Given enough time, the market will probably continue to look at this as a market that has plenty of negativity in it, and I think that will continue to be the main driver.

The DAX initially gapped lower during the Monday open but turned around miraculously to wipe all of that out and end of the day in the green. In fact, it ended positive at about 4/10 of a percent, which is a rather unremarkable figure, and you take a look at the chart and see how much gain it took to get to that point.

At this point, I still think that the DAX is probably going to find some pretty significant selling pressure above, but it looks as if there might’ve been a little bit of value hunting during the day. Signs of exhaustion after rallying will be an excellent opportunity to get short again from what I can see, as the EU is in serious trouble and the German economy is not going to be spared. After all, modern economies demand a lot of energy, not necessarily something that we are going to see in Europe.

ECB’s Policy Favors Bears

• The ECB claims that it’s going to be raising interest rates, which is interesting considering that the EU economy is so fragile now.
•  Inflation is out of control, so they may not have any other option but to try to tighten in this environment. Because of this, it’s difficult to imagine a scenario where the market can simply take off.
• The DAX should open a nice selling opportunity above, perhaps near the 13,200 level.

The candlestick on Friday was rather brutal, and that does suggest that there will be a bit of follow-through. Given enough time, the market will probably continue to look at this as a market that has plenty of negativity in it, and I think that will continue to be the main driver. If inflation continues to be an issue, stocks need to come down, not only in Germany but worldwide in general. The market will almost certainly try to get back down to the 12,500 level, where we had bounced from previously. If we break it down below there, then we could see a major continuation of negativity. All things being equal, I think if you are patient enough to look for selling opportunities, you should do quite well in this environment. If we wipe out the Friday candlestick and take out the top, then I might be convinced we can go further to the upside.

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If we are truly going into some type of major recession, oil will continue to get hammered. 

• The West Texas Intermediate Crude Oil market got a little bit of a bounce on Friday as the job number in America came out with over half a million jobs for the month of July.
• The market is speculating that there will be more demand for crude oil than they had thought 24 hours earlier due to the fact that more people are working.
• Whether or not that’s true is a completely different question, but at this point, it looks like the market is willing to buy that story for the moment.

Still in a Downtrend

You should also keep in mind that perhaps short-sellers took profit heading into the weekend, so that is something worth paying attention to as well. The fact that we are still below the $90 level will weigh upon the idea of bullish narratives, so that is also worth watching. Ultimately, this is a market that has been in a downtrend for a while, so it does make a certain amount of sense that we would continue to go lower.

When you look at this chart, is easy to see that the sellers continue to come back into this market, so I think that this short-term rally will probably get sold into. If we break down below the bottom of the candlestick for the session on Friday, it’s likely that we go lower, perhaps reaching the $80 level underneath. The $80 level is an area that will attract a lot of attention, but quite frankly I just don’t see how that means anything other than a short-term bounce.

If we are truly going into some type of major recession, oil will continue to get hammered. When you look at this chart, you can see that we have been in a bit of a downtrending channel, and it appears that we are going to continue that same overall behavior. Ultimately, I have no interest in buying oil anytime soon, due to the fact that it seems as if all commodities are continuing to sell off, and of course, oil is right in the front when it comes to recessionary concerns. Ultimately, it’s worth noting that we are below the 200ay-d EMA, so it does make quite a bit of sense that we would see further negativity.

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In general, I think this is a market that will continue to be more of a range-bound type of situation.

• The AUD/USD currency pair fell a bit Wednesday to break down below the lows of the previous candle, showing that perhaps there is still plenty of downward pressure.
• However, we have turned around in the middle of the day and have seen the market try to recover completely.
• The 50-day EMA sits just above, and of course, causes a certain amount of noise.

Keep an Eye on Commodity Markets and 10-Year Yield

The candlestick for the day is forming a bit of a hammer, and that is a bullish sign, but we are simply testing the bottom of the recent consolidation area. The market will almost certainly continue to come back into the picture and look at this through the prism of risk appetite and consolidation at the same time. After all, the Australian dollar is considered to be highly levered to commodity markets, which are highly levered to world growth. If the economy starts to enter a very rough patch, it does make a certain amount of sense that the Australian dollar could suffer as a result. Alternatively, if we start to see growth return and perhaps even stimulus, that will help the Aussie as well.

Looking at the 10-year yield helps because it tells you where the US dollar may or may not end up, which is something worth paying close attention to. Another thing worth keeping in the back of your head is the fact that the jobs report comes out on Friday, so it’s more likely than not we go sideways over the next couple of sessions until we get that vital piece of information. The fact that we could not take off in one direction or the other should not be a huge surprise at this point. That being said, I anticipate that we will grind back and forth and essentially chop it up in this tight range. I do favor the downside overall, but I also recognize that we need a catalyst to get moving.

In general, I think this is a market that will continue to be more of a range-bound type of situation, so if you are going to trade it, you need to approach it from the idea of a range-bound short-term setup until we get a break above the 0.750 level or breakdown below the lows of the session on Wednesday.

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We are most decidedly in a bear market at the moment, so I don’t think that we are suddenly going to see everybody jump into the stock market.

• S&P 500 Index had a positive session again on Wednesday.
• We continue to see quite a bit of noise in the market.
• The recovery is quite impressive, but we still have a long way to go before you can start talking about a trend change.

Because of this, you need to take the attitude that you are waiting for a setup that goes with the longer-term trend. The 3900 level above could be resistance, right along with the 50-day EMA that sits at the 4000 level.

4000 Level is the Ceiling

The 4000 level is the “ceiling” as far as I can tell, so therefore I think this is a market that will continue to favor the downside, as the Federal Reserve continues the tight monetary policy, and there are a lot of concerns about inflation and slowing down when it comes to the global economy. With that being the case, the market is more likely than not going to continue to see more of a “fade the rally” type of situation.

At this point, it’s also worth noting that toward the end of the last hour, sellers came in and pushed the market down. That being said, the market is likely to continue to see a lot of noisy behavior, and I do think that given enough time we will struggle. Ultimately, I believe this is a market that will continue to be very noisy, so you need to be cautious with your position size. It’s very difficult to imagine a scenario where the stock market suddenly takes off, but at this point, it’s going to be interesting to see whether or not the jobs number will make for a bigger move, or if it will squash any type of rally. We are most decidedly in a bear market at the moment, so I don’t think that we are suddenly going to see everybody jump into the stock market.

Right now, you can make an argument that we are in the descending channel, and you need to pay close attention to once we get toward the top of it, near the 3900 level. Underneath, if we break down below the lows of the last several days, then the market opens up down to the 3700 level, perhaps even to the 3650 level which opens up even further losses.

Ultimately, I think we will break out and I don’t have any real interest in trying to short this pair anytime soon.

The Canadian dollar initially dropped Wednesday but saw a nice recovery late in the day. This lines up quite nicely with the oil markets, as they had initially sold off, but have also recovered quite a bit. Because of this, the market has jumped right back to its old correlation between crude oil and this market, so it does make sense that we would see the shape of the candlestick look the same in both markets.

At this point, there is no reason to think that this market will not continue to go higher, because the Bank of Japan continues to fight interest rates rising in that country, meaning they are essentially “printing Yen” along the way. They are by far the loosest central bank in the world, so the Japanese yen will continue to pay the price. Furthermore, if there is more demand for crude oil out there, that benefits Canada, and it’s also worth noting that Japan imports 100% of its crude oil.

The ¥102 level looks to be supported, especially now that the 50-day EMA is rapidly approaching that level. This is a nice uptrend, and there’s no reason to fight what’s going on here. Waiting for dips that you can pick up a little bit of value in makes the most sense. It is worth noting that the ¥107.15 level has caused a minor resistant barrier, but there’s nothing from a psychological or long-term standpoint that suggests that we cannot break above that level and continue to go higher. In fact, I fully expect that to be the case, especially after the price action during the trading session on Wednesday.

With oil recovering the way it did late in the day, it does make sense that we would see the CAD/JPY pair continue to show signs of life. That being the case, if we can get some type of significant rally in the stock markets, that may help this pair as well. It’s worth noting that it was a strong balance during the day, so everything lined up for a nice recovery after some early selling during the Asian session. Ultimately, I think we will break out and I don’t have any real interest in trying to short this pair anytime soon.

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

The Dow Jones Industrial Average rose during its recent trading at the intraday levels, to achieve gains in its last sessions, by 2.15%, to gain about 641.47 points. It settled at the end of trading at the level of 30,530.26, after declining in Friday’s trading by -0.13%.

US stocks bounced back from last week’s selling, with government bond yields rising as risk-off sentiment subsided on Tuesday, with all sectors posting gains led by energy, consumer appreciation and consumer goods.

St. Louis Fed President James Bullard warned that inflation expectations could become unchecked without credible action by the Federal Reserve, a credible action by the US Federal Reserve, which could lead to a new regime of high inflation and volatile real economic performance.”

On Tuesday, Richmond Fed President Thomas Barkin called Fed Chair Jerome Powell’s guidance that the US central bank will likely raise interest rates by 50 or 75 basis points in July as “reasonable.”

In other economic news, the pace of US existing home sales fell 3.4% to 5.41 million at a seasonally adjusted annual rate in May, data from the National Association of Realtors showed on Tuesday. The expected drop was 5.4 million in a Bloomberg poll. After four consecutive declines, sales were the lowest since June 2020 and were down 8.6% from the previous year.

Technically, the index is trying to compensate for part of what it incurred from previous losses. At the same time it is trying to drain some of its clear oversold by the relative strength indicators, especially with the emergence of a positive crossover in them. All of this comes in light of the control of the short-term bearish corrective trend along a slope line, as it is shown in the attached chart for a period of time (daily). This is with the continuation of the negative pressure of its trading below the simple moving average for the previous 50 days.

Therefore, we expect the stock’s decline to return during its upcoming trading, especially throughout its stability below the resistance level 31,000, to target the support level 28,658.

It is probably only a matter of time before we see sellers coming back into the market to take advantage of “cheap US dollars.”

The Euro recovered quite nicely during the Thursday session, to break to the resistance barrier yet again. At this point, the market is killing time between now and the jobs number, when we will get the next major catalyst. Whether or not we can continue to go higher is a completely different question, and there is a lot of resistance above that I think could cause some major problems. With this being the case, I think it is probably only a matter of time before the market sells off, but I am cognizant of the fact that if we break above the 1.09 level, we will have cleared several major hurdles.

On the downside, the 1.06 level is a potential target, followed by the 1.04 level, where we had bounced from previously. This is a very noisy chart, but then again, most charts are noisy at the moment as we try to figure out what to do next. I think at this point we are looking at a scenario where traders are going to have to decide where they are going longer-term. Recently, we’ve heard some jawboning out of the ECB that perhaps they may try to tighten monetary policy, but at the end of the day it will be somewhat meaningless in comparison to what the Federal Reserve might be able to do.

Once the jobs numbers out of the way on Friday, we should have quite a bit more clarity in the way that the market may view the US dollar, and therefore we will be able to trade this market with a bit more clarity. There’s not much that makes me want to buy the Euro, and I do recognize that it’s been very noisy. This has been a nice bounce, but when you look at the history of the currency pair, it is nothing out of the ordinary. While we happen falling right along, the Euro has bounced quite a bit over multiple recoveries. I think it is probably only a matter of time before we see sellers coming back into the market to take advantage of “cheap US dollars.” That being said, pay close attention to how the market closes on Friday, because it could give you a bit of a heads up as to where the US dollar may go over the next couple of weeks.

I have no interest whatsoever in trying to buy this market, and I believe it is only a matter of time before we get the signal to start selling.

The S&P 500 rallied in the futures market on Monday as we are above the 3950 level. That being said, the 4000 level above is going to cause a certain amount of resistance, based upon the psychological importance of that level. That being said, we have sliced through it multiple times, so it is only somewhat important at this point. Ultimately, the market has seen a lot of negative pressure more than once, and I think that will continue to be the case going forward.

The S&P 500 has a massive amount of resistance at the 4100 level, extending to the 4150 level. That is an area where we had seen a lot of action in the past, and the previous support level should offer quite a bit of “market memory” if we approach it again, so I think a lot of sellers will come into the picture. Signs of exhaustion will be jumped upon, and I think that this rally is going to be short-lived, to say the least. The candlestick for the trading session on Monday is somewhat bullish, but it is also worth noting that we gave back some of the gains at the end of the day.

Regardless, even if we do take off to the upside, I believe it is probably only a matter of time before we see exhaustion that people will jump on, as the bearish case is still very strong. After all, we have to worry about inflation, and a lack of growth. I am waiting for some type of exhaustion that we can take advantage of and have no interest whatsoever in trying to buy this market. If we were to break above the 4150 level, then it is possible that we could see the 50-day EMA come into the picture as well.

As things stand right now, I have no interest whatsoever in trying to buy this market, and I believe it is only a matter of time before we get the signal to start selling. In fact, we need to get above 4300 to even have that conversation, something that I do not expect to see anytime soon. It is a matter of getting an opportunity, and that means taking your time and being patient.

The Mexican peso strengthened against the greenback during the trading session on Friday, as the USD/MXN pair broke below the 20.25 level. The 20 level is next, and it is offering quite a bit of support. The market breaking below the 20 level would kick off a lot of selling for the greenback, which could make a bit of sense as the interest rate differential here is one of the few places where we might see the US dollar suffer a bit in that scenario.

The Mexican peso is also sensitive to the crude oil market, which has had a nice run higher during the day. Ultimately, that could be a reason for Mexico to continue to attract inflow, but from a technical analysis standpoint, it is likely that we are going to continue to see a lot of back and forth and choppy behavior, something that is very common for this pair. After all, over the last couple of weeks, we have banged around between the 20 and the 20.50 levels, while the 50 Day EMA is grinding sideways. The 200 Day EMA is also going sideways and offering dynamic resistance.

Looking at the chart, you can see that this pair does tend to be very noisy so be very patient if you are going to be trading it. The market is likely to continue to see a lot of movement based upon the central bank differentials, as although the Federal Reserve is very hawkish at the moment, it is likely that we will continue to see higher interest rates in Mexico attract a certain amount of inflow as well. Furthermore, you need to keep an eye on risk appetite, due to the fact that the Mexican peso is correlated to Latin America, which of course is an area where people might throw money at if they feel like taking a bit of risk.

The alternate scenario of course could work out if there is a sudden “risk-off” type of attitude, which has people looking to get into the US dollar. The US dollar being a safety currency is something you should never forget about because it does make quite a bit of sense that money would go flowing into the US bond market if we do have a sudden shock to the system.

As things stand currently, it looks like we are trying to recapture one of the most recent highs, which of course would be a strong turn of events.

The West Texas Intermediate Crude Oil market initially pulled back a bit during the trading session on Thursday, only to turn around and show signs of life again. By forming the candlestick that we have, it is likely that we could break above the $105 level, possibly even looking to get to the $110 level. With this, it would be a very positive turn of events considering just how negative the crude oil market has been.

The 50 Day EMA underneath is a significantly important indicator of the trend, and it sits at the $99.21 level. It is very likely that we will see an attempt to support the market in that general vicinity if we do get some type of pullback, but the uptrend line sitting underneath there is also worth paying attention to as well. With that being said, the market is going to continue to see plenty of value hunters until we break down below that level.

If we were to break down below the trend line, then it opens up a bigger move to the downside. As things stand currently, it looks like we are trying to recapture one of the most recent highs, which of course would be a strong turn of events. There is a lot of volatility out there when it comes to the oil market, due to the fact that inflation is hitting extreme highs, but at the same time, there are questions as to whether or not the demand is going to continue due to the fact that there is a high probability of recessions hitting various economies around the world.

To the upside, the $107.50 level could be a target, followed by the $110 level. As I said, I think that the $110 level will be the initial target, assuming that the buyers can continue to push this market higher. It should be said that the price action on Thursday was very encouraging for the buyers. The fact that we are not able to stick to the downside over the last couple of days is a very good sign for the market, at least for the time being. I anticipate that the volatility in this market is probably only going to get worse as we go further into the year, meaning that you should keep an eye on the OVX as well.