The Dow Jones Industrial Average saw its biggest one-day, pips, and percentage loss since June 16th.

The Dow Jones Industrial Average closed sharply lower during its recent trading at the intraday levels, to record losses for the second consecutive session, by -1.91%. The index lost about -643.13 points and settled at the end of trading at the level of 33,063.62, after its decline in trading last Friday by -0.86%. It ended the week’s trading with a decrease of -0.16%.

The Dow Jones Industrial Average saw its biggest one-day, pips, and percentage loss since June 16th, as investors remained concerned about the possibility of another aggressive rate hike.

Federal Reserve Chairman Jerome Powell and other central bank officials and policymakers will gather this week at the annual Jackson Hole event. Powell is due to deliver a speech on the economic outlook on Friday, and investors will hear any indication of whether a 50 basis point or 75 basis point increase is likely at the September FOMC meeting.

The probability of the Fed raising rates by 75 basis points to a range of 3% to 3.25% increased to nearly 54% as of Monday, compared to 47% on Friday and 39% a week ago.

Investors will also be looking for details about the Fed’s plans to cut its roughly $9 trillion balance sheet, a process that began in June.

Dow Jones Technical Outlook

• Technically, the index previously faced a strong resistance represented by a bearish trend line in the medium term.
• This is shown in the attached chart for a (daily) period.
• This coincided with the start of negative signals on the relative strength indicators, after they reached at the same time overbought areas.
• It caused increasing pressure on the index to break in its recent trading the 33,240 support level.

All of this comes in light of the dominance of a bullish corrective wave in the short term, supported by its continuous trading above its simple moving average for the previous 50 days. It represents the last stronghold of support that could gain it the necessary positive momentum and give it the ability to regain its recovery.

Therefore, given the index’s stability below 33,240, we expect it to decline further during its upcoming trading, to target the support level 32,273.

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If we start to see rates and the dollar fall, then it’s likely that we will see Bitcoin jump into the mix and go much higher.

• Bitcoin has drifted a bit lower again during the trading session on Thursday.
• It looks like the cryptocurrency markets are simply killing time at this point.
• Tthis is a market that needs to see a lot of risk appetite out there, due to the fact that Bitcoin is so volatile, and of course, is pretty far out on the risk appetite spectrum.

Bitcoin Breakdown – What You Need to Know

It’s worth noting that the $25,000 level continues to offer a significant amount of resistance, and now that we are hanging around the 50 Day EMA. It’s very possible that we will see a bit of a squeeze in this general vicinity. If we break down below the $23,000 level, then it’s possible that we could drop from here. If we drop from here, then I anticipate the BTC/US currency pair could drop down to the $20,000 level. The $20,000 level is an area that will attract a lot of attention due to the fact that it is a large, round, psychologically significant figure, and an area where we have seen support previously. If we were to break down below the $20,000 level, it’s likely that Bitcoin will get cratered.

On a break down below that level, then we are talking about a potential move down to the $18,000 level, followed by the $12,000 level. Alternately, if we were to turn around and take out the $25,000 level, then it’s possible that the $28,000 level will be targeted. Above the $28,000 level, it’s very noisy all the way to at least the $32,000 level. Ultimately, this is a market that has a lot of work to do in order to change the entire trend, and it’s not until we break above that $32,000 level that I would be convinced. Because of this, I think we have more noise than anything else ahead of us.

The Bitcoin market will have a lot of negative correlation to the US dollar and the interest-rate markets, so you need to see whether or not the rates are rising over the dollar strengthening which would work against the value of the Bitcoin markets. However, if we start to see rates and the dollar fall, then it’s likely that we will see Bitcoin jump into the mix and go much higher. In general, I think this is a market that continues to see volatility more than anything else.

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The best way to handle Bitcoin is more likely than not going to be buying little bits and pieces if you are more bullish on the longer term.

• The BTC/USD currency pair has rallied significantly during the trading session on Thursday to reach the $25,000 level. However, the market has pulled back from there to show signs of exhaustion.
• The daily candlestick is forming a shooting star, which of course is a very ugly look.
• If we break down below the bottom of the candlestick, then it’s likely that the market could drop down to the $23,000 level.

If we do break down below that $23,000 level, then it’s likely that we could go down to the 50 Day EMA underneath. The 50-Day EMA sits right around the $22,000 level. Anything below there opens up the possibility of a huge drop lower, but I don’t think it’s very likely in the short term. Longer-term, it’s very possible, especially if we get some type of spike in interest rates were sell-off when it comes to risk appetites in general. Ultimately, I think this is a market that will more likely than not continue to be very noisy, and I do think that the Bitcoin market is still in the midst of trying to figure out whether or not it can turn around for the long term.

Even if we do break above the $25,000 level, it’s possible that we will just see more selling pressure near the $28 level. The $28,000 level extends all the way to the $32,000 level, meaning that it should be a major resistance barrier. The market breaking through all of that would end up being a major trend change, and I think everybody will jump in at that point. More likely than not, it’s likely that we go much lower, perhaps trying to get down to the $20,000 level.

If you are a longer-term investor, then you need to look at these dips as a potential buying opportunity, but you also have to be able to put up with quite a bit of volatility. In fact, the best way to handle Bitcoin at this point is more likely than not going to be buying little bits and pieces if you are more bullish on the longer term. That being said, the market continues to be very noisy, and therefore you need to be cautious about getting too deep into a position. In fact, it’s very likely that we can see a longer-term sideways market more than anything else, building up the accumulation phase before the next bullish market.

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If you are an investment banker or a trading firm, you are hoping for poor employment numbers.

• The US dollar has pulled back from the 50 Day EMA against the Japanese yen in trading on Thursday as we wait for the Non-Farm Payroll numbers.
• This announcement could be a major moment of clarity for the market, because quite frankly most people are betting as to whether or not central banks will continue to tighten monetary policy.
• What I find most astounding is that you actually believe that Federal Reserve officials are lying when they say that they will continue to fight inflation.

It’s All About the Federal Reserve Now

This goes to show just how shot the credibility of the Federal Reserve is now. This is what happens when you bend you will need to Wall Street for 14 straight years. Now that we are in a situation where they may actually have to do their job, Wall Street doesn’t believe that they have the wherewithal to do so. Because of this, I think you have to look at it through the prism of perception over reality. Right now, traders perceive that the Federal Reserve is going to bail them out. However, with the jobs number coming out on Friday, that might set up a very bloodied day if the number comes out in the wrong direction for Wall Street.

If you are an investment banker or a trading firm, you are hoping for poor employment numbers. This is because it means that the Fed may not have to tighten much, and you may get your cheap/free money. This is how far from the financial markets have drifted from economic reality, because of the Federal Reserve itself. This is a mess that the Fed has created, and quite frankly in order to fight inflation, they are going to have to break something.

If we get a stronger than anticipated jobs number, the US dollar will probably spike against the Japanese yen because it will make the Bank of Japan step in and start buying more bonds. Part of the reason the Japanese yen has strengthened a bit over the last couple weeks has been that as rates drop around the world, the idea is that it takes less effort by the Japanese to keep the 10 year yield down to 0.25%. We are living in bizarro world, so you might as well get used to it.

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It’s more likely that we chop around sideways than anything else.

The German index fell during the trading session on Thursday as we continue to see a lot of negativity. The DAX has broken below the 50 Day EMA which is a technical indicator that a lot of people pay attention to. By breaking below there, the market is likely to continue seeing downward pressure, perhaps going down to the €14,000 level. Ultimately, this is a market that had recently broken out but then looks as if it’s ready to reverse that move as we are starting to see a lot of negativity when it comes to indices globally.

If we break down below the €14,000 level, then it is likely that the market goes looking to reach the €13,500 level, possibly even lower than that. However, you have to look at this through the prism of the market forming a much higher low than previously, so it’ll be interesting to see at this point whether or not the traders try to put this market into an uptrend, but we have to break above the highs in order to confirm an uptrend, and quite frankly we have not been able to do that. Because of this, it’s very likely that the market is going to continue to be volatile more than anything else.

Keep in mind that the German index is highly sensitive to the global economy as so many of the major players in the index are exporters. The market will have to pay attention to growth in multiple areas, not the least of which will be the European Union. Other economies in Europe are big buyers of German goods. As the rest of the European Union seems to be struggling, that’s going to have a lot of negativity flowing into this market as well.

Furthermore, you need to pay attention to the DAX because it can give you a bit of a heads up as to what’s going to happen in other European indices, and therefore we need to look at is a harbinger for the rest of the continent. However, if we were to turn around and break above the 200 Day EMA, it’s likely that the market goes looking to the €15,000 level, and if it breaks above there, we could go much higher. It’s more likely that we chop around sideways than anything else.

The attitude of the market is one that seems to be very skittish, so make sure that you keep your position size somewhat reasonable.

The German index initially fell on Tuesday but has recovered a bit later in the day. At this point, the market looks like we are just hanging about and trying to figure out where we are going to go next. Looking at the start does look like we are trying to pressure to the upside, but the 200 Day EMA sits above and is likely to see a lot of interest paid to it. Above there, the €15,000 level is the next major area. I think it’s going to be difficult to get above that, so it’ll be interesting to see whether or not we can do so. If we did, it would obviously be a very bullish situation.

If we were to break down below the bottom of the candlestick for the trading session on Tuesday, it could have the DAX looking to reach the 50 Day EMA below. The market looks as if it is simply chopping around and trying to find its next direction, which can be said for most markets at the moment. The DAX has a major influence on how the rest of the indices and the European Union is concerned, due to the fact that the German economy is by far the largest economy on the continent.

Keep in mind that the DAX is heavily sensitive the global demand, as so many of the major companies that make up the index are international exporters. The DAX is a market that will continue to see a lot of volatility regardless of what happens next, but you should keep in mind that the DAX is not operating in a vacuum, so if you pay close attention to other industries around the world, it could give you a bit of a “heads up” as to where we go next. In turn, then other indices such as the CAC and the MIB in the EU will follow the DAX.

The Euro is cheap, so that does help with exports a bit, but at this point, it is all a matter of time before risk appetite comes into the picture, and it takes so little these days to get the market to sell off. The attitude of the market is one that seems to be very skittish, so make sure that you keep your position size somewhat reasonable.

As things stand right now, I do believe that we are in the process of a longer-term bottoming pattern.

Will markets have rallied rather significantly during the trading session on Thursday as we have reached the $1870 level. This is an area that has been important previously, so it’s not you surprised to see that we have stopped here. If we can break above here, then it’s very possible the gold market looking to reach the $1900 level over the longer term. If that’s going to be the case, then is very likely that we will see the US dollar take a bit of a hit.

A lot of this could come down to risk appetite, so pay attention to what other markets are doing. If there seems to be a general concern about owning anything that has risk attached to it, that may or may not work for gold, depending on how traders are looking at it. I know it’s a bit confusing, but at the end of the day gold can be a lot of different things. Pay attention to bond markets, because of interest rates start to soar again, that will more likely than not put downward pressure on gold, and could cause a lot of headaches. Ultimately, I think this is a market that is going to continue to be difficult to hang onto for anything other than a longer-term investment. I see a lot of noise just above, but it certainly looks as if we are trying to build up enough bullish pressure to rally again.

On the downside, I see the $1840 level as a potential area of support, and therefore could be an area where you could reenter the market if we do pull back. I don’t have any interest in shorting gold, at least not in the meantime. I think it is probably only a matter of time before gold takes off toward the $2000 level, especially if yields continue to fall. After all, if people start buying bonds again, that will drive yields lower. The bond markets have been erratic, and unfortunately for the rest of us, that means chaos in our markets. Keep in mind that bond markets tend to drive where the rest of the world goes, so you really need to learn as much about them as you can. As things stand right now, I do believe that we are in the process of a longer-term bottoming pattern.

If the market suddenly takes off to the upside, it is likely that we would see a bigger continuation move, and I do think that things are lining up for that.

Gold markets have fallen initially during the trading session on Thursday but turned around to show signs of life again. By doing so, the market looks as if it is trying to overcome the 200 Day EMA, but it’s obvious that there is a lot of noise in this general vicinity. With that in mind, I think we will continue to see a lot of choppy behavior, and as we have had very little clarity, I would anticipate that we will continue to focus more on short-term charts than anything else.

Keep in mind that gold is highly sensitive to interest rates, so you need to pay attention to what’s going on in the bond market. As of late, interest rates have started to calm down a bit, and that helps gold become a bit more attractive. If interest rates truly start to sell off, then it’s likely that gold will be a rather major beneficiary. It is worth noting that the markets had been sold off quite viciously, so even though we have had a nice bounce, we probably have some work to do in order to change the overall trend. After all, the market does tend to be very choppy under the best of circumstances, and therefore I think you will continue to see a lot of short-term back-and-forth trading more than anything else.

If we were to break above the highest of the week, then I think it’s likely that we would go much higher. At that point, we would threaten the 50 Day EMA, and then eventually the $1900 level. On the other hand, if we were to break down below the lows of the last couple of days, we may pull back toward the $1825 level. Although a bearish move, it could be a simple continuation of base building in the market as there had been so much support right around the $1800 level.

The one thing that you can probably count on over the next several days is that things will be rather noisy, so you need to be very cautious with your position size. If the market suddenly takes off to the upside, I think it is likely that we would see a bigger continuation move, and I do think that things are lining up for that. However, it won’t necessarily be easy.

We still expect the index’s decline to return during its upcoming trading.

The Dow Jones Industrial Average continued to rise during its recent trading at the intraday levels, to achieve gains for the fourth consecutive session, by 0.60%, to add 191.66 points to it. It settled at the end of trading at the level of 32,120.29, after rising in Tuesday’s trading by 1.98%.

The Federal Reserve released its meeting minutes in early May, showing support for half-point moves by the Fed as it seeks to make the sovereign interest rate “quick to neutral” over the next two meetings, and high inflation remains the main focus. This indicated that the central bank remains open to rethinking aggressive plans to raise interest rates to tame high inflation.

The minutes also focused on potential direct sales of mortgage securities to the central bank as it looks to cut its balance sheet approaching $9 trillion.

In other economic news, the highlights of Wednesday’s calendar were smaller-than-expected gains in new orders for durable goods and another dip in mortgage applications. New orders for durable goods rose 0.4% in April, while shipments rose 0.1%. Excluding transportation, new orders rose 0.3% and shipments rose 0.2%. Earlier today, the Mortgage Bankers Association reported that mortgage applications fell 1.2% in the week ending May 20 after a 11% drop in the previous week’s report.

Technically, the index’s stability above the main resistance level of 32,000 is considered a positive sign for the index, especially amid the continued influx of positive signals in the RSI indicators. Despite this, the corrective bearish trend is still the dominant trend in the short term with the index trading in a price channel range, as shown in the attached chart. For a period of time (daily), while the negative pressure continues for its trading below the simple moving average for the previous 50 days.

Therefore, we still expect the index’s decline to return during its upcoming trading, especially if its stability returns below the 32,000 level, after which it will target the main support level 31,000.

I will short signs of exhaustion as they occur, it will not be convinced to buy this market until we break above the 0.72 level.

The Australian dollar has broken higher during the trading session on Thursday as we have seen the US dollar gets hammered. That being said, we are still very much in a downtrend so therefore I do not look at this as something that changes the outlook, rather it could be setting up for a potential opportunity. After all, the US dollar is the strongest currency in the world right now, despite what we had seen during the day. Furthermore, the US dollar was somewhat overbought so it should not be a huge surprise to see that we had a little bit of a turnaround.

As you can see, the 0.70 level has been important multiple times, so that is not a huge surprise to see that the market reacted here. At this point, I do not believe that the market is one you can buy with any type of confidence, simply because it would only take yet another shock to the system to get people concerned again. The Australian dollar is highly levered to China, and of course the commodity markets. The idea is that if the global economy continues to slow, it could very well put a bit of a beating on the Aussie dollar as a proxy.

One of the main drivers of US dollar weakness during the day was yields dropping a bit, but they are still very elevated at this point. This suggests that perhaps we are going to continue to see the US dollar favored, and that it is only a matter of time before it starts to strengthen again. That is how I look at this market, one that has sold off for a reason, and will continue to do so over the longer term. As things stand right now, I believe this is a scenario in which we need to be cognizant of the yields in the 10 year when it comes to the US dollar. If those yields start to rise again, that will send the Aussie much lower. That being said, it needed to bounce after selling off the way it has, so I look at this as a blip on the radar more than anything else. I will short signs of exhaustion as they occur, it will not be convinced to buy this market until we break above the 0.72 level.