Daily Analysis: Stocks Skyrocket amid Trade War Relief

Monday Market Recap

Asset Current Value Daily Change
S&P 500 2666 2.81%
DAX 11,787 -0.83%
WTI Crude Oil 65.58 0.0%
GOLD 1353.00 0.38%
Bitcoin 8,180 -4.53%
EUR/USD 1.2450 0.67%

US stock futures rallied strongly today in pre-market trading following Friday’s steep late-session drop that carried equities close to the February crash lows. As we noted on Friday, the major indices became short-term oversold amid the surge in volatility, and that led to a violent countertrend rally, thanks to the easing of the trade war fears over the weekend.

Treasury secretary Steve Mnuchin told the press that the US is having a productive conversation with China in order to avoid a widespread trade war, and that helped in improving the extremely negative investor sentiment of the last week.

Nasdaq 100, 4-Hour Chart Analysis

The Nasdaq led the way higher following a bearish week for the tech benchmark, rising by more than 3% off the Friday low. The benchmark hit the 6725 level during the bounce, as we expected, but the short-term downtrend is still clearly intact, even as the Nasdaq remained the strongest major market globally.

While the bounce was impressive, short covering was the name of the game, with the most-shorted issues clearly outperforming the broader market. On an interesting note, the daily gains were the largest since 2015, but still, the benchmarks only recovered just a bit over Thursday’s close.

Dow 30, 4-Hour Chart Analysis

Volatility should decline substantially before the end of the correction, and market breadth is also very weak, and while a bear market is far from being confirmed, the recently weak markets and segments are still struggling, so we still advise investors to remain defensive. European stocks remained under pressure for most of the day, as the Euro jumped higher against the Dollar, while Asian stocks were stronger thanks to the jump in Chinese shares, and the Japanese Yen’s pullback that lifted the Nikkei.

Dollar Index Close to 3-Year Low

EUR/USD, 4-Hour Chart Analysis

Thanks to the improving global sentiment, the Dollar’s slide accelerated against the Euro, with the EUR/USD pair hitting 1.2450 for the first time in 5 weeks, breaking out from a slightly declining consolidation pattern, and getting within 1% of the February high.

The Greenback lost ground compared to most of the other majors as well, as risk-on currencies rallied together with stocks, the Yen retreated from Friday’s multi-year high compared the Dollar, as safe-haven flows reversed.

Gold benefited from the Dollar weakness too, as it followed through on its recent break-out and inched closer towards its yearly high near $1360, while crude oil had a consolidation day after the strong rally on Friday, with the WTI contract still trading near the $65 per barrel price level.

Cryptocurrencies

BTC/USD, 4-Hour Chart Analysis

The segment suffered yet another, slight regulatory blow today, as Twitter confirmed the rumors that it will follow the likes of Facebook and Google, banning ICO and crypto-related ads. The LitePay fiasco also weighed on sentiment today, and the major coins broke below key short-term support levels, heading towards last week’s lows, despite the late-week rally.

While no coin hit a new low today, Bitcoin fell below $8000, while Ethereum and Ripple remained relatively weak, pushing the total value of the market back to the $300 billion mark. As on Friday, the segment experienced a strong bounce after the US close, but for now the short-term technical picture is still shaky, and most of the coins are still in downtrends.

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.