Daily Analysis: Stocks Shed Early Gains as Yield Curve Re-Collapses

Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2685 -0.07%
DAX 13070 -0.02%
WTI Crude Oil 59.59 -0.62%
GOLD 1291.00 0.61%
Bitcoin 15,145 -6.30%
EUR/USD 1.1899 0.31%

US markets finished today’s session virtually unchanged, despite the early gains in the major indices as steady selling pressure dragged stocks lower. The benchmarks are still trading near their all-time highs, even as participation in the rally remains tepid, and outside the indices, life is less rosy on Wall Street.

S&P 500 Futures, 4-Hour Chart Analysis

It’s been a very quiet day in equity markets, but not so much in bonds, as the dominant trend in the US Treasury markets, namely the collapse of the yield curve resumed after the pre-holiday counter-trend move. To be precise, both short- and long-dated Treasuries rallied today, but the longer end of the curve fell much more, with short-term yields only falling slightly.

TLT, (Long-Dated Treasury ETF), 4-Hour Chart Analysis

While the inversion of the curve, a major recessionary sign in the previous, non-QE dominated economic cycles, at this rate we could be facing that in a matter of months. Stocks got slightly spooked by the sizeable moves in Treasuries, and as Apple (AAPL) failed to rebound after yesterday’s sell-off, the NASDAQ continued to lag the other indices a bit.

Forex markets returned to volatility, as trading centers all over the globe re-opened, and the recent short-Dollar trade remained in the center of attention, with especially some of the commodity-related currencies gaining ground on the Greenback. The Aussie shot up by almost 1%, as both oil and gold have been pushing higher in the last couple of weeks, while the Canadian Dollar also continued its rally.

AUD/USD, 4-Hour Chart Analysis

As currencies reacted to the recent commodity trends, crude oil actually corrected somewhat after the recent run-up, although gold added to yesterday’s gains, edging ever closer to the $1300 level.

Gold, 4-Hour Chart Analysis

Cryptocurrencies

Trading activity picked up in the crypto segment as expected, and while the broad bounce continued in early trading, Bitcoin and most of the altcoins turned lower in the second half of the session. BTC hit an intraday high at $16,500 but fell by $2,000 end it’s still hovering around the $15,000 mark following the end of the US session.

BTC/USD, 4-Hour Chart Analysis

Most of the major altcoins are also lower after an active, but still low-volume day, with Ripple standing out once again, hitting a new all-time high in late-trading. The coin broke above the $1.25 level after an already strong session, and although the long-term trend in the coin is already overbought, the short-term trend is still positive, and the $1.5 level is now in sight.

Ripple/USDT, 4-Hour Chart Analysis

Monero and Ethereum are the other two relatively strong majors from a technical perspective, but as the long-term bearish pressure is still apparent in the segment, investors should wait until setups with better risk/reward ratios start to pop up, as the correction runs its course.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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.

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