US home sales have fallen into a severe crisis zone
Sales in the secondary housing market in the US have fallen to an annualised pace of 3.96 million. At the peak of the downturn, the figure managed to stay above 4 million. Only during the darkest times for the US economy, during the global financial crisis, have secondary home sales been below that level.
Now, the reason is extremely high mortgage rates. The market's main benchmark - the rate on a 30-year fixed mortgage - has reached 8 per cent, a level we haven't seen since 2000. That's a real shock to consumers, who have been fed by a long era of zero interest rates. As a result, the weekly index of mortgage activity has fallen to its lowest level since 1995.
Sales in the secondary housing market in the US have fallen to an annualised pace of 3.96 million. At the peak of the downturn, the figure managed to stay above 4 million. Only during the darkest times for the US economy, during the global financial crisis, have secondary home sales been below that level.
Now, the reason is extremely high mortgage rates. The market's main benchmark - the rate on a 30-year fixed mortgage - has reached 8 per cent, a level we haven't seen since 2000. That's a real shock to consumers, who have been fed by a long era of zero interest rates. As a result, the weekly index of mortgage activity has fallen to its lowest level since 1995.
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In previous episodes of modern history, such low sales have coincided with problems in other sectors, forcing the Fed or the government to stimulate abundant demand. But don't expect that to happen this time. It now appears that the central bank will look past the collapse in sales in the coming months. There is still a need to contain inflation, even if the process is initially hypertrophied in the housing sector.
At the same time, the stock of unsold homes stands at a comfortable 3.4 months of sales at the current pace - double the level at the start of 2022. Prices have also retreated from their pandemic trend, rising by more than 50 per cent in less than two years.
Meanwhile, falling home sales and prices are further bad news for banks, which are already sitting on huge "paper" losses due to the collapse in bond prices. As house prices fall, more Americans may choose to default on their monthly payments as their debt falls below the house price.
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At the same time, the stock of unsold homes stands at a comfortable 3.4 months of sales at the current pace - double the level at the start of 2022. Prices have also retreated from their pandemic trend, rising by more than 50 per cent in less than two years.
Meanwhile, falling home sales and prices are further bad news for banks, which are already sitting on huge "paper" losses due to the collapse in bond prices. As house prices fall, more Americans may choose to default on their monthly payments as their debt falls below the house price.
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#WaveAnalysis
#GBPCHF falling inside minor impulse wave 3
Likely to fall to support level 1.0820
GBPCHF currency pair continues to fall inside the minor impulse wave 3, which reversed earlier from the resistance level 1.1000 (former multi-month support level from March).
The active minor impulse wave 3 belongs to the intermediate impulse wave (C) from the middle of June.
Given the clear daily downtrend, GBPCHF can be expected to fall further toward the next support level 1.0820 (target for the completion of the active impulse wave (C)).
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#GBPCHF falling inside minor impulse wave 3
Likely to fall to support level 1.0820
GBPCHF currency pair continues to fall inside the minor impulse wave 3, which reversed earlier from the resistance level 1.1000 (former multi-month support level from March).
The active minor impulse wave 3 belongs to the intermediate impulse wave (C) from the middle of June.
Given the clear daily downtrend, GBPCHF can be expected to fall further toward the next support level 1.0820 (target for the completion of the active impulse wave (C)).
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#WaveAnalysis
#CHFJPY under bullish pressure
Likely to test resistance level 170.00
CHFJPY currency pair under the bullish pressure after the pair broke above the key resistance level 166.10 (which reversed the pair 3 times in August as can be seen below).
The breakout of the resistance level 166.10 accelerated the active intermediate impulse wave (5) from the start of October.
Given the clear daily uptrend and the accelerating upward momentum, CHFJPY can be expected to rise further toward the next resistance level 170.00 (target for the completion of the active impulse wave (5)).
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#CHFJPY under bullish pressure
Likely to test resistance level 170.00
CHFJPY currency pair under the bullish pressure after the pair broke above the key resistance level 166.10 (which reversed the pair 3 times in August as can be seen below).
The breakout of the resistance level 166.10 accelerated the active intermediate impulse wave (5) from the start of October.
Given the clear daily uptrend and the accelerating upward momentum, CHFJPY can be expected to rise further toward the next resistance level 170.00 (target for the completion of the active impulse wave (5)).
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The crypto market is roaring, gaining over 3% in the last 24 hours. Bitcoin has accelerated its growth, with altcoin buyers seemingly emboldened by its sustained rise in recent days.
At one point, the total capitalisation exceeded 1.13 trillion, the highest since mid-August. The Fear and Greed Index is approaching 50 - also the highest since August - and Bitcoin's share is above 50% - the highest in two years.
Bitcoin is moving upward, reminiscent of the dynamics of shorts squeezed out of the market. Bitcoin is making a series of higher local lows and highs.
Technically, the leading cryptocurrency feels increasingly confident at levels above its 200-day average and has returned to territory above its 200-week average.
We think it's important to note that the break of these curves was accompanied by a strong move, marking the capitulation of some of the sellers. A fundamental shift usually follows this in investor sentiment.
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At one point, the total capitalisation exceeded 1.13 trillion, the highest since mid-August. The Fear and Greed Index is approaching 50 - also the highest since August - and Bitcoin's share is above 50% - the highest in two years.
Bitcoin is moving upward, reminiscent of the dynamics of shorts squeezed out of the market. Bitcoin is making a series of higher local lows and highs.
Technically, the leading cryptocurrency feels increasingly confident at levels above its 200-day average and has returned to territory above its 200-week average.
We think it's important to note that the break of these curves was accompanied by a strong move, marking the capitulation of some of the sellers. A fundamental shift usually follows this in investor sentiment.
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#WaveAnalysis
#EURCHF reversed from support level 0.9420
Likely to test resistance level 0.9530
EURCHF currency pair recently reversed up from the major support level 0.9420 (which stopped the sharp weekly downtrend in 2022 as can be seen below).
The support level 0.9420 was further strengthened by the nearby lower weekly and the daily Bollinger Bands.
Given the bullish divergence on the weekly Stochastic, EURCHF can be expected to rise further toward the next resistance level 0.9530.
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#EURCHF reversed from support level 0.9420
Likely to test resistance level 0.9530
EURCHF currency pair recently reversed up from the major support level 0.9420 (which stopped the sharp weekly downtrend in 2022 as can be seen below).
The support level 0.9420 was further strengthened by the nearby lower weekly and the daily Bollinger Bands.
Given the bullish divergence on the weekly Stochastic, EURCHF can be expected to rise further toward the next resistance level 0.9530.
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#WaveAnalysis
#EURNZD rising inside sharp impulse wave 3
Likely to test resistance level 1.8260
EURNZD currency pair rising inside the sharp upward impulse wave 3, which previously broke the key resistance level 1.7800 (top of the previous minor correction iv, can be seen below).
The breakout of the resistance level 11.7800 accelerated the active impulse wave 3 of the intermediate impulse wave (3) from May.
Given the clear daily uptrend and the bullish EUR sentiment see across the FX markets today, EURNZD can be expected to rise further toward the next resistance level 1.8260, which reversed the pair twice at the start of September.
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#EURNZD rising inside sharp impulse wave 3
Likely to test resistance level 1.8260
EURNZD currency pair rising inside the sharp upward impulse wave 3, which previously broke the key resistance level 1.7800 (top of the previous minor correction iv, can be seen below).
The breakout of the resistance level 11.7800 accelerated the active impulse wave 3 of the intermediate impulse wave (3) from May.
Given the clear daily uptrend and the bullish EUR sentiment see across the FX markets today, EURNZD can be expected to rise further toward the next resistance level 1.8260, which reversed the pair twice at the start of September.
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Over the past 7 days, the crypto market has gained over 8.3%, bringing its cap to $1.17 trillion, the highest since mid-August.
The market has reached a plateau where it stabilised from late June to mid-August. The dive back then was due to the spike in government bond yields, which suppressed global risk appetite.
This factor is no longer an obstacle and may even be playing into crypto's hands. But such a link can only work while the stock market’s retreat is relatively organised. A solid risk-off momentum will almost inevitably trigger institutional selling in crypto.
Bitcoin has gained over 10% in the last seven days. On Monday morning, the price climbed to nearly $31K.
This is a significant turning point. Bitcoin reversed from here in April and June, accelerating the sell-off in June 2022, but Bitcoin was actively bought back from these levels from January to July 2021. A consolidation above $31K could force the bears to capitulate and quickly send the price into the $40K area.
The market has reached a plateau where it stabilised from late June to mid-August. The dive back then was due to the spike in government bond yields, which suppressed global risk appetite.
This factor is no longer an obstacle and may even be playing into crypto's hands. But such a link can only work while the stock market’s retreat is relatively organised. A solid risk-off momentum will almost inevitably trigger institutional selling in crypto.
Bitcoin has gained over 10% in the last seven days. On Monday morning, the price climbed to nearly $31K.
This is a significant turning point. Bitcoin reversed from here in April and June, accelerating the sell-off in June 2022, but Bitcoin was actively bought back from these levels from January to July 2021. A consolidation above $31K could force the bears to capitulate and quickly send the price into the $40K area.
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The index of global equities (ETF #VT) fell below the local lows of early October and May to its lowest level since March. The sell-off intensified when the index broke below its 200-day moving average. The last time global equities traded at such a low was at the height of the US regional banking crisis. At the start of the month, the last time the index fell below this curve, equities had accumulated significant oversold conditions. The bounce and subsequent consolidation allowed sellers to build liquidity for a new, sharper attack.
The weekly timeframe now shows a tug-of-war near the 200-week moving average. Over the past decade, a break below this line has accelerated the sell-off, with losses of 11% in September 2022, over 23% in March 2020 and around 9.5% in January 2016. This was the most dramatic but relatively short-lived phase. Less than a month later, we saw a sharp rebound. Will that happen this time?
The weekly timeframe now shows a tug-of-war near the 200-week moving average. Over the past decade, a break below this line has accelerated the sell-off, with losses of 11% in September 2022, over 23% in March 2020 and around 9.5% in January 2016. This was the most dramatic but relatively short-lived phase. Less than a month later, we saw a sharp rebound. Will that happen this time?
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The major US stock indices closed lower last week, sending an important signal of buyer weakness that could trigger a more substantial sell-off in the new week.
The S&P500 (#SPX) ended last week below its 200-day moving average and started the new week close to the October lows near 4200. After rallying to nearly 4400 in early October, the S&P500 temporarily recovered almost half of its losses since the sell-off began in August. However, it then encountered strong resistance in the form of the round level and the 50-day moving average.
Developing this Fibonacci pattern opens a 5% downside potential to 4000. Still, we also look to the 200-week average (now at 3945, or -6%), which could be a centre of gravity for the bears.
The S&P500 (#SPX) ended last week below its 200-day moving average and started the new week close to the October lows near 4200. After rallying to nearly 4400 in early October, the S&P500 temporarily recovered almost half of its losses since the sell-off began in August. However, it then encountered strong resistance in the form of the round level and the 50-day moving average.
Developing this Fibonacci pattern opens a 5% downside potential to 4000. Still, we also look to the 200-week average (now at 3945, or -6%), which could be a centre of gravity for the bears.
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The Nasdaq100 (#NDX) is decisively looking for a bottom, having returned to 14500, where it stayed briefly in early October. Previously, we saw a sharp reversal to the downside as it approached the upper boundary of the descending range, confirming its strength.
Building on the pessimistic picture in the broader indices, we are preparing for an intensified sell-off in the Nasdaq100 with a potential target in the 13700-14000 area. The lower boundary is the pivot point from August last year, while the upper boundary is the 200-day average. A deeper target for the bears is seen in the 12700 area, where the 200-week average runs through.
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Building on the pessimistic picture in the broader indices, we are preparing for an intensified sell-off in the Nasdaq100 with a potential target in the 13700-14000 area. The lower boundary is the pivot point from August last year, while the upper boundary is the 200-day average. A deeper target for the bears is seen in the 12700 area, where the 200-week average runs through.
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#WaveAnalysis
#AUDUSD reversed from key support level 0.6300
Likely to rise to resistance level 0.6400
AUDUSD currency pair recently reversed up from the key support level 0.6300 (which has been reversing the pair from November).
The support level 0.6300 was strengthened by the lower daily Bollinger Band and by the support trendline of the weekly down channel from February.
Given the strength of the support level 0.6300, AUDUSD can be expected to rise further toward the next resistance level 0.6400.
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#AUDUSD reversed from key support level 0.6300
Likely to rise to resistance level 0.6400
AUDUSD currency pair recently reversed up from the key support level 0.6300 (which has been reversing the pair from November).
The support level 0.6300 was strengthened by the lower daily Bollinger Band and by the support trendline of the weekly down channel from February.
Given the strength of the support level 0.6300, AUDUSD can be expected to rise further toward the next resistance level 0.6400.
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#WaveAnalysis
#CADCHF reversed from support level 0.6480
Likely to rise to resistance level 0.6550
CADCHF currency pair recently reversed up from the powerful support level 0.6480 (which has been reversing the pair from July) coinciding with the lower daily Bollinger Band.
The upward reversal from the support level 0.6480 stopped the previous sharp downward impulse wave 3.
Given the strength of the support level 0.6480 and the oversold daily Stochastic, CADCHF can be expected to rise further toward the next resistance level 0.6550.
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#CADCHF reversed from support level 0.6480
Likely to rise to resistance level 0.6550
CADCHF currency pair recently reversed up from the powerful support level 0.6480 (which has been reversing the pair from July) coinciding with the lower daily Bollinger Band.
The upward reversal from the support level 0.6480 stopped the previous sharp downward impulse wave 3.
Given the strength of the support level 0.6480 and the oversold daily Stochastic, CADCHF can be expected to rise further toward the next resistance level 0.6550.
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The crypto market cap has risen over 7.3% in the last 24 hours to $1.25 trillion.
The formal reason was further speculation around the launch of a spot ETF on Bitcoin. At the same time, the liquidation of short positions intensified the amplitude, as the wave of triggered orders came at a time of low market liquidity.
#Bitcoin opened Tuesday with a jump to $35.2K, a level not seen since May 2022. The BTC dominance exceeded 52%.
The technical picture points to a long-awaited exit from consolidation and a rapid start to growth. The first cryptocurrency found systematic support in early October at the 50-day moving average. It overcame this with a sharp move at the beginning of last week and then held above the 200-day. Now, it is gaining strength in the area above the 200-week, where long-term holders can join the buying.
The $31K to $46K range is an area of thin air, with not many obstacles. The market blew it down quickly last year, and it is worth being ready to mirror the move this time around.
The formal reason was further speculation around the launch of a spot ETF on Bitcoin. At the same time, the liquidation of short positions intensified the amplitude, as the wave of triggered orders came at a time of low market liquidity.
#Bitcoin opened Tuesday with a jump to $35.2K, a level not seen since May 2022. The BTC dominance exceeded 52%.
The technical picture points to a long-awaited exit from consolidation and a rapid start to growth. The first cryptocurrency found systematic support in early October at the 50-day moving average. It overcame this with a sharp move at the beginning of last week and then held above the 200-day. Now, it is gaining strength in the area above the 200-week, where long-term holders can join the buying.
The $31K to $46K range is an area of thin air, with not many obstacles. The market blew it down quickly last year, and it is worth being ready to mirror the move this time around.
Euro dampened by weak PMI
Economic activity in Europe is cooling, raising the spectre of an emerging recession in Germany and the whole eurozone.
The PMI indices have proven to be a reliable indicator of the economic cycle for currency and equity market investors. The latest preliminary estimates for October disappointed, showing a deepening of the recession rather than the expected improvement.
The main disappointment was the German services sector, where the index fell from 50.3 to 48.0, back into contraction territory, unable to stay in growth territory and much weaker than the expected 50.1.
In France, the services index came in at 46.1, better than the expected 44.9 but still very low.
Economic activity in Europe is cooling, raising the spectre of an emerging recession in Germany and the whole eurozone.
The PMI indices have proven to be a reliable indicator of the economic cycle for currency and equity market investors. The latest preliminary estimates for October disappointed, showing a deepening of the recession rather than the expected improvement.
The main disappointment was the German services sector, where the index fell from 50.3 to 48.0, back into contraction territory, unable to stay in growth territory and much weaker than the expected 50.1.
In France, the services index came in at 46.1, better than the expected 44.9 but still very low.
PMI for the entire euro area fell to 47.8, the lowest level since February 2021.
The euro area manufacturing sector accelerated its contraction, falling from 43.4 to 43.0 instead of the expected rebound to 43.6.
The composite index fell from 47.2 to 46.5, the sharpest decline since October 2020. The fact that markets had braced themselves for a rise to 47.4 fuelled the sell-off in the single currency.
The euro area manufacturing sector accelerated its contraction, falling from 43.4 to 43.0 instead of the expected rebound to 43.6.
The composite index fell from 47.2 to 46.5, the sharpest decline since October 2020. The fact that markets had braced themselves for a rise to 47.4 fuelled the sell-off in the single currency.
#EURUSD lost nearly 0.5% shortly after the data was released, turning sharply lower on a move away from 1.07. Technically, sellers piled on the pressure after the pair touched its 50-day moving average, a medium-term trend indicator.
A close below 1.07 would be a reminder that the pair's slow recovery from 1.05 levels this month was a correction of oversold and not a trend change.
Fundamentally, Europe again shows it is struggling to grow with rising interest rates and volatile energy prices. These conditions have led the ECB to stop raising rates earlier than the Fed. Perhaps, as in the previous cycle of rate hikes following the global financial crisis, the ECB will turn to easing earlier than the Fed. This is an important factor weighing on the euro against the dollar at a time when the carry trade has re-emerged as a market driver.
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A close below 1.07 would be a reminder that the pair's slow recovery from 1.05 levels this month was a correction of oversold and not a trend change.
Fundamentally, Europe again shows it is struggling to grow with rising interest rates and volatile energy prices. These conditions have led the ECB to stop raising rates earlier than the Fed. Perhaps, as in the previous cycle of rate hikes following the global financial crisis, the ECB will turn to easing earlier than the Fed. This is an important factor weighing on the euro against the dollar at a time when the carry trade has re-emerged as a market driver.
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The US “Big Oil” has picked up recently, with both production growth and mergers and acquisitions.
At the end of last week, the number of active drilling rigs in the US rose to 502 oil rigs and 122 gas rigs, according to Baker Hughes estimates. This is the second week in a row with some increase. It is minimal, but it could start a trend if it is reinforced by other news.
The last two weekly EIA reports show a jump in average daily oil production to 13.2 million bpd, a record high. And the rising rig count suggests that companies in America are finally seeing the potential in investing in expanding oil production.
They may have been spurred on by the fact that crude oil inventories are now 4% lower than a year ago and close to their lowest levels since 2015 when the shale boom was in full swing.
Oil producers may have been encouraged by the US government's move to buy oil for the Strategic Petroleum Reserve.
At the end of last week, the number of active drilling rigs in the US rose to 502 oil rigs and 122 gas rigs, according to Baker Hughes estimates. This is the second week in a row with some increase. It is minimal, but it could start a trend if it is reinforced by other news.
The last two weekly EIA reports show a jump in average daily oil production to 13.2 million bpd, a record high. And the rising rig count suggests that companies in America are finally seeing the potential in investing in expanding oil production.
They may have been spurred on by the fact that crude oil inventories are now 4% lower than a year ago and close to their lowest levels since 2015 when the shale boom was in full swing.
Oil producers may have been encouraged by the US government's move to buy oil for the Strategic Petroleum Reserve.
Chevron agreed to buy Hess for $60bn. About two weeks earlier, Exxon Mobil announced it was buying Pioneer Natural Resources for $58bn. Now it's clear what the US oil majors have been saving up for.
The easing of sanctions on Venezuela could also be a boon for US oil producers, having capacity there.
The Middle East war and the risk of supply disruptions are long-term factors favouring investment in US oil production.
Perhaps the OPEC+, which have spare capacity but artificially limit production to support the price, also see this trend. So far, however, there has been no response from the Islamic world to Iran's calls for an oil blockade of the West.
This could be the prologue to a shift in focus from the battle for profits and the final price of crude to a war for market share. Given years of record interest rates, it won't be easy for US companies. But it is also worth noting that the biggest players are now in business, with impressive capital reserves and strong lobbies in government.
The easing of sanctions on Venezuela could also be a boon for US oil producers, having capacity there.
The Middle East war and the risk of supply disruptions are long-term factors favouring investment in US oil production.
Perhaps the OPEC+, which have spare capacity but artificially limit production to support the price, also see this trend. So far, however, there has been no response from the Islamic world to Iran's calls for an oil blockade of the West.
This could be the prologue to a shift in focus from the battle for profits and the final price of crude to a war for market share. Given years of record interest rates, it won't be easy for US companies. But it is also worth noting that the biggest players are now in business, with impressive capital reserves and strong lobbies in government.
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Gold rally runs out of steam
Gold is experiencing profit-taking after an impressive rally following the escalation in the Middle East.
The cost of a troy ounce of gold was down to $1955 at the peak of the European session on Tuesday, after a two-week rally from $1811 to almost $2000 since the 6th of October.
This week's opening with a gap down was a sign that the market had built considerable profit-taking demand. The gap was closed during the day, but the decline continued Tuesday.
The market blew off steam just as the daily RSIs hit overbought levels. If this is not some short-term market noise, a full-blown correction of the latest rally would take the price to $1925, up to 61.8% of the initial advance.
Theoretically, there is a more bullish scenario for gold. According to this, today's pullback to $1955, or 76.4%, has already removed some overbought conditions and spurred enough buying demand to increase the price.
Gold is experiencing profit-taking after an impressive rally following the escalation in the Middle East.
The cost of a troy ounce of gold was down to $1955 at the peak of the European session on Tuesday, after a two-week rally from $1811 to almost $2000 since the 6th of October.
This week's opening with a gap down was a sign that the market had built considerable profit-taking demand. The gap was closed during the day, but the decline continued Tuesday.
The market blew off steam just as the daily RSIs hit overbought levels. If this is not some short-term market noise, a full-blown correction of the latest rally would take the price to $1925, up to 61.8% of the initial advance.
Theoretically, there is a more bullish scenario for gold. According to this, today's pullback to $1955, or 76.4%, has already removed some overbought conditions and spurred enough buying demand to increase the price.