This is a market that I think continues to see choppy volatility.

• The West Texas Intermediate Crude Oil market has pulled back a bit, losing over 2% during the trading session on Thursday.
• Because of this, the market is likely to continue to see a bit of selling pressure, and the 200-Day EMA looks as if it is offering a significant amount of resistance.
• Furthermore, the 50-Day EMA is sitting just above there and is dropping, so it’s likely that we would see some type of “death cross” form in that area.

Looking at the situation in the oil market, you need to pay close attention to the fact that there are a lot of moving pieces. The Saudi government has recently started complaining about the fact that the paper market is not keeping up with the physical market, and therefore they may cut production to boost prices. On the other hand, there’s also the possibility that Iran may be able to enter the markets if they sign some type of deal with the West when it comes to nuclear constraints. If that’s the case, that could add 1 million barrels a day.

Market Expects Volatility

Furthermore, you have the Federal Reserve and its monetary policy. The Chairman of the Federal Reserve Jerome Powell will be speaking on Friday at the Jackson Hole Symposium, and traders will try to figure out whether the Federal Reserve is going to get aggressive as far as being hawkish is concerned. This is a market that I think continues to show a lot of noisy behavior, therefore it does make quite a bit of sense need to be cautious with your position size, assuming you are involved in the market at all.

If we can break above the 50-Day EMA, then it’s possible that we could go to the $100 level. If we can break above the $100 level, then it’s possible that the market could go looking to the $105 level. On the other hand, if Jerome Powell becomes hawkish, it’s possible that we could see oil drop due to the idea that the Federal Reserve is going to slow down the economy, and therefore demand for crude oil could drop through the floor. All things being equal, this is a market that I think continues to see choppy volatility.

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The NASDAQ 100 has fallen hard during the trading session on Friday and has broken down below the 200-Day EMA. The market is going to continue to see noise around the 13,500 level. The market pulling back the way it has suggests that perhaps we have a little bit of negativity ahead of us. The 13,000 level underneath would be a potential support level, as it was a previous resistance barrier. A certain amount of “market memory” is going to continue to be a major factor there. Furthermore, we also have the 50-Day EMA reaching towards that area as well.

If we were to break down below the 50 Day EMA, then it’s likely that the market could go down to the 12,000 level. The 12,000 level would have a certain amount of support from a psychological standpoint, and an area where we had bounced from. If we can break down below the 12,000 level, then it’s likely that we are going to go down to the 11,000 level. The 11,000 level was a major scene of support and any move below that level could open up a firestorm of selling.

What will be for the week ahead?

We have been rallying for a while, and now that we have challenged this area and failed, it’ll be interesting to see how next week plays out, due to the fact that central bankers are going to be speaking at the Jackson Hole Symposium and talking about inflation. After all, inflation is roaring around the world, and central bankers are going to have to do something to address this. In other words, they will more likely than not continue to pound on the idea of raising interest rates, and if that’s going to be the case that works against the NASDAQ 100 quite stringently.

• This next week is going to be very noisy, and today probably will be a continuation of the pullback.
• If we do rally, it’s not until we get through this coming week that I would be comfortable going long unless, we make a fresh, new high, after some type of litany of speeches in Wyoming that could be looked through.
• I don’t necessarily think that the situation is going to continue to see a “whistle past the graveyard” type of move.

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If we were to break down below the bottom of the candlestick, it’s likely that the €6400 level will be targeted.

The Parisian index had a picture-perfect pullback from the 200 Day EMA during the session on Wednesday, making for a classic technical analysis pullback. The Parisian index has been a bit overdone for a while, so it’s not a huge surprise to see that we are starting to see a little bit of hesitation. After all, the European Union has a whole litany of problems coming its way, and therefore it’s a bit difficult to get bullish.

Recently, the big bull argument has been low yields that are dropping, and then the fact that economic indicators are pointing to a slowdown, meaning that the ECB will have to be loose with monetary policy. This is the same nonsense that New York has been doing for a while, as the idea is about liquidity and not actual economic growth. I recognize that there is a bit of a threat that we could continue to go higher based on “bad news.” However, it’s a little bit different this time in the European Union since the economy is probably going to get pummeled this winter.

CAC 40 Forecast

The size of the candlestick does suggest there might be a little bit of follow-through, and it’s probably worth noting that the Jackson Hole Symposium is next week, and a lot of people will be paying close attention to what central banks have to say.

• This is a market that I think continues to see the central bankers out there as the main impediment to higher prices, so people will be paying close attention to Christine Lagarde.
• Unless the ECB is willing to step in and save Europe from its almost certain recession, stocks will take a huge beating.
• There are a lot of energy concerns for the European Union, and France cannot get away from that.

Ultimately, we are overdone anyway, so if we were to break down below the bottom of the candlestick, it’s likely that the €6400 level will be targeted. If we break it down below there, then the 200 Day EMA is near the €5200 level.

On the other hand, if we were to break above the 200 Day EMA, then it could open up a move to the €6800 level. Obviously, that would take quite a bit of effort at this point, but it is a situation you need to be aware of.

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The market could also be one of the first places money comes flying out of it we have issues with risk appetite and see things like stocks get hammered.

• The BTC/USD currency pair pulled back a bit on Tuesday as we continue to see Bitcoin pullback from the crucial $25,000 level the $25,000 level.
• Bitcoin has been rather resilient as far as selling pressure is concerned, but at the end of the day, I think we got a scenario where a pullback was necessary.
• The $22,500 level underneath is significant support, so it is possible that could be where we are aiming to get to.

If we were to turn around a break above the $25,000 level, that would obviously be a very bullish sign because we would be clear in an area that has already shown itself to be supportive previously and resistant now. The market breaking above that level also breaks above the top of a shooting star, which is also a very bullish sign as well.

Hoping for Hawkish Monetary Policy

Keep in mind that there’s a lot of speculation as to what the Federal Reserve is going to do and what monetary policy is going to be like going forward. If they do in fact have to become a little bit less hawkish, that is good for Bitcoin because it means that risk appetite will return. Remember, Bitcoin is about as far out on the risk appetite spectrum as you can get, so you will need to have other risk appetite-related markets rising as well.

The market could also be one of the first places money comes flying out of it we have issues with risk appetite and see things like stocks get hammered. In fact, it’s worth noting that the correlation between stocks in the United States and Bitcoin has been very strong over the last year or so, and because of this you need to be cognizant of what’s going on in those markets as well.

You should also probably pay close attention to the bond market in the United States right along with the US dollar because yields and the greenback work in direct competition with the Bitcoin market, which is now a much more mature market than it had been previously. There are a lot of institutional players in these markets now, so they will behave more like traditional assets. Gone are the days of 15% gains, as institutional players don’t like that type of noise. The good part of that is also 15% losses are probably gone as well.

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We have a bit of exhaustion coming into the market, so it makes sense that we would see the market give back some of the recent gains.

• The gold markets have pulled back again on Tuesday as we are now below the $1780 level.
• Ultimately, this is a market that I think will continue to show bits and pieces of hesitation, but whether or not it breaks down completely might be a completely different question. After all, gold markets have seen a nice rally as of late.

Noisy Behavior Ahead

However, you also have to keep in the back of your mind that the candlestick from the Monday session was a massive outsized candle and that typically gets a little bit of follow-through if nothing else. The market will continue to see a lot of noisy behavior, because of everything that’s going on in the bond market. Keep in mind that the bond market drives where the gold market will go most of the time, and that has certainly been the case for the last several months.

The gold markets are difficult to trade unless you are keeping an eye on the 10-year yield because if you have the ability to pick up the yield on a piece of paper, you don’t have to pay for storage when it comes to gold. Because of this, you must keep an eye on both charts. Furthermore, you need to keep an eye on the US dollar, because it has a major influence on where we get on, as gold is priced in those very same US dollars.

The candlestick for the trading session on Tuesday was negative, although it certainly was a lot less negative than the previous one. There is a certain amount of support to be found near the $1750 level, so I think we ought to pay close attention to it, because if we break down below that level, then it opens up a move quite a bit lower. On the other hand, if we were to turn around and break above the $1815 level, that could kick off the next move higher, perhaps looking to chase the 200-day EMA above, presently near the $1845 level. At this point, the entire trading world is all about interest rates and bond markets, so you need to pay attention to these yields more than anything else. Ultimately, it does look like we have a bit of exhaustion coming into the market, so it makes sense that we would see the market give back some of the recent gains.

 

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Right now I think we have more of a back-and-forth situation ahead of us.

• The BTC/USD currency pair initially rallied on Monday but turned around to give back those gains and show signs of weakness.
• Ultimately, the Bitcoin market is continuing to struggle with the $25,000 level, so it looks like we are going to continue to see a lot of trouble above.
• At this point, the market is very likely to continue pulling back in the short term, but I do see various signs of support underneath as well.

Market Confident But Lacks Volume

The fact that we are forming a shooting star suggests that we are going to continue to see selling pressure, but I also see that the $22,500 level is a minor support level, followed by the 50-day EMA. This has been a nice grind to the upside, and quite frankly that’s exactly what you want to see in Bitcoin because there have been so many negative traders out there that the market just squeezing higher slowly shows that we are building up a bit of confidence. However, there is a severe lack of volume and that is probably the one thing that concerns me.

I think we are essentially in a major “crypto winter”, but that doesn’t mean the end of the world. In fact, we have seen this before so it does make a certain amount of sense that traders will look at this through the prism of possibly being able to build up a bit of a bigger position for the good times. I think that it is probably only a matter of time before we see some type of attempt to grind much higher, but we need some type of catalyst.

Without a doubt, the biggest catalyst is going to be if and when the Federal Reserve decides it is going to loosen monetary policy. There is a lot of expectation at the moment that the Fed is going to be forced to be less aggressive with monetary policy, but with inflation as high as it is, I am a bit hesitant to get that excited quite yet. In other words, I think we have some work to do as we go back and forth and try to establish some type of foothold. A move below the 50-day EMA could have Bitcoin reaching down to the $20,000 level. However, right now I think we have more of a back-and-forth situation ahead of us.

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I will be paying attention to the 10 year yield, as it has been a good indicator as to where we can go next and not only gold, but other markets as well.

• Gold markets fell almost immediately in the futures market on Monday as we continue to hear a lot of noise around the US dollar and the interest rate complex.
• Keep in mind that higher interest rates will work against the value of gold, and it should probably be noted that gold has had a nice rally for a while.
• Because of this, I think it is probably only a matter of time before we see a significant turnaround, and perhaps an attempt to clear out a lot of the “weak hands.”

Technical Analysis

It’s worth noting that we are sitting at the 50-day EMA, which is an area that a lot of people will pay attention to from a technical analysis standpoint, but quite frankly also can be sliced through quite easily. If we were to break down below the bottom of the candle for the trading session on Monday, then it’s possible that we would drop down to the $1750 level. I think at this point we are more likely than not going to see volatility over everything else, so I do think that it makes sense that we drop a bit.

Pay attention to the US dollar, because it does have a negative correlation to the gold market, which has been relatively strong as of late. If we were to turn around and take out the $1815 level in the spot market, I think that kicks off a lot of short-term short covering and allows the market to go reaching the 200–day EMA. The 200-day EMA is currently at the $1845 level, so it makes for a quick easy $30.

On a break down below the $1750 level, it’s possible that gold goes looking to the $1720 level. The interest rates in the US continue to be a major driver of where you go, with the inverse correlation being so strong. The $1720 level is massive support, and if we were to give that up, things could get rather ugly in short order. In that scenario, we could see a massive flush lower as the US dollar would continue to punish almost everything else in the financial markets. With that in mind, I will be paying attention to the 10 year yield, as it has been a good indicator as to where we can go next and not only gold, but other markets as well.

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I think the best way to attack this market is to fade rallies, as we continue to see a lot of selling pressure overall.

• The West Texas Intermediate Crude Oil market fell a bit on Friday as the 200-day EMA has offered a bit of trouble. 
• This is a market that has a lot to digest, due to the fact that the economy is all over the place, as we are starting to factor in the possibility of a slowing situation when it comes to demand.

Sliding Down the Channel

The market will continue to pay attention to the descending channel that we are in, and therefore it’s likely that we will see the market respect that going forward. The market breaking down below the low of the Friday session could open up the possibility of a move down to the $87 level, and it should probably be noted that there is a certain amount of psychology involved in the $90 level as well.

On the other hand, if we turn around and crack above the 200-day EMA, then it’s possible that we could see the market try to make a move towards the 50-day EMA, which would essentially put the market looking at the $103 region. Ultimately, I think this market continues to see a lot of noisy and choppy behavior, but I think the best way to attack this market is to fade rallies, as we continue to see a lot of selling pressure overall.

While we could see a little bit of a rally at this point, the reality is that demand is going to suffer due to the slowing economy around the world. That works against the demand equation, and that probably is the story going forward. Because of this, I have no interest in buying, at least not in the short term, but will keep an eye on growth going forward from a global standpoint. Furthermore, we also need to keep an eye on the US dollar, because it can have a negative correlation to this market as well. Ultimately, I do think that this is a market that is going to be noisy at best, so volatility typically breeds negativity over the longer term. The market breaking down below the lows that we made just a few sessions ago could open up the floodgates to reach down to the $80 level rather quickly. Because of this, I think you need to be very cautious.

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The Friday close could tell us a lot about how people feel about holding on to risk assets.

• The S&P 500 index rallied a bit during the trading session on Thursday but gave back gains rather quickly.
• This is a market that looks like it is running into a bit of overextension, and the fact that we did up forming a bit of a shooting star should not be a huge surprise considering that the market shot straight up in the air after the “surprise” CPI number.
• Now that the children are out of the way, cooler heads have prevailed, which is quite often the case during these announcements.

Ultimately, the CPI numbers coming out the way they did were cooler than anticipated, but the reality is that the inflation numbers in the United States are far too high to think that the Federal Reserve is going to slow down. In fact, they have been telling anybody that will listen to them that they are in fact going to continue to see reasons to hike rates. Because of this, it’s very unlikely that the stock market can simply go straight up in the air from here. Furthermore, we are heading toward the weekend, so the Friday close could tell us a lot about how people feel about holding on to risk assets.

With that being said, would not surprise me at all to see a little bit of a pullback at this point, perhaps reaching toward the bottom of the candle from the Thursday session. If we blow through that, then it’s likely that the market goes much lower, perhaps reaching down to the 4000 level. I do not think this market simply melts down, but the reality is that the economic situation has not changed whatsoever, so I’m not overly concerned about trying to get long at this point.

If we do break to the upside, then we would need to deal with the 200 Day EMA, which has a lot of psychology attached to it. We also have the 4300 level, which is a major resistance barrier, so that would take quite a bit of effort to get through. If we do that, then I think we have a longer-term “buy-and-hold” type of situation ahead of us. That seems to be very unlikely at this point though, simply due to the fact that we have so many crosscurrents out there.

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This is a market that I think will be choppy and difficult to put a lot of money in.

• The AUD/USD currency pair pulled back a bit from the crucial 0.70 level, as we have seen happen multiple times.
• As we wait for the CPI number to come out on Wednesday, it’s likely that we are going to see some type of bigger move.
• If the CPI number comes out hotter than anticipated, which would be the 0.5% level month over month, that could send this market reeling to the downside.

On the other hand, if we turn around a break above the 0.7050 level, then it’s probably going to be a result of the CPI number coming out cooler than anticipated. In that scenario, it’s possible that market participants may do everything they can to convince themselves that the Federal Reserve is going to loosen monetary policy. While that may take some of the aggressiveness out of the situation, the reality is that we are still very much in a downtrend, and for multiple reasons.

Commodity Markets Selling Off

When you look at commodity markets, they have been selling off in general, and that of course puts a bit of negativity into the Aussie dollar. I think given enough time, we will probably try to test the lows again, but I don’t think necessarily that it is a market that we should be buying. However, there are a couple of levels above that could cost some issues anyway. Not the least of which would be the 200-day EMA which is sitting just below the 0.72 level.

If we turn around and start falling apart, the 0.69 level is an area where I would see a lot of support, and if we break down below that level then we will almost certainly try to get down to the low at 0.67. Keep in mind that there is a lot of economic and inflationary noise out there that is going to cause this market to be choppy at best. The 50 Day EMA is right in the middle of the consolidation area that we are in right now, so that will attract a certain amount of algorithmic trading as well. This is a market that I think will be choppy and difficult to put a lot of money in. However, we should get a bit more clarity by the end of the Wednesday session, so analysis tomorrow will probably be much more convincing.

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