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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You should keep in mind that the stock market is about monetary flow these days and not so much about fundamentals.

• The S&P 500 Index rallied a bit on Tuesday as we continue to see a lot of volatility and upward momentum.
• The market is going to have a serious look at the 200-day EMA, which is an area that does tend to attract a certain amount of attention.
• If we can break above the 200-day EMA on a daily close, that is the very definition of an uptrend for some traders, so it is worth paying close attention to.

On the other hand, if we break down from here, then it could be the end of the uptrend, especially as we are hanging around the crucial 4300 level on the E-mini contract. That would obviously attract a lot of attention in and of itself, so it’s worth paying close attention. If we do break above the top of the candlestick for the trading session on Tuesday, then I think the market is going to continue to “melt-up.”

It’s All About Monetary Flow

There are a lot of reasons to think that stock markets will probably drop, but quite frankly fundamentals don’t matter anymore. You should keep in mind that the stock market is about monetary flow these days and not so much about fundamentals. Because of this, it comes down to the bond market and what people believe the Federal Reserve is going to do. At this point, it looks very much like the market is going to continue to see the Federal Reserve as being relatively dovish, and that suggests that equities should continue to go higher.

If we do break down from here, then it’s likely that we will go looking to the 4200 level for significant support. Breaking down below there could kick off even more selling pressure, but right now it doesn’t seem very easy to make that happen. That being said, the market is also going to have to pay close attention to risk appetite on the whole, because there is a huge correlation between all markets at this point.

If we do break above the top of the candlestick for the session on Tuesday, it’s very possible that we may be talking about a 4500 print before it’s all said and done. That’s an area where I would expect to see a lot of psychological resistance.

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The Dow Jones Industrial Average rose slightly during its recent trading at the intraday levels, to achieve slight gains in its last sessions, by 0.09%. It gained about 29.08 points, and settled at the end of trading at the level of 32,832.55, after its rise during Friday’s trading by 0.23%.

Traders were hoping that a strong labor market would defy the latest evidence of a slowing US economy, as the quarterly corporate earnings season draws to a close, which was well-received in the second quarter overall.

But last week’s strong jobs report for the month of July makes it more difficult for investors to think that the Fed will rely on its plans to raise interest rates at its next meeting next month, as Friday’s solid work report indicates that companies have not cut employment distance.

Investors were also weighing the implications of the massive healthcare, climate and tax package passed by the Senate in a party-line vote on Sunday, giving President Joe Biden a political victory. The package is expected to win approval in the Democratic-controlled House of Representatives.

Traders are now waiting for the CPI to be released on Wednesday, with economists expecting an 8.7% YoY increase which will be down from 9.1% in June. The market now needs to see that inflation is going down, or else it will assume that the Fed will remain somewhat aggressive in raising interest rates and stocks will collapse.

Technical Analysis

Technically, the index is rising with the support of its continuous trading above its simple moving average for the previous 50 days, until it reached its last trading to test the ceiling of that bearish corrective price channel that limits its previous trading in the short term, as shown in the attached chart for a (daily) period, with the influx of Negative signs on the RSI indicators, after reaching overbought areas.

Therefore, our expectations suggest a return to the index’s decline during its upcoming trading, as long as the resistance level 33,240 remains intact, to target the support level 31,885.

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The USD/CAD has packed plenty of price action in the past few days of trading and volatility is likely to continue as ‘fair’ equilibrium is sought.

As of this writing the USD/CAD currency pair is near the 1.285750 mark.  On the 4^th of August the USD/CAD was trading near lows of 1.28200, coming within sight of support seen in the last week of July and but not coming anywhere near the low on the 1^st of August which touched 1.27675. On the 5^th of August the USD/CAD soared to nearly 1.29880, but then reversed lower before going into the weekend.

Monday’s move towards Lows may Raise Eyebrows of USD/CAD Speculators

Intriguingly yesterday’s trading in the USD/CAD also produced another selloff and the currency pair actually consolidated between 1.28480 and 1.28650 for a lot of the day. This morning’s trading has seen the USD/CAD essentially sustain these lower marks, which were last traded in a sincere way on the 4^th of August. The spike upwards on Friday via buying in the USD/CAD happened after the Average Hourly Earnings data showed an uptick in payroll spending, per my interpretation of Forex.

• Volatility continues to be a minefield in the USD/CAD for day traders, and risk management certainly is needed.
• The USD/CAD is testing lows seen on the 4^th of August, which may entice speculators who believe the currency pair is momentarily oversold.

The notion that the USD/CAD spiked higher on strong buying Friday, and then reversed lower may be seen as a pure technical move proving the Forex pair was overbought. However, some speculators may look at the current value of the USD/CAD as it traverses important support and suspect the currency pair may actually now be oversold. Choppy conditions are likely to be demonstrated in the coming days.  

If the USD/CAD starts to trade within a Narrow Range this may Prove Attractive

Traders who are cautious may want to see if current support levels can hold. If the USD/CAD can stay within the 1.28570 to 1.28600 zone for a time, this may prove to be a rather interesting ignition point to launch trades. However, day traders should probably look for quick hitting trades that are not overly ambitious.  The use of conservative leverage and a slightly wider stop loss, compared to a relatively close take profit target may prove to be worthwhile.

Consolidation may prove to be favorable in the near term as financial houses interpret the tea leafs from the U.S Federal Reserve. Traders looking to take advantage of support levels may want to place buying positions near support around the 1.28565 to 1.28550 vicinity to look for upside momentum.

Canadian Dollar Short-Term Outlook

Current Resistance: 1.28650

Current Support: 1.28555

High Target: 1.28970

Low Target: 1.28212

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The AUD rose on a minor risk-on rally.

My previous signal on 30^th June was not triggered, as none of the key support and resistance levels were reached that day.

Today’s AUD/USD Signals

Risk 0.75%

Trades may only be taken prior to 5pm Tokyo time Wednesday.

• Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of the descending trend line shown in the price chart below which currently sits at about 0.6898, or 0.6915.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

• Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.6848 or 0.6797.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

AUD/USD Analysis

I wrote in my previous forecast on 30^th June that we had a consolidation pattern consolidation reinforced by a narrowing triangle formation which was holding the price, suggesting that the best opportunity which could set up here over the day was a long from another rejection of the level at 0.6848. This did not set up – the price held within the triangle until the Asian session, when it fell strongly enough to cleanly break through that support level.

The Australian Dollar is in focus right now for two reasons:

1. The minor risk rally seen over recent hours has pushed the price up close to the long-term descending trend line, which is shown within the price chart below.

2. The RBA is expected to shortly hike its interest rate by 0.50%. Any deviation from this will certainly cause a major price movement here in the AUD/USD currency pair.

It looks as if we may have an opportunity for a short trade from a bearish reversal at either the descending trend line or the horizontal resistance level at 0.6915. I would be happy to enter either trade. On the other hand, if the price rises after the RBA’s release and holds up for a few hours above the resistance at 0.6915, that would be a significant bullish breakout and suggest the beginning of a stronger bullish price movement.

You can trade my forecasts in a real or demo Forex brokerage account according to whether you want to strengthen your self-confidence before depositing real funds with a suitable Forex / CFD broker.

Concerning the AUD, there will be a release of the RBA’s Cash Rate and Rate Statement at 5:30am London time. There is nothing of importance scheduled today regarding the USD.

ADA/USD has stumbled again and is within sight of important lower depths, as nervous sentiment in the broad cryptocurrency market remains evident.

ADA/USD is trading near the 48 and half cent ratio as of this writing. On the 26^th of June Cardano was able to touch the 52 and half cent level, but selling has certainly erupted again the past couple of days which has brought ADA/USD back to important lower values. Cardano remains a volatile cryptocurrency due to quick moves. In early trading this morning ADA/USD traded briefly near the 0.47220000 level.

The 42 cents to 56 cents price range has proven rather interesting since the middle of June.  ADA/USD remains within a long term bearish trend and its incremental loss of value is clear on technical charts. In the first week of September 2021, ADA/USD was trading above the 3.00000000 level. Those sunnier days now feel long gone, and traders who have been waiting for a sudden burst of strong upwards buying gaining sustained strength have been sorely disappointed.

The inability of ADA/USD to achieve sustained moves higher will keep bearish traders attention on support levels which lurk.  If ADA/USD can keep its head above the 48 cents level this may actually attract short term bullish buyers who want to aim for 49 cents and slightly above, but they should probably only look for very fast trades and use take profit orders to cash in. Because if the 48 and a quarter cent ratio were to suddenly come into focus, sellers could not be blamed for targeting values below again.

The broad cryptocurrency market continues to show signs of nervousness.  Yesterday’s trading began to produce incremental selling and the price action of ADA/USD has mirrored the results of the larger market. Cardano remains an important cryptocurrency with a market capitalization ranking at number 8. If ADA/USD technically falls below the 48 cents level this could be viewed as an indicator that additional nervous selling will build.

Lows in ADA/USD have continued to test marks within the 47 cents price range the past week of trading when downturns have occurred. Speculative sellers who believe another round of downwards momentum is going to develop may want to ignite shorts when ADA/USD has touched technical resistance areas perhaps around 0.48610000 if they are conservative. Traders should use entry price orders when trading ADA/USD because it moves fast. Speculators are also encouraged to use take profit and stop loss orders as risk taking tools within the current market conditions.

Cardano Short-Term Outlook

Current Resistance: 0.48860000

Current Support: 0.47990000

High Target: 0.49370000

Low Target: 0.45490000

The DAX has been somewhat volatile during the trading session on Monday, as we continue to look at the €13,250 region as an area of interest because it has been supported in the past, but we did break through it on Thursday of last week. Over the last two trading sessions, the market has rallied to test that area for potential resistance, so now “market memory” could come into the picture. At this point, it’s only a matter of time before the sellers jump back in as we continue to see a lot of negativity.

When you look at the chart, you can see that over the last couple of weeks, all of the impulsive candlesticks have been read, showing that there is much more momentum to the downside than anything. It’s not until we can break above the €13,750 level before I would start to question the overall downtrend. After all, there are a lot of concerns in the European Union, and of course, Germany when it comes to energy supply. In fact, Germany has gotten so desperate that they are starting to go back to coal.

The 50 Day EMA is sitting at the €14,000 and is dropping lower. The market has recently bounced from the €13,000 level, which of course is a large, round, psychologically significant figure. If the market does rally a bit from here and then shows signs of exhaustion, is very likely that we may push to go down to the €13,000 level again. If we can break down below the €13,000 level, then it’s possible that we could go down to the €12,500 level next, an area that we had bounced from rather significantly as of late.

About the only thing that the DAX has going for it at the moment is the fact that the euro is cheap, but if there is going to be a major slowdown globally, even that probably doesn’t matter. I have no interest in buying any of the equity indices right now, not just the DAX. Quite frankly, we need to see a shift in inflationary expectations and central-bank attitude. As long as the market continues to have to fight these headwinds, I just don’t see how this market rallies for a bigger move anytime soon. A little bit of a bounce in the short term does make a certain amount of sense, but given enough time we will continue to see sellers.

If you are a longer-term trader, then you can buy little bits and pieces, but a short-term trader has to be looking to the downside, and the downside only.

The Bitcoin market has fallen during the trading session on Thursday as it looks like we are ready to test the $20,000 level again. This is an area that is a large, round, psychologically significant figure, and therefore if we were to break down below the $20,000 level, I think it opens up a rush of new selling. The previous session formed a hammer, so if we were to break down below it, that would also signify rather negative pressure.

On the other hand, if we were to rally from here it’s likely that we will see significant selling pressure above. The market breaking above the $24,000 level might kick off a bit of a relief rally, but that is all that it will end up being. Ultimately, this is a market that I think will have plenty of sellers above as the people that jumped in during the previous consolidation area will be willing to get out as close to “break-even” as they possibly can. Crypto is almost dead at this point. Don’t get me wrong, there is a significant amount of interest in the crypto markets going forward, but there are a lot of them that are going to zero.

Over the next several months, if not several years, I anticipate the crypto is going to underperform. This makes sense as we have seen so many ridiculous “meme coins” attract a lot of attention over the last two years. We’ve also seen a lot of fraud, and therefore the entire industry is looking suspicious to most traders at this point. However, this is a lot like the technology selloff in 1999, there will be a handful of winners that go on for decades. After all, there was a point where Google and Amazon both got absolutely crushed along with the rest of the .com stocks. This is essentially where we are at right now, so you need to pay attention to the big coins. At this point, the only thing that is likely is that Bitcoin and Ethereum should continue to have a use case scenario, so starting with these two markets would be the first way to recover. If you are a longer-term trader, then you can buy little bits and pieces, but a short-term trader has to be looking to the downside, and the downside only.

It is worth noting that the market is rather neutral, which is interesting considering just how bullish it was the previous three days.

The S&P 500 has been rather messy as of late, as Jerome Powell has been summoned by Joe Biden for a conversation. At this point, the reading of the market is that “Uncle Jerome” is going to come and save everybody. That being said, it is more likely that Pres. Biden will tell Powell to become increasingly hawkish, as inflation is going to decimate the Democratic lead in all seats of government.

That being said, hope burns eternal on Wall Street and there is always a narrative to push the markets around. I think that’s most of what’s going on, and of course a bit of short covering. That being said, the 50-day EMA sits at the 4200 level and should offer a bit of resistance. The market breaking down below the bottom of the candlestick for the trading session would be a negative turn of events, as it would show just how negative this market is, and how resistive this area continues to be.

Even if we break above the 4200 level, it’s not really into would break above the 4300 level that it would show a significant amount of momentum to make people pile in this market, as it has been so beaten up, and there are plenty of economic reasons to think that stocks should be lower. In fact, the Federal Reserve has even had several members explicitly say that they need stock prices lower. We need wealth destruction in order to fight inflation because it destroys demand. I do believe that it’s only a matter of time before stock traders get hugely disappointed, but right now it looks like the latest rumor and speculation have fueled a little bit of a recovery.

It is worth noting that the market is rather neutral, which is interesting considering just how bullish it was the previous three days. This is exactly where you would expect to run into trouble, so that is worth noting as well. The area below current trading is very noisy, so I don’t necessarily think that we will slice right through it and go to the 3900 level easily, but I do recognize that it’s a very real possibility given enough time. All things being equal, I remain rather bearish of this market as I think nothing has truly changed.

 

While it looks bullish, noticing how we close at the end of the day on Friday could also be used as a potential entry.

The Japanese index initially pulled back during the session on Thursday but then turned around to show signs of life. The market is currently threatening the ¥27,000 level, which happens to coincide quite nicely with a downtrend line that makes up the top of the channel that I have marked on the chart. If we can break above there, then it’s likely that we go looking to the €27,500 level next. What’s interesting about that level is that it also includes the 200 Day EMA.

If we do turn around and break down below the ¥26,500 level, then it’s likely that we go looking to reach the ¥26,000 level underneath. After that, then you are looking at a potential move down to the ¥25,600 level. We are testing the top of the channel at the moment, so the Friday session is going to be crucial. In fact, it’s why I picked this market to analyze during the trading session because I realize that this could be a harbinger of where Europe goes heading into the weekend.

If Asia has a good Friday session, is very likely that we will see that follow through on not only the European continent but possibly the North American continent. It’s worth noting that the S&P 500 rallied quite nicely late Thursday, which could lead to more buying when it comes time for the Japanese to get involved. However, you should also keep in mind that a lot of this is going to come down to the prospects of exports, which is something that’s a little bit trickier than a simple technical pattern. After all, Japan is a heavily export-laden economy, and this of course means that the Nikkei 225 is going to be sensitive to the rest of the world.

Market participants will have to keep an eye on the Japanese yen, because if it suddenly appreciates too much, then exporters start to get worried, and of course, so do market participants as it would have such a negative effect on earnings. All things being equal though, it is worth noting that the most recent pullback was much shallower than the ones before it, so this could be yet another sign that we are about to see a stock market rally, at least in the short term. While it looks bullish, noticing how we close at the end of the day on Friday could also be used as a potential entry.