Ethereum has recently been a little bit negative but previously had seen a massive move higher based upon the idea of “The Merge” coming soon, and the idea that Ethereum will become much cheaper as far as transactions are concerned, and a whole host of other features.

• The ETH/USD market rallied a bit during the trading session on Monday, getting over 7%.
• However, you need to keep in mind that a 7% gain from here is much smaller than it would have been a couple of weeks ago. It most certainly is quite a bit smaller than it was a year ago.
• The market is likely to continue seeing a lot of noisy behavior, so at this point, I’m not necessarily sold on the idea of Ethereum suddenly taking off.

If we break down below the bottom of the candlestick for Monday, you can see that there’s been a little bit of support in that area, and it’s likely that we could drop down from there to reach the $1000 level. The $1000 level is an area where we have seen a lot of action in the past, and obviously, the $1000 level will have a lot of psychology attached to it. Breaking down below the $1000 level would be extraordinarily negative, and that could open yet another leg lower. Ethereum has recently been a little bit negative but previously had seen a massive move higher based upon the idea of “The Merge” coming soon, and the idea that Ethereum will become much cheaper as far as transactions are concerned, and a whole host of other features.

Bounce not Likely to Last

The reality is that the market has more likely than not already priced this in. Furthermore, you must keep in mind that risk appetite is going to be a major driver of what happens in this market, as well as everything else related to cryptocurrency. I don’t necessarily think that the market is out of the woods yet, and I would fully anticipate that we drop again. However, the question at this point is whether the Ethereum market rallies toward the 50 Day EMA, and then beyond, or if it just starts falling.

A lot of this is going to come down to central-bank behavior, and how hawkish they are. Pay attention to bond markets, because if interest rates continue to rise, that would of course work against risk appetite, and thereby work against Ethereum. Ethereum does seem to be one of the better performers in this financial asset class over the last several weeks.

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I believe that the market will continue to respect the 200 Day EMA, currently sitting at the 4200 level and going sideways. 

• The S&P 500 has done very little during the training session on Monday after initially gapping lower.
• The fact that we have bounced is a bit surprising, but it’s also indicative of just how many traders out there don’t believe the Federal Reserve.
• The market seems to be respecting the 4000 level in the E-mini contract right now, and the fact that we sold off so viciously on Friday seems to be something that people are willing to look past, at least in the short term.

Massive selloffs like we had on Friday very rarely happen in a vacuum, so I think it is more likely than not that any rally that we see gets sold into. I believe that the market will continue to respect the 200 Day EMA, currently sitting at the 4200 level and going sideways. That also happens to be at the top of the candlestick from the Friday session, so it all ties in together quite nicely. A short-term rally opens the possibility of shorting at a better price, but I also need to see signs of exhaustion to get short again. After all, I don’t want to sell the market just for the sake of selling it.

Monetary Tightening Likely to Put Pressure on Markets

The alternate scenario would be that we break down below the lows of the candlestick on Monday, which should open and move down to the 3900 level. The 3900 level being broken to the downside opens the possibility of a move down to the 3700 level, which is roughly where we bottomed it previously. Furthermore, you need to be cautious about the fact that even though Wall Street is willing to ignore the Federal Reserve, quantitative tightening has just started, and there are a lot of signs of stress in other markets. Of note would be the credit markets, which are starting to show signs of an issue.

It’s not until we break above the 200 Day EMA that I look at this as a market that’s willing to take on the 4300 level again. If we were to break above there then you can make an argument for a bit of an inverted head and shoulders, which would obviously be a very bullish sign. I’m not holding my breath for that, just am keeping that in the back of my mind.

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With everything that’s going on, I believe that crude oil market will continue to be very noisy and difficult to trade, so the only thing you can truly do is keep an eye in your position size.

The West Texas Intermediate Crude Oil market has gone back and forth during the day on Friday, showing signs of hesitation and confusion. It is worth noting that crude oil has a lot of different crosscurrents that it has to deal with right now, and therefore the confusion makes quite a bit of sense.

With your own pal stating that the Federal Reserve is going to be extraordinarily hawkish, it does make a certain amount of sense that we would see oil struggle in this type of environment. If the Federal Reserve slows down the economy, the demand for crude oil should drop. On the other hand, we have a situation where OPEC is talking about cutting output, and that should drive up prices if the supply/demand quotient gets shifted.

Market Awaits Noise

• The market recently had broken out of a “falling wedge”, so in theory, we should go higher.
• At this point, the market is likely to continue to see noisy behavior, but based upon the technical analysis, one would think that we should go looking to the $102 level.
• However, that doesn’t necessarily mean that it has to.

We also have to worry about whether or not the economy is going to be even remotely strong enough to push demand. The situation around the world is deteriorating, so it would make a certain amount of sense that there would be a severe lack of demand. Beyond that, we also have the Iranians possibly getting involved and producing a million barrels of oil for the markets if the nuclear deal gets agreed to. If that’s the case, then it’s obvious that the market would have to pay close attention to the potential oversupply of the markets. With everything that’s going on, I believe that crude oil market will continue to be very noisy and difficult to trade, so the only thing you can truly do is keep an eye in your position size. If we break above the 200 Day EMA and the 50 Day EMA, it suggests that we have further to go, but if we break down below the $90 level, we could break down rather rapidly as well. I think the only thing you can count on is a lot of chop and noisy behavior of the next several days.

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EUR/USD

The EUR/USD has gone back and forth during the week, as we continue to hang around the parity level. At this point, it looks like we are taking a bit of a pause, but I think have to look at this through the prism of “fading short-term rallies” going forward. The market has gotten down to this level rather quickly, but now Jerome Powell has reiterated the hawkish attitude of the Federal Reserve, it’s likely that we will continue to see the US dollar reign supreme. I like fading rallies, especially near the 1.03 level if we get all the way up there.

GBP/USD

The GBP/USD initially tried to rally during the trading week but gave back gains as we continue to see a lot of negativity when it comes to the British pound, as the Bank of England has already stated that the United Kingdom is going into a recession. Because of this, the market is likely to continue fading rallies, and maybe even worse off than the Euro. If we were to break above the 1.20 level, then you might be able to make an argument for something else. Until then, this looks very bearish to me.

USD/JPY

The USD/JPY has pulled back slightly to kick off the week but then ended up rallying yet again. It looks as if we are eventually going to try to break above the recent highs, perhaps breaking through the ¥140 level. The ¥132 level underneath continues to be significant support, so I do like the idea of any pullback being bought into. If we break down below the ¥132 level, then we start to have other questions asked at that point. If the Bank of Japan continues to fight rising interest rates, this more likely than not will continue to be a “one-way trade.”

AUD/USD

The AUD/USD initially tried to rally during the week but gave back a lot of the gains at the 0.70 level. The market has seen a lot of volatility, and a lot of resistance at the 0.70 level. If we can break above the 0.70 level, then it is possible that we could go looking to the 50 Week EMA. However, it looks more likely than not that we are going to threaten the lows again after the Federal Reserve has spoken.

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If interest rates start to shoot higher, then it almost certainly will work against the value of the NASDAQ 100.

The NASDAQ 100 did not do too much during the trading session on Thursday, gaining 1%. It was a relatively positive day, but it’s also worth noting that the Chairman of the Federal Reserve speaks Friday morning at the Jackson Hole Symposium, and traders around the world are trying to figure out whether the Federal Reserve is looking to ease its monetary policy.

Inflation data does not suggest that they should be doing that, but the Federal Reserve has created this monster. After all, they have had a long history of making sure Wall Street gets paid, via cheap money. Now that Federal Reserve governors are not allowed to actively trade in the markets, they may not be as inclined. They have created a generation of traders that have no idea what it’s like to trade in an inflationary environment, or trade without the Federal Reserve looking to bail everybody out at the first sign of trouble. In other words, the markets have been so distorted for the last 14 years that it’s difficult to see how we get out of that machine.

Traders Waiting for Jackson Hole Symposium

• Nonetheless, after he speaks during the session on Friday, if we break down below the 50-Day EMA, then it’s possible that the NASDAQ 100 drops to the 13,000 level, possibly even the 12,000 level.
• On the upside, the 13,500 level is an area that has offered resistance previously, so it’s possible that we could see that as a short-term ceiling. If we were to break above there, then that could change things, turning the market into more of a “buy-and-hold” type of situation.
• If that happens, the market is likely to go looking to the 15,000 level. That would also see certain stocks such as Tesla, Amazon, Microsoft, and the like going higher.

If interest rates start to shoot higher, then it almost certainly will work against the value of the NASDAQ 100, and it’s also probably worth noting that we have recently pulled back from roughly the 50% Fibonacci level. This is a market that I think continues to see a lot of volatility, and I’m almost positive Jerome Powell do something to mess this entire situation up one way or the other. Because of this, be cautious about your position size, and recognize that you will need to be very flexible.

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The WTI Crude Oil market rallied significantly during the trading session on Wednesday as we are now approaching the 200-Day EMA. The 200-Day EMA is sitting just above and now could offer a bit of resistance. The $95 level will be resistant, with the 50-Day EMA sitting just above there. There are a lot of questions when it comes to crude oil right now, so does make a certain amount of sense that we should see noise.

If the 50-Day EMA breaks down below the 200-Day EMA, then we have the “death cross.” This is a longer-term negative signal and could have some algorithms starting to sell. Furthermore, we have a lot of fundamental questions, not the least of which we whether not the Iranians are able to produce and sell crude oil into the markets. If that’s the case, and I do think that eventually ends up being the situation, that will flood the market with supply.

On the other hand, Saudi Arabia is now talking about cutting, so it’ll be interesting to see how this all plays out because they are complaining about the paper market not representing the physical market. At this point, the market is trying to break out and break higher from a rising wedge, but I think $100 is about as good as it gets to the upside.

Market Noise Ahead

• If we turn around and break down below the $90 level, then it is likely that the market could go much lower. At that point, we could see the market go down to the $80 level.
• The $80 level is an area where we should see quite a bit of interest, and a lot of longer-term analysts are starting to think that’s the target.
• Regardless, I think what we are going to see is a lot of noisy and choppy behavior, and therefore it’s likely that you need to think more or less of short-term trading more than anything else.

Keep an eye on the overall attitude of risk appetite as well, because if risk appetite is strong, then oil should do well. On the other hand, if risk appetite starts to pull apart, that could be negative for oil. A lot of this comes down to what central banks are doing as well, because if they raise rates drastically, that could drive down industrial demand.

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It’s about speculation, and not holding for the future like some people will tell you. 

The BTC/USD continues to go sideways as the market seems content to hang around the $21,500 level. There’s no real volume, nor is there any interest in owning Bitcoin now. It’s times like this where accumulation starts to happen and therefore big profits can be made, assuming that you can wait to get paid.

This is not to say that we are at the bottom, but I do know that a lot of longer-term addresses are starting to accumulate again, suggesting that we might be near an accumulation phase. If we break down below the recent lows from a couple of months ago, then it’s likely that we drop down to the $12,000 level. That’s very possible given the financial situation around the world. After all, Bitcoin has not decoupled from the S&P 500, and more specifically the NASDAQ. The NASDAQ is all over the place due to concerns about the Federal Reserve tightening monetary policy, and therefore so is Bitcoin.

What Really Matters in This Market

• Keep in mind that institutional money is what pushes Bitcoin around these days, so it’s going to act more like a commodity than anything else.
• Whether or not it has any real-world use is completely irrelevant to most people who trade it, nor does it matter to them who controls everything.
• What matters to them is whether they can make money trading it. That’s the very essence of crypto that we have seen so far, people trying to make money.

While this is not necessarily an indictment of crypto itself, it does give you an idea of the mentality behind this market. It’s about speculation, and not holding for the future like some people will tell you. Yes, there are maximalists out there, but they are such a small portion of the market that they hardly move the needle. At this point, every time we dip a few thousand dollars, they will be longer-term buyers and investors willing to get involved, because they are waiting for the next great bull market. I believe it’s too early to see that, but as soon as the Federal Reserve pivots, that’s where we start to see Bitcoin and other risky assets such as crypto in general start to take off. That will be your cue that the next bullish run has started.

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• The S&P 500 has done almost nothing during the trading session on Tuesday as traders continue to wait for multiple central bank speakers at the Jackson Hole Symposium.
• This can have a massive influence on where risk appetite goes, and those speakers will move interest rates.
• Interest rates rising certainly will have a major influence on risk appetite, and therefore it’s a bit of a feedback loop.

From a technical analysis standpoint, the 200 Day EMA sits just above and is offering a bit of resistance, so if we can break above it, we might have the ability to run toward the 4300 level, which is a large, round, psychologically significant figure. That’s an area that has been important recently, and therefore a bit of market memory could come back into the picture. In that scenario, I would anticipate a lot of selling pressure. However, if we were to break above the top of that area, then it’s likely that the market could go much higher, perhaps entering into a bullish trend.

I do not expect that to happen though, because the world has far too many issues out there to think that we are simply going to take off. Ultimately, this market will continue to be noisy, but it’s possible that we may finally get some type of longer-term clarity.

That being said, if we break down below the 50 Day EMA, then we could drop down to the 4000 level rather quickly. That would almost certainly be due to the interest rates tightening and traders suddenly realizing that central bankers will have to fight inflation rather than lift assets, something that they have not done for at least 14 years. This is an issue that the central bank has created itself, as the Federal Reserve has spoon-fed Wall Street for far too long.

Noise and Disbelief Ahead

Because of this, we will continue to see a lot of noise and disbelief but given enough time it’s likely that we will eventually see some type of realization. The realization will more likely than not send this market much lower, but you have to follow what price does because quite frankly the market “should have fallen over the last couple of weeks. Now that we have had this big bounce, we will have to see how things play out.

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The NASDAQ 100 initially tried to rally on Tuesday but continues to see a bit of trouble. The 13,000 level has offered resistance, and at this point, it’s likely that we will continue to see a lot of “market memory” in this area, as it has been an area of both support and resistance multiple times over the last several years.

Now the market is sitting on the 50-Day EMA, and if we break down below the 50-Day EMA, then we could see a continuation to the downside, reaching the 12,500 level, possibly even the 12,000 level after that. Keep in mind that the NASDAQ 100 is only driven by a handful of stocks, so we will have to pay close attention to the company such as Tesla, Amazon, Alphabet, Microsoft, and the like. It’s also worth noting that the NASDAQ 100 is highly sensitive to interest rates, so pay close attention to the 10-year note. If interest rates continue to rally, that will have a negative effect on this market given enough time.

Market Waiting for Central Bankers Symposium

• Central bankers are speaking to Jackson Hole this week, and that could give market participants a bit of a “heads up” as to where monetary policy is going.
• That’s a bit surprising to say because the Federal Reserve and other central bankers have discussed the need to type monetary policy in order to fight inflation repeatedly.  However, it’s worth noting that Wall Street is currently at the end of a 14-year stretch of easy money, as the Federal Reserve has done everything it can to prop up its friends on Wall Street.
• The Federal Reserve officials don’t day trade anymore, so perhaps they will actually let it go.

It’s not until we make a fresh, new high that we would see this market go higher, perhaps reaching the 15,000 level. That would take quite a bit of momentum, so at this point in time I suspect is easier for this market to pull back in the short term. However, we will have to see where we end up at the end of the week before we get any type of serious clarity. In the meantime, keep very calm, and make sure that you are not overtrading nor are you using huge positions.

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• The GBP/USD has attempted to bounce during the trading session on Tuesday as the selling pressure seems to be letting up a bit.
• We are in the midst of the Jackson Hole Symposium, and central bankers will be speaking quite a bit this week.
• People will be trying to figure out what happens next, as a lot of traders have decided to call the bluff of central banks.

There’s been this narrative going around that perhaps central bankers are going to pivot, because of poor economic numbers. What traders seem to be ignoring is the fact that inflation is out of control, and even though it is slowing down a bit, in places like the United States it’s 8.5% year over year, and in the United Kingdom, it’s over 10% year over year. Because of this, central banks are going to have to tighten, despite the fact that it will almost certainly cause a recession.

Recession is Coming

The Bank of England already said that a recession is coming, essentially confirming what most people want to say out loud. The market continues to see a lot of narrative from time to time that has people thinking differently, especially in stock markets. However, in the Forex world, you can see that traders are running towards the US dollar. That should continue to be the case, especially if Jerome Powell ends up putting rumors to rest about the Federal Reserve and pivoting.

It’s been quite an interesting sideshow, watching traders try to talk themselves into a pivot that’s not coming.The US dollar is going to be like a wrecking ball for the entire world, and the United Kingdom is not going to avoid this problem. However, rallies will happen from time to time, but those are going to be opportunities to pick up “cheap US dollars.” Going forward, I suspect it’s probably a “fade the rally” type of situation. In fact, is not to we break above the 1.25 level that I would consider buying the British pound. Even then, I will have to see what the fundamental noise and news is, because although technical analysis can help, in times like this it’s more about the fundamentals than anything else, as there have been so many crosscurrents at the same time.

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