If yields around the world start rising, that’s an excellent buying opportunity in this market, and of course vice versa as we have seen this correlation play out for a while.

• The US dollar rallied during the Friday session to show signs of life again against the Japanese yen.
• The longer-term uptrend has been very strong, so it does make quite a bit of sense that we would see this area offer buyers given enough time.
• Overall, the USD/JPY currency pair will continue to pay close attention to the ¥132 level as potential support, but it’s also worth noting that we have been noisy over the last week or so.

When you look at this chart, you can see that we have shown a bit of a pullback as of late, but we had been a little overdone, and that’s part of a normal market. With the Bank of Japan continuing to print unlimited yen, via buying unlimited bonds, that does put a certain amount of downward pressure on the Japanese currency. However, if interest rates around the world are going to continue to fall, that releases some of that pressure on the Japanese, and thereby makes the Japanese yen strengthen.

Watch the Bond Markets

In other words, you need to pay close attention to the bond markets worldwide to get an idea as to how the Japanese yen may perform. If yields are dropping around the world, then it’s possible that we could see the Japanese yen strengthen. However, if we see a spike in rates, then it’s likely that the Japanese yen gets sold off quite drastically. In that scenario, we will probably look towards the 50-day EMA, which is just below the ¥136 level. If we can break above there, then it’s likely that the market then would perhaps try to make a move to the ¥140 level.

It’s almost impossible to trade this market without paying close attention to the 10-year yields worldwide, so I would have the chart open for the United States, Japan, Germany, and the United Kingdom. If yields around the world start rising, that’s an excellent buying opportunity in this market, and of course vice versa as we have seen this correlation play out for a while. I don’t think that will change any time soon, so as long as you keep an eye on all of these markets combined, it should give you a clear roadmap as to where we go next. Expect volatility, but expect that correlation.

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I think the only thing we can count on now is going to be a lot of noisy behavior, so you need to be cautious about your position sizing.

• The AUD/USD currency pair rallied significantly on Wednesday as the CPI number came out much cooler than anticipated.
• Because of this, the idea is that the Federal Reserve can start to pivot a bit, but it’s very unlikely to happen. After all, inflation is 3 ½ times what the Federal Reserve looks for, so they are going to continue to be very tight.

Strong Candlestick

The size of the candlestick is very strong, and it does suggest that we have a little further to go. At this point, the market looks as if it is going to threaten the 200-day EMA, as it is now below the 0.72 level and grinding lower. I think that could be a bit of difficulty trying to hang onto, and I think it’s probably only going to offer a lot of trouble. Signs of exhaustion will get sold into, due to the fact that the US dollar continues to be highly sought after in general, especially as we have a major recession ahead of us.

If we do break above the 0.72 level, then possibly we could see this move all the way to the upside. At that point, we could see the 0.76 level. I just don’t see that happening though, and it’s likely that the market is going to run into exhaustion before we get there. If we break down below the 50-day EMA, that opens up the possibility of a drive down to the 0.69 level, which has been supported previously. Breaking below there opens up the possibility of a move to the 0.67 handle. That’s an area where we have been multiple times over the longer term, and it has offered a massive amount of support. Breaking below that level could open up a massive selloff and what would be a very negative turn of events for risk appetite overall.

I think the only thing we can count on now is going to be a lot of noisy behavior, so you need to be cautious about your position sizing. That’s probably sage advice for just about any market right now, but the Aussie does tend to be very noisy, so that makes quite a bit of sense. The US dollar seems to be trying to recover against the euro and the British pound, so we will see what happens here.

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The fact that we gapped at the open also helps as well, because that shows that there is a huge surge of buying.

The Wall Street narrative on Wednesday suggests that even though inflation numbers are higher, it’s possible that the Federal Reserve may have to pivot. I don’t subscribe to this theory, at least not yet, as interest rates still have a long way to go before they are “neutral.” The fact is that inflation is at least three times what the Federal Reserve likes, so they are more likely than not going to have to continue tightening more than Wall Street is comfortable with.

Approaching the 13,500 Level

Nonetheless, the buying pressure seems to be there, and it’s going to be worth noting that we are getting close to the 13,500 level. That’s an area that should be rather resistive, so if we were to break above there, then it’s likely that the market goes looking to the 14,000 level. The 14,000 level also is where the 200-day EMA is sitting and dropping lower. The 200-Day EMA will be an area where people are paying close attention, as it defines the longer-term trend.

If we break down below the 13,000 level, then it’s likely that the market will go looking to the 50 Day EMA underneath, which is sitting at the 12,250 level. Keep in mind that technology stocks are extraordinarily sensitive to interest rates, so if they start to turn around and rise, that could be very negative for the NASDAQ 100 Index. Either way, I think we have a market that still has more bullish influence than bearish, at least in the short term. However, we know that volatility is off the rails at times, and it’s likely that we need to see the NASDAQ 100 become really noisy. It’s overdone recently, so do not be surprised if we get some type of pullback sooner or later. I thought we got that earlier in the week, but it does not look like it has quite stuck yet.

The fact that we gapped at the open also helps as well, because that shows that there is a huge surge of buying. The futures market went nuts when the CPI number came out lower than anticipated, but it should be kept in the back your mind that the Federal Reserve is going to have to continue tightening rather aggressively, even with is less than feared number.

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A lot of this is going to come down to the Federal Reserve as well, as we are watching inflation very closely.

• The BTC/USD currency pair rallied a bit Monday as we continue to see quite a bit of buying pressure.
• Ultimately, this is a market that has to pay close attention to risk appetite globally, especially as Bitcoin is so volatile.
• If risk appetite starts to fall off, Bitcoin could get slammed.
• BlackRock has recently got involved in Bitcoin via Coinbase, and it plans on offering Bitcoin to 200 institutional clients.

Technical Analysis

If we do break above the $25,000 level, it’s likely that the bitcoin market could go to the $28,000 level. The $28,000 level is the beginning of rather significant resistance that extends all the way to the $32,000 level. The $32,000 level being broken to the upside could send this market much higher, thereby kicking off a bullish run. I don’t think that’s going to be the case anytime soon, but it’s something to keep in the back of your mind. If we were to break out above there, then we go much higher.

If we turn around and break down below the 50-day EMA, then it could open up quite a bit of selling pressure, opening up the possibility of reaching the $20,000 level. The $20,000 level obviously has a significant amount of psychology attached to it, so you should pay close attention if we do break down below it. If we do, that could open up quite a bit of selling pressure, causing a lot of noise. In that scenario, Bitcoin could see the bottom fall out of it. I don’t necessarily think that’s going to be the case, at least not in the short term. However, if we do get that breakdown, it might lead to a nice drop down to the $12,000 level. The $12,000 level is an area that a lot of people have an interest in, so I think that might be the beginning of the building of a major accumulation phase. At that point, we would probably see a lot of sideways action before ultimately turning things around and kicking off a new bullish trend. If we don’t, that would be an extraordinarily negative turn of events for Bitcoin. A lot of this is going to come down to the Federal Reserve as well, as we are watching inflation very closely.

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Buying on dips could be used as a way to pick up a little bit of value here and there for a longer-term position.

• Ethereum rallied Friday, but there is also a significant amount of resistance above that continues to cause major problems.
• The major source of resistance is the $1800 level, which extends to the $2000 level.
• Because of this, I think we still have a lot of concern out there when it comes to any type of rally.

Ethereum Likely to Struggle

Ethereum is going to continue to be somewhat bullish in terms of crypto markets, mainly due to the fact that “The Merge” is coming, and it could bring in good things for the network. The reality is that there is still a lot of work to be done before you can clear all of this noise above, so I think Ethereum will continue to struggle in general. If the market were to break down from here, there are a couple of places where I would expect to see support, not the least of which would be the 50-day EMA which is sitting just above the $1200 level.

The $1200 level is an area that extends down to the $900 level and has been a massive support. If we were to break down below that level, then it’s likely that we could go much lower. At that point, it’s likely that we would see Ethereum drop drastically. I think given enough time, we will eventually try to build up enough momentum and reason to go higher. Ultimately, this is a market that will continue to see a lot of volatility.

The market will continue to be very noisy, but I think more than anything else we will continue to see a lot of questions when it comes to risk appetite. Keep in mind that the risk appetite is going to drive what happens in this market. This is the same with all crypto, which has been trying to build up a little bit of a presence, but right now it’s been difficult to get a bit of momentum going. With this being the case, I think you will continue to see a lot of back-and-forth, and then eventually momentum. I do think that we will see the market recover, but I’m not convinced that we are there quite yet. That being said, buying on dips could be used as a way to pick up a little bit of value here and there for a longer-term position.

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It’s interesting that we are lining up for a fight just as we are running into a bit of significant resistance.

• The S&P 500 Index initially pulled back Friday but then turned around to show signs of bullish pressure late in the day.
• It does make sense that the market rallied on Friday, mainly due to the fact that money managers will try to mark up into the end of the month.
• This is a market that has a little further to go before it hits massive resistance, but it is worth noting that the market has been relentless.

Eyeing the 4200 Level

I do believe that we will out of momentum sooner or later, with the 4200 level above being important. It’s worth noting that the area has been resistant before, so if we get some type of exhaustion candlestick in the general vicinity, I am willing to start shorting. This makes sense, due to the fact that even though interest rates have dropped in the United States, the reality is that the Federal Reserve has not suggested that it was ready to pivot. True, they said something about being near the neutral rate, but they also suggested that there are still hikes coming.

If we do break above the 4200 level, then it’s possible that the market could go looking to the 200-day EMA. That obviously would be a very bullish turn of events, and at that point, I think the market would have just about proven its uptrend. This has been a market that has been overdone on multiple time frames. Because of this, I think at the very least we can probably count on some type of pullback, but the fundamental information out there that we have right now does not suggest that we are ready to take up to the upside.

The 4000 level underneath would probably be important as well, as it is a large, round, psychologically significant figure. After that, then we have the 3950 level which would be rather important as well. The market is most clearly bullish in the short term, and momentum is most certainly on the side of the buyers. However, it’s interesting that we are lining up for a fight just as we are running into a bit of significant resistance. Whether or not we can continue this move is a completely different question, but I do think Monday is going to be interesting to say the least.

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The British pound rallied significantly during the trading session on Wednesday after the Federal Reserve raised interest rates by 75 basis points.The market is more or less going to continue to see the overall downtrend continue, due to the fact that the market has seen a line of negative pressure. The 50 Day EMA sits near the 1.22 level, which is an area that has been important multiple times. The market is likely to continue to see sellers come into this market as we have been so negative over the longer term.

Underneath, the 1.20 level underneath is a large, round, psychologically significant figure, and therefore we do see a little bit of market memory in that area, especially as we had previously seen the 1.20 level offer such resistance, as well as support. Ultimately, this is a market that I think is going to find one reason or another to sell off, not the least of which is the fact that although the Federal Reserve was seen as being dovish by the market, the reality is that the market always seems to get it wrong the first day. It’s more or less a relief rally at best.

If we can break above the 50 Day EMA, then the market could go to the 1.24 level. The 1.24 level is an area where we have seen noise out in the past as well, and I think it extends to the 1.25 level. Any signs of exhaustion in that area would also be a nice selling opportunity as well. Regardless, I think this is a market that you are looking for signs of exhaustion that you can get involved with. The candlestick for the trading session was rather impressive, but when you look at the big picture, it is likely that we will continue to see the overall economic uncertainty come into the picture and cause people to run to the US dollar yet again. The market has been a very messy place over the last couple of months, and the market should continue to be very much the same. At this point, the Federal Reserve will be data-dependent, and the date is going to look miserable when it comes to the inflation numbers as we have seen recently.

We had sold off quite drastically over the last couple of weeks, so I would anticipate a short-term rally before continuing the overall malaise that we have seen in this market for so long.

• The German DAX Index initially dipped a bit in the futures market on Friday, but then turned around to show signs of strength.
• Ultimately, the market pierced the €13,000 level but found a bit of resistance there.
• The rally ended up being just under 9/10 of a percent, which is a good day at the markets.
• We are still very much in a downtrend, so one has to look at this through the prism of a market that is bouncing from extremely oversold conditions.

At this point, I’m waiting for signs of exhaustion that I can start fading. We clearly do not have that yet, but I think there is a huge case to be made for resistance at the €13,250 level, the €13,400 level, and then the €13,600 level. In other words, there is a lot of work to do to change the overall trend of the DAX, especially as the German economy has been less than thrilling to watch lately.

Germany’s Energy Woes

The ECB is essentially stuck with monetary policy because even though there’s a lot of inflation in the European Union, there’s no real way to fight it without causing major economic damage. After all, the Europeans cannot even provide their own energy at the moment and have gone so far as to label natural gas as “green energy”, right along with nuclear. Nuclear power has been taboo in the European Union, so this shows you just how desperate things are getting with the situation involving Russian gas.

Looking at this chart, the 50-day EMA is sloping quite drastically to the downside, and it looks like we are going to continue to see sellers at rallies that show signs of exhaustion or an opportunity to get short again, and I do think that eventually, we may have to threaten the €12,500 level again. If we break down below there, then it’s likely that we go much lower, perhaps down to the €12,000 level. Obviously, we had sold off quite drastically over the last couple of weeks, so I would anticipate a short-term rally before continuing the overall malaise that we have seen in this market for so long. It is not until we break above the €13,600 level that I would start to take a rally seriously, and at that point I would have to pay close attention to the overall economic situation globally.

I think this is a situation where you are going to fade the rally until we get a huge move to the upside.

• The S&P 500 recovered even further on Friday, as the jobs number came and went.
• We are trying to trade within this downtrend, and of course, it is a down-trending channel.
• The top of the channel coincides nicely with the 50-day EMA, which is just below the 4000 level.
• A lot of this coincides quite nicely with a potential selling opportunity, but we did not get the exhaustion that I was hoping to see.

Breaking down below the bottom of the candlestick on Friday could be the first clue that we are getting ready to fall again, perhaps trying to get back down to the 3800 level. It’s also worth noting that the 3750 level offered a significant amount of support previously, and I think that is a nice target if we break down. If we were to break through there, then it’s likely that the market will go much lower, perhaps continuing to make fresh, new lows. The 3700 level is an area of interest as well, which would be hit along the way.

If we were to break out to the upside, it’s not until we get above the 4000 level that I start to take a rally seriously. If we were to break above there, then the next target is the 4200 level. A break above there then changes the entire trend, as we flip to the outside. At that point, becomes more “buy-and-hold”, but I think this is a dream at this point, despite the fact that it has been so bullish as of late.

Inflation Impact

Wall Street is pretty good at coming up with narratives, and the latest narrative is that perhaps inflation is slowing down, and it’s likely that the Fed could start cutting rates again at the beginning of next year. One thing I’ve noticed over the last 13 years is that eventually the Federal Reserve does what Wall Street tells them to, but we are nowhere near that at the moment. It’s also worth noting that as long as inflation continues to rip higher, we will probably continue to see more downward pressure than anything else. With that being the case, I think this is a situation where you are going to fade the rally until we get a huge move to the upside.

I think that we have a scenario in which it’s almost impossible to get long of the DAX.

The German DAX Index initially tried to rally Tuesday but saw plenty of sellers jump back in, just as we had seen on Monday. The €13,250 level is an area that continues to be important, as we have seen this market bounce from there, break down from there, and see multiple reactions.

If we turn around and break above the €13,500 level, then it’s possible that we could reach to the €13,750 level, which is where the 50-day EMA is sitting just above. The 50-day EMA is an indicator that a lot of people will pay close attention to, as the indicator is used in a lot of technical trading systems. Ultimately, this is a market that continues to fade rallies, and I think it’s likely that we will see plenty of sellers jump into this market and take advantage of the first signs of selling pressure and exhaustion.

On the downside, the €13,000 level would be an area of psychological support, and if it can break down below there is likely that we would see the €12,500 level targeted, as we had bounced from there previously. Because of this, if the market would break down below there, it would open up a “trapdoor effect” in the market and at that point, it’s hard to tell where we woudl end up.

Alternately, if we were to break above the 50-day EMA, then it’s possible that the market could go looking to reach the €14,000 level, possibly even the 200-day EMA which is currently sitting at the €14,500 level. It’s not till we break above that level that I think the trend could change, but even then I would be suspicious. After all, we need to know what central banks are going to do, as they look like they are all getting ready to tighten. If that’s going to be the case, then stocks will more likely than not pay the price. There are a lot of concerns about inflation and global slowdowns out there, so I think that we have a scenario in which it’s almost impossible to get long of the DAX, but I could say that about most other indices. Quite frankly, the risk appetite around the world continues to look anemic, and Germany is going to be no different, especially as energy becomes a concern.