday of 2018”.

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Dow Futures, 4-Hour Chart Analysis

EUR/USD Changing Behavior

The European session brought about an oversold bounce that stabilized markets from stocks to currencies. The EUR/USD pair that has started acting “normally” considering its relationship with US Treasury yields lately, is headed south once again, trading only 0.5% above its recent correction lows after clearly breaking below the rising trendline.

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EUR/USD, 4-Hour Chart Analysis

The bull-trap that we identified a few days ago was the start of the current leg lower, and if the regime change will be persistent, the most traded forex pair could be back to the role of the “risk-on/risk-off” indicator that has been the privilege of commodity currencies in the last couple of weeks.

USD/JPY, 4-Hour Chart Analysis

The Japanese Yen is showing notable strength after its overbought dip, and the primary safe-haven currency could be in for more gains, should the risk-selloff continue. The Yen also gained ground on the common European currency, following the dovish ECB meeting accounts and the misses in the German IFO business climate indicator and the British GDP, which all question the European growth-monetary tightening narrative.

Canadian Dollar in for a Wild Ride

USD/CAD, 4-Hour Chart Analysis

With the Canadian retail sales report and the US crude oil inventory data coming out soon, forex traders should expect sizeable moves in the recently weak currency, while the USD should also be very active during the US stock market session.

All eyes are on Treasury yields again, with the slight correction today helping the bounce in stocks and other risk assets. The Nasdaq could be the motor of a stronger rally on Wall Street, but we wouldn’t bet the house on that, as the short-term technical setup remains bearish, and a re-test of the correction lows is still the most likely scenario for the coming weeks.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 109 rated postsTrader 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.




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