The market is a situation that looks like trouble just waiting to happen, especially as we have seen so much negativity in the stock market after the Jerome Powell speech.

• The BTC/USD has fallen during the trading session on Friday as we continue to see negativity in the Bitcoin market.
• Jerome Powell has given his speech at Jackson Hole, leaving no doubt as to how the Federal Reserve is going to behave.
• As they continue to be hawkish, that will drive money away from riskier assets such as Bitcoin.

When I look at this chart, we had a massive selloff last week, and now we are getting ready to break down below the big candlestick from last week. If we break it down below the $20,000 level, it more likely than not will send Bitcoin much lower. If we break down below that level, then it’s likely that we go much lower. I do think that will end up being the trajectory going forward, as there are far too many things out there that could cause issues for Bitcoin not the least of which is that there is a lot of panic out there.

Selling Opportunities Ahead

Rallies at this point in time should be thought of as selling opportunities, especially the first signs of exhaustion. The 50 Day EMA sits below the $24,000 level and is starting to slope a little bit lower. That should be dynamic resistance, and I think a lot of people will continue to look at that as an area that is worth paying attention to. I think it is only a matter of time before the bearish traders come in and start taking advantage of rallies, but if we turn around and break above the $25,000 level that would change everything as far as momentum is concerned.

At the very least, I think we are going to see a lot of volatility, and of course choppiness. The only thing you can do is keep your position size reasonable because you need to understand that volatility could be quite wild at times. That being said, it certainly looks as if the sellers are starting to flexor muscles, and I do think that Bitcoin ends up falling again. There’s no real “risk appetite” out there, so I just don’t see how you have an argument for getting aggressive to the upside. The market is a situation that looks like trouble just waiting to happen, especially as we have seen so much negativity in the stock market after the Jerome Powell speech.

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Speculators who enjoy opportunistic markets and wagering on the USD/INR may have a rather intriguing path ahead this week.

The USD/INR has delivered strong bumps in the past week of trading, and there is plenty of reason to suspect the rather challenging ride ahead will be equally volatile.  Traders who like a wagering environment in which they can test their perceptions may find the USD/INR currency pair fits their desires in the coming days. As of this writing the USD/INR is near the 79.5600 ratio with quick action being demonstrated.

After Testing Important Short Term Lows on Friday a Sudden Bullish Reversal Higher for USD/INR

On Friday of last week the USD/INR hit the 78.9300 vicinity, while retesting depths last seen on the 3^rd of August.  On the 2^nd of August the USD/INR sunk to nearly the 78.3800 level. The last time the USD/INR had seen this ratio was the last week of June, this before the currency pair began to shoot much higher eventually touching the 80.2000 mark in the middle of July, before erosion lower.

Technical Highs of mid-July are Actually Still within Sight for the USD/INR

Technically the USD/INR may be perceived as having reached highs in mid-July and having sold off incrementally since then. However, traders who follow fundamentals appreciate the behavioral sentiment being generated by U.S Federal Reserve interest rate hikes and outlooks. The slump to short term lows on Friday suddenly saw a reversal, when it became apparent via U.S economic data that wage inflation remains a credible danger in the States and the U.S central bank is likely to be confronted with this issue.

• If the 79.5100 level continues to prove durable as support for the USD/INR in the short term, this could spur on speculative buying positions.
• This entire week is likely to see rather choppy price action as financial houses interpret their analysis regarding the U.S Feds actions in the months to come.
• A hawkish perspective of the U.S Fed could lead to more buying of the USD/INR.

While important all-time highs certainly met with rather strong selling and hit lower depths in early August, after last Friday and this morning’s price action the USD/INR is still within eyesight of July’s strong bullish activity. Speculators who feel the USD/INR could test higher values should keep realistic targets and not aim for the stars.

However looking for quick hitting upward movement after support levels prove durable could be a worthwhile wager on the USD/INR. It is not out of reason to suspect the USD/INR could challenge the 79.8000 ratio sooner rather than later. Again, traders are urged to cash out winning positions if they develop and not let them vanish into thin air, this while using stop loss orders as risk management too.

USD/INR Short Term Outlook:

Current Resistance: 79.6190

Current Support: 79.5089

High Target: 79.7980

Low Target: 79.3000

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Pay attention to the uptrend line underneath, which is currently at roughly $105

The West Texas Intermediate Crude Oil market has found Monday to be rather quiet, which makes sense considering it was Juneteenth in the United States, and this of course had a major influence on the futures markets. That being said, we had a massive selloff on Friday, and one would have to believe that there is still a little bit of a hangover from that breakdown. Because of this, I think it is probably only a matter of time before we see a little bit more downward pressure, I think it’s short-term at best.

Pay attention to the uptrend line underneath, which is currently at roughly $105. The market breaking below that level would be a significant signal that perhaps the uptrend line is giving way, and we could go down to the 200 Day EMA, currently sitting at the $95 level. That being said, I do think that there are buyers between here and the uptrend line, so we need to see a little bit of stabilization on a full day in order to build the confidence to go higher again. Yes, this has been a vicious selloff, but ultimately it is yet just another selloff in a market that is volatile, to begin with.

The 50 Day EMA was pierced on Friday, so recapturing that would be a good sign, and that could bring more buyers into the market as well. Crude oil rallying from here more likely than not will go looking to test the $120 level, perhaps even higher than that. Longer-term, I do think that we have further to go, especially as the demand for crude oil will continue to pick up due to a lack of drilling during the pandemic. However, there are concerns about the economy slowing down, so that of course is something that will have to be paid attention to as well. In other words, think this means that we are going to have a very volatile market, but that can be said about almost every market that I follow, so I see no reason why oil would be any different.

Keep your position size reasonable, because we could see sudden moves. You can always add as the position goes in your favor, which is the way you should be trading markets anyway.

There are several coins that I am watching right now that I do not think will be trading next year.

Polkadot had a very volatile trading session on Friday, but the sellers came back and punished anybody trying to pick it up. The $9.00 level looks as if it is trying to offer a certain amount of support, but it is more likely than not a situation where we are going to see this market break down below there. The $9.00 level is an area that opens up the possibility of a move back down to the $7.50 level, and then eventually to the $5.00 level.

The outlook for Polkadot is miserable to say the least. In fact, anything not named “Bitcoin” looks especially vulnerable. Even Bitcoin has been struggling. If we see that market unravel again, coins such as Polkadot are going to be eviscerated. As I look at the altcoin markets, nothing looks good with perhaps the minor exception of Monero, which seems to be in its own world recently. Because of this, all of these smaller markets are to be shorted every time they rally, and Polkadot is no different.

It looks as if the $10.00 level has offered quite a bit of resistance over the last couple of weeks, and the $12.00 level beyond that has been important as well. The 50-day EMA is near the $13.70 level and dropping. There is a nice spread between the 50-day EMA in the 200-day EMA, and it’s likely that we would continue to see a lot of negativity in this market. As long as we see the bigger coins fall apart, a smaller one like Polkadot stands no real chance. It’s also worth noting that there was a significant spike in volume, but we did not get a move to the upside. That’s normally a very bad sign, so I would not be surprised to see this market lose a few dollars in the next couple of weeks.

Unless we break above the $15 level at the very minimum, I just don’t see a situation where you should be a buyer of this market. If we did do that, then it could be the beginning of a change, but until risk appetite returns and the Federal Reserve changes its overall attitude, I just don’t see crypto going well. There are several coins that I am watching right now that I do not think will be trading next year.

The buyers are becoming just a bit more aggressive as of late.

The West Texas Intermediate Crew Oil market rallied during the training session on Thursday to slam into the $115 level. As you can see on the chart attached, I have drawn a line at that area, and you could make an argument for some type of ascending triangle, or something similar to it at this point. I like the idea of buying dips, and I do think that every time this market pulls back there will be buyers willing to step in and try to take advantage of any type of value.

The 50 Day EMA is sitting at the $105 level and is rising. Ultimately, I think that it offers dynamic support as you have seen multiple times in the past, but I would think of it more as a “spongy area” as it hasn’t acted like a trend line. In fact, you could even make an argument for an uptrend line underneath that level, and it coincides quite nicely with the $100 level. The $100 level is a large, round, psychologically significant figure, so I think that if you were to break the role of that, then you can start to have an argument to the downside. Nonetheless, this is a market that I think will remain bullish for the foreseeable future, but not quite as strong as in the past.

On a break above the $116 level would clear the market for a move to the $120 level, possibly even the $125 level. I think at this point in time, we will more likely than I see that happen, because of everything that’s going on with the crude oil supply around the world. We continue to see a lot of concerns when it comes to the Russian supply as well, even though they are selling crude oil to a handful of major importers, such as China and India.

Think of this as a market that you need to find value in, and I would also point out that the most recent dip was much shallower than the three previous dips before that. That suggests that we are starting to see a build in momentum, and I do think that is something that’s worth paying attention to. In other words, the buyers are becoming just a bit more aggressive as of late.

The sharp upward trajectory of the performance of the USD/JPY currency pair reached the 131.25 resistance level, the highest in 20 years. At the end of last week’s trading, the currency pair fell to the level of 129.31 after announcing the unexpected contraction of the US economy in the first quarter. This led to the decline of the US dollar against the rest of the other major currencies, but any weakness is still seen as temporary, as economists say that the economy must return to healthy growth.

All US dollar pairs and markets are on an important date this week, as the US Federal Reserve will announce an increase in US interest rates for the first time since 2018.

The dollar pared fresh multi-month highs against sterling and multi-year highs against euro and yen on news that the US economy contracted 1.4% qoq in the first quarter. The market had expected the economy to grow by 1.1% on a quarterly basis. Commenting on this, Joe Manimbo, chief analyst at Western Union Business Solutions says, “The US dollar gave up some of its strength after the worrying news of growth in the first quarter.”

The dollar index is a broad measure of the currency according to a basket of US dollar exchange rates – has been steady below multi-year highs of 103.80 in the wake of the numbers. Meanwhile, strong GBP/USD selling was halted near 1.2436, with EUR/USD flat at 1.04. “The sudden contraction in growth has the dollar ready for some profit taking after its amazing strength exploded this week,” the analyst adds. Earlier, “the dollar made its way to highs as it remained the preferred currency in the face of mounting concerns about global growth.”

Certainly, it is too early to end the dollar’s rally and the Forex markets will remain on the alert for further gains.

Looking at the details of the GDP release, there is no major cause for concern regarding the outlook. In fact, final domestic demand was still growing well at 2.6% and consumer spending increased by 2.7% during the quarter. “Where the economy faltered was producing goods,” says economist Avery Shenfield of CIBC Capital Markets. “This has accelerated business investment spending, which is a sign of confidence about future demand that matches the desire to add workers,” he explains.

He notes that the increase in imports has been a drag on GDP as companies replenish stocks, buoyed by improvements in global supply chains during the quarter.

The drop in GDP is not as bad as it seems, says Daniel Vernazza, chief international economist at UniCredit in London. This is because the biggest factors detracting from GDP in Q1 22, net exports and inventories, are also the most volatile components and are likely to improve in the coming quarters.

He notes that with rising inflation, consumers seem to finance consumption by indulging in the savings accumulated during the pandemic. But “at some point, Americans are going to start cutting back on demand unless prices start dropping again.” However, CIBC capital markets expect a return to healthy growth over the next two quarters, as net trade and inventories are unlikely to be equally negative, and crucial to the dollar’s outlook, the Fed is unlikely to be affected by a GDP disappointment.

Inflation is rising rapidly, and they will look at the data and choose to raise interest rates by 50 basis points in the upcoming meetings.

This would provide the dollar’s exchange rates with an ongoing yield boost.

According to the technical analysis of the currency pair: In the near term and according to the performance of the hourly chart, it appears that the USD/JPY currency pair is trading within the formation of a descending channel. This indicates a strong short-term bearish momentum in the market sentiment. Therefore, the bears will look to extend the current series of declines towards 129.38 or lower to 128.88. On the other hand, the bulls will target channel breakout profits at around 130.36 or higher at 130.91.

In the long term, and according to the performance on the daily time frame, it appears that the USD/JPY is trading within the formation of a sharp ascending channel. This indicates a strong long-term bullish momentum in the market sentiment. Therefore, the bulls are looking to extend the current gains towards the 131.30 resistance or above to the 133.30 resistance. On the other hand, the bears will be looking for potential reversals at around 128.43 or lower at 126.51.

 

 When things are bad, it often seems like the end of the world; when they’re good, it feels like the party’s never going to end. 

There’s an old saying, “make hay while the sun shines,” meaning that you should make the most out of your opportunities while they last. The adage is particularly relevant to our financial markets of late, as it seems investors have been taking it quite literally over the course of the summer. Even as markets across the board were falling following the worldwide spread of the coronavirus, the urge to find the right dip to buy became ever harder to resist. At the time, with flu season out of the way (at least in the northern hemisphere), we witnessed a powerful recovery as well as an increase in confidence that the worst was behind us, that a vaccine was just around the corner, and that a full return to growth was on the cards for 2021.

Of course, collective sentiment tends to overshoot on both the upside and the downside. When things are bad, it often seems like the end of the world; when they’re good, it feels like the party’s never going to end. What we seem to be witnessing now is a moment of collective sobering up. Winter is coming, COVID-19 cases are on the rise again, further lockdowns appear to be in store, and investors don’t want to be caught wrong-footed like they were back in March.

Market Sell-Off

Following the slump in US equities that we saw in early September from their all-time highs, the S&P 500 has attempted to bounce, stalled at the 3422 level between September 8-10, unsuccessfully retested the same level between September 15-16, and has since set a new lower-low at around 3230. We’ve seen the Dow Jones Industrial Average and Nasdaq do much of the same thing, with the S&P 500 and Nasdaq recently hitting levels last seen in July, and the Dow Jones since early August. On Monday, September 21, for the first time since February, the S&P 500 posted losses on four consecutive days. It ended around 10% down from the record high the index set on September 2.

As is routinely the case, each bounce is met with a great deal of fanfare. The S&P 500 is currently up around 2.9% off those lows, but there could be further selling in store. The attempted bounce we’re seeing is currently being led by tech giants Amazon and Apple. The other usual subjects in the technology space (Microsoft, Alphabet and Facebook) have, in combination, fuelled the US stock market’s improbable post-COVID-19 rally and have also posted slight gains since the sell-off.

Market Worries

What we’re seeing now is a period of coming back down to earth and a tentative recognition that perhaps stocks rallied too hard through the summer to become overpriced relative to the risks. The first of the unknowns weighing on investors’ animal spirits is whether Congress will approve further stimulus measures before the November election. This was echoed by Fed chairman Jerome Powell, who has publicly called for further fiscal support from the government. With the unemployment benefits and other stimulus measures of the CARES Act having recently expired, the big question on everyone’s lips is whether a deadlocked Washington will manage to put together another package.

US-China tensions are also continuing to rise with President Trump gunning for the Chinese tech platforms. Citing data privacy and national security concerns, the US Department of Commerce has recently launched a series of measures that will severely curtail the US activities of Chinese tech companies like TikTok and WeChat.

In other news, the recent death of Supreme Court Justice Ruth Bader Ginsberg has added further tensions in an already fraught election run-up as Republicans and Democrats begin an acrimonious battle over who is to replace her.

All the above is taking place amidst an uptick in coronavirus cases. Aside from the United States, the top 15 list of daily coronavirus cases has been dominated by the developing world throughout the summer (mostly South America, India and Russia). Recently we’ve seen Spain and France re-emerge with an explosion in daily cases and now the UK is also making its way back up the list. On Sunday, September 20, the UK reported 4422 cases, the highest case count since May. With new cases and hospital admissions doubling every week, it’s now becoming apparent to leaders in the northern hemisphere that a second wave is almost upon us, that the relaxation of measures throughout the summer and encouragement of the public to go out and spend, has given the virus a foothold just as the flu season is about to begin.

Tesla in the Spotlight

The stocks that run the hardest during the irrational exuberance of a rally can be the ones that sell-off the hardest when outlooks begin to change. Pre-COVID, Tesla peaked in February at around $193 per share. Post-COVID it surged to around $360 in July and then catapulted to $500 in late August to the complete bemusement of most onlookers.

Tesla stock was hit particularly hard during this recent sell-off. On September 8 it gapped down upon opening and went from $417 on Friday’s close to around $330 on Tuesday’s close. That’s a more than 21% drop, the worst single-day performance in the company’s entire history, which wiped more than $80 billion from the company’s valuation. From peak to trough, Tesla corrected by over 34% in September. True to form, the rebound has been even more impressive, having bounced by more than 38% since the September 8 low to set a lower-high at around $463.

Aside from the technicals, what else is weighing on Tesla’s much-loved story stock? Well, for one, it was widely anticipated that the company would be added to the S&P 500. This did not come to pass as the committee responsible for vetting new entries decided against the addition. More recently, the company’s CEO, Elon Musk, has stated that the company may experience difficulties in scaling up production following an analyst’s warning that its heavy reliance on aluminium parts could pose problems. Finally, even though the stock behaves and is often treated as a sort of honorary tech stock, the reality is that it’s an auto manufacturer that could be severely affected by the second wave of coronavirus infections and lockdowns. This is due to supply chain disruptions but also shifting priorities among consumers if the global economy is due to suffer another hit. Tesla is definitely a stock to watch as the potential downside is great should the worst come to pass, as well as the inevitable bounces following each sell-off.

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References:

https://www.theguardian.com/business/2020/sep/21/us-stock-markets-fall-dow-drops-510-points-coronavirus-fears

https://uk.reuters.com/article/usa-stocks/us-stocks-nasdaq-sp-500-crawl-higher-on-amazon-apple-boost-idUSL3N2GJ2HV

https://www.voanews.com/economy-business/us-stocks-fall-global-markets-swoon

https://www.barrons.com/articles/global-stocks-slump-on-worries-over-infections-gridlock-and-money-laundering-allegations-51600680149

https://www.straitstimes.com/business/companies-markets/us-stocks-advance-cautiously-after-powell-mnuchin-testify

https://www.worldometers.info/coronavirus/

https://www.bbc.com/news/business-54234006

https://www.cnbc.com/2020/09/08/tesla-shares-slump-10percent-in-premarket-trading-after-sp-500-snub.html