From the high on 11 July to the intraday lows of the day on 25 July, which is exactly two weeks, the Nasdaq100 is down 9%, which is near informal correction territory (down over 10% from the peak).
The latest pullback fits into an uptrend formed since early 2023, with a potential pullback target at the lower boundary of this corridor, 18300-18500. This area is also interesting because there was active resistance here in March and April, and at the end of May, it was already working as support. A failure below would indicate that we are seeing more than a routine shakeout.
On the bullish side, the idea of rotation from Big-Tech to smaller companies is still on the table, as the Russell 2000 just started its rally on 11 July and is now 7.5% above the levels of that starting point. So, while the drawdown in many stocks is quite painful, it is due to their apparent overheating earlier.
The latest pullback fits into an uptrend formed since early 2023, with a potential pullback target at the lower boundary of this corridor, 18300-18500. This area is also interesting because there was active resistance here in March and April, and at the end of May, it was already working as support. A failure below would indicate that we are seeing more than a routine shakeout.
On the bullish side, the idea of rotation from Big-Tech to smaller companies is still on the table, as the Russell 2000 just started its rally on 11 July and is now 7.5% above the levels of that starting point. So, while the drawdown in many stocks is quite painful, it is due to their apparent overheating earlier.
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We also pay attention to the VIX index. It fell a little short of the 19 level on Wednesday, having reached a three-month high. In our observations, meaningful sell-offs have only occurred when the VIX jumped above 20.
July and August are often weak months as investors prefer to rebalance positions and prepare for the start of the new US financial and fiscal year in October.
Thus, the US market dynamics over the next few days will help determine whether we see a short-term correction, albeit a furious one, or whether this is the beginning of a bear market, which at worst could be a repeat of what we saw in 2000-2002 or 2007-2009.
July and August are often weak months as investors prefer to rebalance positions and prepare for the start of the new US financial and fiscal year in October.
Thus, the US market dynamics over the next few days will help determine whether we see a short-term correction, albeit a furious one, or whether this is the beginning of a bear market, which at worst could be a repeat of what we saw in 2000-2002 or 2007-2009.
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#WaveAnalysis
#EURJPY reversed from support level 165.00;
Likely to rise to resistance level 168.00.
EURJPY currency pair recently reversed up from the pivotal support level 165.00 (former strong resistance from March and April, which also stopped the previous correction 2 at the start of May).
The support level 165.00 was strengthened by the 50% Fibonacci correction of the previous sharp uptrend from December.
Given the clear uptrend, EURJPY currency pair can be expected to rise further to the next resistance level 168.00 (former strong support from May and June).
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#EURJPY reversed from support level 165.00;
Likely to rise to resistance level 168.00.
EURJPY currency pair recently reversed up from the pivotal support level 165.00 (former strong resistance from March and April, which also stopped the previous correction 2 at the start of May).
The support level 165.00 was strengthened by the 50% Fibonacci correction of the previous sharp uptrend from December.
Given the clear uptrend, EURJPY currency pair can be expected to rise further to the next resistance level 168.00 (former strong support from May and June).
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#WaveAnalysis
#USDCAD reversed from long-term resistance level 1.3850;
Likely to fall to support level 1.3760.
USDCAD currency pair is under bearish pressure after previously reversing from the long-term resistance level 1.3850 (which has been repeatedly reversing the price from the end of 2022, as can be seen below).
The resistance level 1.3850 was strengthened by the nearby upper daily and the weekly Bollinger Bands.
Given the strength of the resistance level 1.3850 and the clear bearish divergence on the weekly Stochastic indicator, USDCAD currency pair can be expected to fall further to the next support level 1.3760.
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#USDCAD reversed from long-term resistance level 1.3850;
Likely to fall to support level 1.3760.
USDCAD currency pair is under bearish pressure after previously reversing from the long-term resistance level 1.3850 (which has been repeatedly reversing the price from the end of 2022, as can be seen below).
The resistance level 1.3850 was strengthened by the nearby upper daily and the weekly Bollinger Bands.
Given the strength of the resistance level 1.3850 and the clear bearish divergence on the weekly Stochastic indicator, USDCAD currency pair can be expected to fall further to the next support level 1.3760.
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#Crypto market rallied 3.4% overnight to $2.4 trillion, taking advantage of the mixed performance of US indices, with the Russell2000 and Dow Jones up and the Nasdaq100 and S&P500 down. It's not a full recovery, but it's the second bounce in a week from just under $2.31 trillion.
#Bitcoin rose 4.4% over the last 24 hours to $67.0K, taking the crypto market with it. It bounced off the 50-day MA and continued to gain strength on Friday. This is an indication of the strength of the bulls, who have managed to defend the medium-term uptrend. At current levels, bitcoin has returned to the upper boundary of the descending channel formed in March.
#Ethereum is finding support near its 200-day MA, which also demonstrates the bulls' desire to keep the coin in a long-term growth trend and confidently buy on dips towards $3000. Ethereum is now trading near $3200 and has no technical hurdles ahead until the $3500 area where local profit-taking could occur.
#Bitcoin rose 4.4% over the last 24 hours to $67.0K, taking the crypto market with it. It bounced off the 50-day MA and continued to gain strength on Friday. This is an indication of the strength of the bulls, who have managed to defend the medium-term uptrend. At current levels, bitcoin has returned to the upper boundary of the descending channel formed in March.
#Ethereum is finding support near its 200-day MA, which also demonstrates the bulls' desire to keep the coin in a long-term growth trend and confidently buy on dips towards $3000. Ethereum is now trading near $3200 and has no technical hurdles ahead until the $3500 area where local profit-taking could occur.
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#Review
#Gold bent but not yet broken
Gold came close to closing lower for the second week in a row, falling to $2372 per troy ounce on Friday morning, $111 below its high on July 17th.
This decline occurred in two impulses, with an intermediate correction in between, and fits within a 61.8% Fibonacci retracement pattern from the initial decline. The extension of the pattern within the classic expansion suggests a downside target near $2320.
On the other hand, gold found buying support on Thursday and early on Friday at the crossover of the 50-day moving average near $2360. This also coincides with the consolidation centre of the repeated pullbacks from April to June. This means that the decline in this area is well within the framework of a correction, and it is not yet possible to claim that the gold rally has broken and that a top has been established for many months and years to come.
#Gold bent but not yet broken
Gold came close to closing lower for the second week in a row, falling to $2372 per troy ounce on Friday morning, $111 below its high on July 17th.
This decline occurred in two impulses, with an intermediate correction in between, and fits within a 61.8% Fibonacci retracement pattern from the initial decline. The extension of the pattern within the classic expansion suggests a downside target near $2320.
On the other hand, gold found buying support on Thursday and early on Friday at the crossover of the 50-day moving average near $2360. This also coincides with the consolidation centre of the repeated pullbacks from April to June. This means that the decline in this area is well within the framework of a correction, and it is not yet possible to claim that the gold rally has broken and that a top has been established for many months and years to come.
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Therefore, there are two possible lines of defence for gold in the short term: $2360 and $2320. It is worth keeping a close eye on the price action around these levels. If gold breaks through them with a strong move, we should be prepared for a prolonged decline. If the buyers manage to break the trend near one of these lines, the price may well continue to rise on buyers' encouragement.
Gold's ability to avoid a sell-off in June after breaking the 50-day probably helped it make new highs in July. This story could be repeated if the financial markets avoid another deep sell-off and return to growth even without an official correction (a fall of more than 10% from the peak).
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Gold's ability to avoid a sell-off in June after breaking the 50-day probably helped it make new highs in July. This story could be repeated if the financial markets avoid another deep sell-off and return to growth even without an official correction (a fall of more than 10% from the peak).
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#EconomicComment
Friday saw the release of the last important piece of the inflation puzzle ahead of next week's Fed meeting. The FOMC's preferred measure of inflation, the Core Personal Consumption Expenditures Price Index, rose 0.2% m/m and 2.6% y/y, keeping the annual rate of increase at its lowest level since March 2021.
Alongside the more neutral inflation data, we continue to see alarm bells ringing for US consumer activity. Personal spending rose by 0.3% in June, compared with income growth of 0.2%. Households saved $703bn, or 3.4% of disposable income, the lowest level in 18 months.
Friday saw the release of the last important piece of the inflation puzzle ahead of next week's Fed meeting. The FOMC's preferred measure of inflation, the Core Personal Consumption Expenditures Price Index, rose 0.2% m/m and 2.6% y/y, keeping the annual rate of increase at its lowest level since March 2021.
Alongside the more neutral inflation data, we continue to see alarm bells ringing for US consumer activity. Personal spending rose by 0.3% in June, compared with income growth of 0.2%. Households saved $703bn, or 3.4% of disposable income, the lowest level in 18 months.
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Aside from the pandemic in 2022, the only other time in US history that savings were this low was between 2005 and 2008, leading to the Global Financial Crisis.
After that, people's desire to save by rebuilding a financial safety cushion severely delayed the economic recovery.
At that time, the situation was largely rescued by the huge government spending that has since become the norm. Today, rising debt and chronic deficits severely limit the scope for government stimulus as the economy contracts, and this could be a multi-year problem.
After that, people's desire to save by rebuilding a financial safety cushion severely delayed the economic recovery.
At that time, the situation was largely rescued by the huge government spending that has since become the norm. Today, rising debt and chronic deficits severely limit the scope for government stimulus as the economy contracts, and this could be a multi-year problem.
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The recent data, which were close to traders' and analysts' average forecasts, did not lead to a significant reassessment of the markets.
At the same time, they kept the Dollar Index above its 200-day moving average, which the DXY has been trying to break daily since the 19th. At the same time, equity indices are seeing increased buying, with the Dow Jones and Russell 2000 posting gains of almost 1.3%. The latter is only 1.35% below its 2.5-year high of 17 July. The Dow Jones is trading above 40,000 but still close to this psychologically significant round level. The S&P500 is hovering around its 50-day average.
Next week promises to be a bellwether for market sentiment. It will be dominated by meetings from the Fed, Bank of Japan, and Bank of England, as well as the monthly NFP employment report.
This concentration of news, coupled with the proximity of key levels, has a good chance of setting the trend for the coming weeks.
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At the same time, they kept the Dollar Index above its 200-day moving average, which the DXY has been trying to break daily since the 19th. At the same time, equity indices are seeing increased buying, with the Dow Jones and Russell 2000 posting gains of almost 1.3%. The latter is only 1.35% below its 2.5-year high of 17 July. The Dow Jones is trading above 40,000 but still close to this psychologically significant round level. The S&P500 is hovering around its 50-day average.
Next week promises to be a bellwether for market sentiment. It will be dominated by meetings from the Fed, Bank of Japan, and Bank of England, as well as the monthly NFP employment report.
This concentration of news, coupled with the proximity of key levels, has a good chance of setting the trend for the coming weeks.
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The #crypto market cap has returned to $2.49 trillion, adding 3.3% in the last 24 hours. At this stage, the top coins are the lifting force for the market, with BTCUSD up 3.1%, Ethereum up 4.4%, and Solana up 5.5%.
#Bitcoin's price has reached $69.5K, its highest since mid-June. The Bitcoin 2024 conference tipped the scales in favour of the bulls. The technical picture speaks in favour of further upside, as the latest spurt came after a local shakeout that removed overbought conditions and broke the resistance of the descending channel.
#Ethereum is gaining momentum after pushing back from its 200-day MA for the second time this month. On Monday, the coin is testing the 50-day MA, rising to $3380, the taking of which opens a fast route to $3500 and then $4000.
#Solana is making steady progress upwards, reaching $192, its highest since early April. This shows a stronger recovery compared to Bitcoin and the broader market, where capitalisation is lower than the peak in early June.
#Bitcoin's price has reached $69.5K, its highest since mid-June. The Bitcoin 2024 conference tipped the scales in favour of the bulls. The technical picture speaks in favour of further upside, as the latest spurt came after a local shakeout that removed overbought conditions and broke the resistance of the descending channel.
#Ethereum is gaining momentum after pushing back from its 200-day MA for the second time this month. On Monday, the coin is testing the 50-day MA, rising to $3380, the taking of which opens a fast route to $3500 and then $4000.
#Solana is making steady progress upwards, reaching $192, its highest since early April. This shows a stronger recovery compared to Bitcoin and the broader market, where capitalisation is lower than the peak in early June.
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#Review #WTI
Oil Is a Step Away from Falling Off a Cliff
Oil is currently adding 0.6% to $76.45 per barrel WTI, but that's only half of the spurt at the start of trading after the weekend. An important technical signal is forming in oil, as it closed last week below its 200-week average (now at $77.19) for the first time since January 2020 and was unable to quickly get back above it.
Cautious traders will probably prefer to wait for a failure below $75, which would cement a technical break of support through the area of the past 16 months lows.
Oil Is a Step Away from Falling Off a Cliff
Oil is currently adding 0.6% to $76.45 per barrel WTI, but that's only half of the spurt at the start of trading after the weekend. An important technical signal is forming in oil, as it closed last week below its 200-week average (now at $77.19) for the first time since January 2020 and was unable to quickly get back above it.
Cautious traders will probably prefer to wait for a failure below $75, which would cement a technical break of support through the area of the past 16 months lows.
On the daily timeframes, the bears' local victory has already manifested itself in the active oil sell-off at the touch of the 200-day average last week. On the other hand, oil has so far managed to avoid a violent emotional sell-off on breaking this level, in contrast to how it was at the end of May, as well as in February and November.
Oil has so far failed to ride the favourable news background with the tightening geopolitical tensions in the Middle East. In the second half of last week, reports of a 3.7 million drop in commercial inventories to 436.5 million (-4.5% y/y) also failed to attract buyers.
Oil has so far failed to ride the favourable news background with the tightening geopolitical tensions in the Middle East. In the second half of last week, reports of a 3.7 million drop in commercial inventories to 436.5 million (-4.5% y/y) also failed to attract buyers.
Among the moderately negative factors for oil were a rise in the number of oil drilling rigs by 3pc to 482 and a continuation of record US production at 13.3m bpd.
However, the most important selling factor is the signs of a cooling economy that the market fears. So far, this has manifested itself in a slowdown in consumer spending, reduced price pressures, and weak home sales.
This week, the market will face how the Fed assesses the trajectory of the economy on Wednesday and housing market data later in the week. This is a strong enough set to trigger a sell-off in oil or, conversely, to convincingly support buying.
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However, the most important selling factor is the signs of a cooling economy that the market fears. So far, this has manifested itself in a slowdown in consumer spending, reduced price pressures, and weak home sales.
This week, the market will face how the Fed assesses the trajectory of the economy on Wednesday and housing market data later in the week. This is a strong enough set to trigger a sell-off in oil or, conversely, to convincingly support buying.
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Central Bank meetings this week are a reason for volatility
The week ahead will be packed with significant economic events, so the market behaviour could turn into quite a bumpy ride this week.
On Wednesday morning, the Bank of Japan will announce its rate decision and the parameters of its balance sheet asset purchase programme. On average, the purchases are expected to be halved, but the key rate is not expected to change. At the same time, the central bank may go for a second rate hike to 0.25% after the March hike from -0.1% to +0.1%.
Sharper cuts in balance sheet buying are not ruled out. This is a potentially positive turn of events for the yen. In previous months, the Bank of Japan has been criticised for its loose policy weakening the yen, leading to currency intervention. Tightening monetary policy is a less costly way to support the currency without selling off international reserves.
The week ahead will be packed with significant economic events, so the market behaviour could turn into quite a bumpy ride this week.
On Wednesday morning, the Bank of Japan will announce its rate decision and the parameters of its balance sheet asset purchase programme. On average, the purchases are expected to be halved, but the key rate is not expected to change. At the same time, the central bank may go for a second rate hike to 0.25% after the March hike from -0.1% to +0.1%.
Sharper cuts in balance sheet buying are not ruled out. This is a potentially positive turn of events for the yen. In previous months, the Bank of Japan has been criticised for its loose policy weakening the yen, leading to currency intervention. Tightening monetary policy is a less costly way to support the currency without selling off international reserves.
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No actual policy changes are expected from Wednesday night's Fed rate decision. Still, observers will dive into studying the accompanying commentary changes to gauge the chances of a rate cut in September and the number of those cuts before the end of the year. Rate futures give a 10% chance that the rate will be 50 basis points lower in September than it is now, which is excessive. Slightly less excessive is the market's estimate of a 63.5% chance of 3 or more rate cuts before the end of the year. Approaching that probability to 100% or moving to expectations of two cuts promises to be a major field for Fed "expectations management". A shift to soft sentiment is a market risk: bearish for the dollar and bullish for equities. A surprise tighter rate approach has the potential to set off a spiral of dollar gains and a sell-off in risk assets.
On Thursday, all eyes are on the Bank of England rate decision. The chances of a cut are barely over 50%. If it stays this way until Thursday, any outcome will cause a surge of volatility in the markets of England and pairs with the pound. GBPUSD has added over 3% since the start of the month to 17 July but has squandered half of that gain since then. This could well be a tactical retreat before a fresh attempt to break 1.30, which failed in mid-July. Bank of England's softness has the potential to erase last month's gains in GBPUSD rather quickly, pushing the pair back to 1.26.
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#WaveAnalysis
#AUDCHF reversed from key support level 0.5735;
Likely to rise to resistance level 0.5850.
AUDCHF currency pair recently reversed up with the daily Japanese candlestick Piercing Line from the key support level 0.5735 (the previous monthly low from April, as can be seen below).
The support level 0.5735 was strengthened by the nearby lower daily Bollinger Band.
Given the strength of the support level 0.5735 and the still oversold reading on the daily Stochastic indicator, AUDCHF currency pair can be expected to rise further to the next resistance level 0.5850.
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#AUDCHF reversed from key support level 0.5735;
Likely to rise to resistance level 0.5850.
AUDCHF currency pair recently reversed up with the daily Japanese candlestick Piercing Line from the key support level 0.5735 (the previous monthly low from April, as can be seen below).
The support level 0.5735 was strengthened by the nearby lower daily Bollinger Band.
Given the strength of the support level 0.5735 and the still oversold reading on the daily Stochastic indicator, AUDCHF currency pair can be expected to rise further to the next resistance level 0.5850.
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