I think this is a market that continues to see a lot of negativity unless of course the US dollar suddenly changes this trajectory, something that I can’t see happening based on interest rates and what they are doing right now. 

The NASDAQ 100 got crushed on Friday as Jerome Powell has finally talked the market into believing the fact that he is trying to fight inflation. In other words, interest rates will continue to be high, and that absolutely crushes growth stocks. Growth stocks make up the major push in this market, therefore it’s likely that we continue to go lower.

We are now below the 50-Day EMA, and closing at the bottom of the candlestick. In other words, it’s very likely that we continue to go lower, and therefore I think that we have now entered the next phase of the bearish market. If we break down below the bottom of the candlestick, we could see this market go down to the $12,000 level. Breaking down below there then opens up the possibility of a move down to the $11,000 level.

Looking for Signs of Exhaustion

• If we do rally, I will be looking for signs of exhaustion that I can start shortening, especially with the 200 Day EMA sitting just below the $13,500 area, which is where we topped out at.
• I think this is a market that continues to see a lot of negativity unless of course the US dollar suddenly changes this trajectory, something that I can’t see happening based on interest rates and what they are doing right now. Markets are all over the place, but it certainly looks as if a lot of people got on the wrong side of the trade.
• This is a scenario where I will be looking at an opportunity every time we get a rally and exhaustion, and therefore I will be watching this chart very closely.

The market certainly seems to have gotten a bit of a shock, and the fact that we are closing at the very bottom of the candlestick does suggest that we have further to go. In this scenario, I am very aggressively short on a breakdown, or at the first signs of an exhausting candle. I do like the idea of shorting the NASDAQ 100, and I think that it’s needed to happen for quite some time as the stock market has continued to ignore reality, but it got a huge dose of it during the Jackson Hole Symposium speech. 14 years of spoon feeding Wall Street has caused this train wreck, now it’s up to the Federal Reserve to end it.

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• The S&P 500 dropped significantly during the day on Friday, losing over 1% as we headed into the weekend.
• The 4300 level has offered a significant amount of resistance, as it is an area that we had seen selling pressure at previously.
• The 200 Day EMA also sits underneath, which is a major indicator as well.
• The market is likely to continue to see a lot of noise in this general vicinity.

If we do break down below the 200-Day EMA, it’s likely that we would continue to go lower, perhaps reaching the 4100 level. The 50-Day EMA is starting to reach that area as well, so I think that also offers support. This is all about cheap and free money coming from the Federal Reserve, so with this week coming up, I think that a lot of the speeches at the Jackson Hole Symposium will be watched very closely, as the attitudes of central bankers will continue to dictate where interest rates may go. After all, this is all about whether or not money is cheap and free, which it’s not, and it’s getting less so.

Wall Street is starting to look at the possibility of the Federal Reserve having to loosen monetary policy in the future, and that’s part of what we have seen displayed on the chart. That being said, reality may come back into the picture, and it’s likely that we would see equities take a bit of a beating. This bear market rally has been impressive, but if we were to break above the 4300 level, or essentially the highs of the week, then we could go all the way to the 4500 level.

Pullbacks are making sense

The question now is whether or not central bankers can get their message across during the week in various speeches, or if they will continue to muddy the waters. It’s kind of impressive just how much the Wall Street haters have been able to deny what they are hearing from the Federal Reserve. This week could be a change in the attitude, or it may simply be more of the same which would truly be impressive. At this point, I think a pullback makes quite a bit of sense more than anything else.

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This is a market that continues to be choppy, but favors the downside.

• The EUR/USD currency pair fell a bit on Friday as we continue to see a lot of concern around the world.
• Keep in mind that we’ve been in a downtrend for quite some time, and it does make sense that we will see the euro suffer as a result, based upon simple momentum.
• Furthermore, you need to keep an eye on the fact that the interest rates in America continue to be much higher than in the European Union, which makes sense considering just how much negativity there is surrounding the European Union.

Fed Likely to Strengthen USD

While inflation is a bit of a problem throughout parts of the EU, the reality is that the Federal Reserve is going to remain very tight and therefore it’s likely that we will continue to see the US dollar strengthen. Ultimately, this is a situation that should continue going forward, especially as we see so much in the way of concern about energy in the European Union going forward. Quite frankly, the market is likely to see this as a “fade the rally” type of situation. It will continue to eventually try to get down to the parity level again, and I think it’s probably only a matter of time before we break below.

The 50-day EMA is a significant resistance barrier, but more important than that is going to be the 1.04 level. Breaking above that level would be a bullish sign, but it’s not until we break above the 1.06 level that I would consider this market broken out to the upside for a bigger move. While I cannot necessarily envision that happening, it’s a matter of following price at that point. If we do break above there, then the market is likely to continue to see the euro bounce quite higher.

The markets are trying to figure out whether or not the Federal Reserve is going to remain tight, which they very well should. However, if inflation starts to drop even further, then it’s possible that we could see the euro be a short-term beneficiary. If we break down below the parity level, it’s likely that the market could go down to the 0.98 level, perhaps even the 0.96 area. Ultimately, this is a market that continues to be choppy, but favors the downside.

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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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If you miss the Ethereum trade, you may be able to pick up some other coins as they should be even more effective.

• Ethereum had a nice run over the last several days but slowed down on Friday to show signs of hesitation.
• The market is sitting just below the $1800 level, an area that I think a lot of people will be paying attention to.
• The market had been supported in that general vicinity for quite some time, so now one would anticipate that “market memory” comes into the picture.

Eyeing the $2000 Level

There should be a significant amount of noise between $1800 and $2000, so I think it’s very likely that we will continue to see a lot of pushback in this general vicinity. In fact, it’s not until we break above the $2000 level that you can suggest that this market is going to take off for a bigger move. Granted, there are a lot of moving pieces at the moment, and it’s worth noting that the biggest type as of late is “The Merge” coming in September. That being said, Ethereum has a long history of disappointing when it comes to upgrades.

I think it’s more likely than not that we could probably drop down to the 50-day EMA. The 50-day EMA is sitting right around the $1200 level, which is an area that I think should be important. If we break it down below there, then it’s likely that the market drops to the $900 level. The market is obviously going to be very noisy, but that’s typical for crypto. It’s been a nice rally over the last couple of days, but if we get more of a “risk off” type of market out there, then it’s likely that the Ethereum markets will fall right along with the rest of them.

Regardless, I think you have a bit of noisy behavior ahead of you, and I think it’s going to be very difficult to break above the $2000 level. If that does happen, then it’s likely that we would see other altcoins as being the real play. If Ethereum takes off to the inside, it’s likely that a lot of the smaller markets will continue to see upward pressure as well. Ultimately, they will follow right along, so if you miss the Ethereum trade, you may be able to pick up some other coins as they should be even more effective.

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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.

Ultimately, I think this is a market that will be noisy, but every time we rally, I’m looking for signs of exhaustion that I can start shorting.

The S&P 500 fell rather hard on Friday as inflation numbers came out much stronger than anticipated, destroying the narrative that Wall Street was trying to put together. After all, the traders on Wall Street were hoping that inflation had peaked, but based on the number on Friday, we are far from that being the case.

Furthermore, when you look at the candlestick for the trading session on Friday, it shows just how negative things are. It looks as if we are going to threaten the 3900 level, which is a large, round, psychologically significant figure and an area where we had seen support. If we were to break down below there, then it opens up the possibility of a move to the 3800 level. The 3800 level has been the scene of a major bounce, so if we were to break through there, it’s likely that the market would then go looking to the 3600 level.

If we do rally a bit at this point, there is plenty of resistance above, not only at the 50-day EMA which recently had offered a significant amount of selling pressure. The 4000 level between here and there could be an area where we can have selling, right along with 4100. At this point, as long as the S&P 500 has to deal with the Federal Reserve tightening interest rates drastically, as well as running off the balance sheet, Wall Street will suddenly have to find itself working at making a profit instead of just throwing money at everything. This is what you are seeing currently, an unwinding of a massive bubble.

Ultimately, I think this is a market that will be noisy, but every time we rally, I’m looking for signs of exhaustion that I can start shorting. That’s what the last couple of weeks has been, and now it looks like we are ready to continue threatening to the downside. The 50-day EMA has spread quite far from the 200-day EMA, showing just how negative the trend is, and how much momentum it has. The last couple of candlesticks has been very negative and long, so that does suggest that there is going to be a significant amount of follow-through waiting to happen. Typically, if you close at the bottom of candlestick, it means that the market is comfortable being short, or at the very least uncomfortable buying.

We have been going sideways for a while, but this looks a lot like the last time we were going sideways, just before we fell.

The Bitcoin market fell a bit on Friday as we continue to see bearish pressure. At this point, the $28,000 level underneath offers quite a bit of support, so if we were to break down below that level it’s likely that Bitcoin will fall apart, sending the market down to the $25,000 level, perhaps even down to the $20,000 level.

Notice that the market has been going sideways overall, as we have bounced around the $30,000 level. The most recent rally had reached the $32,500 level, where we had seen previous selling pressure. If we can break above there, then I think we could get a little bit of a squeeze to the upside, sending this market to the $35,000 level, possibly even the $37,500 level.

It’s not until Bitcoin breaks about the $40,000 level that you can make an argument for a trend change, and I just don’t see that happening. Crypto has been beaten up rather significantly over the last several months, as the US dollar has been strengthening and risk appetite has been eviscerated. At this point, it’s likely that we will continue to see a lot of noisy behavior, but I think that any rally at this point in time will find enough exhaustion that you can start shorting again. Bitcoin has a long way to go before it turns around to show a longer-term move to the upside, and now it looks to me like we probably break down even further.

The $30,000 level is a bit of a magnet but at this point, it looks like the sellers are starting to get a little bit more aggressive as we have seen the most recent rally smashed. A lot of that was probably marking up into the end of the month, which is something that is illegal in normal markets. At this point, it’s very unlikely that crypto suddenly turns around for any bigger move, as risk appetite is absolutely destroyed. The market will continue to see a lot of volatility, and volatility quite often will keep big money out of the market. Until the Federal Reserve changes its overall tune, I just don’t see how Bitcoin outperforms the US dollar anytime soon. We have been going sideways for a while, but this looks a lot like the last time we were going sideways, just before we fell.

Keep in mind that the market is likely to continue seeing a lot of noisy behavior, so you need to be cautious with it at this point.

The S&P 500 futures market pulled back heading into the weekend, reaching the 4100 level. The 4100 level is an area that will attract a certain amount of attention, as there has been both buying and selling in that area. Ultimately, if we can break down below the 4100 level, the market is likely to go looking to the 4000 level, perhaps even down to the 3900 level.

On the upside, the 50-day EMA sits just below the 4200 level. If we break above there, then it offers a short-term rally that could go as high as the 4300 level. If we were to clear that level, then I think it completely changes the overall trend and starts to have people rush into the market. That being said, it’s very unlikely that we would see that happen. More likely than not, we would have to have a huge “risk-on rally” that has legs and we would need to see the Federal Reserve change its attitude.

More likely than not, we will break down and go looking to the 4000 level, perhaps even the 3900 level over the longer term. After that, the 3800 level is where we bounced from previously and could be retested. Keep in mind that the market is likely to continue seeing a lot of noisy behavior, so you need to be cautious with it at this point. Ultimately, I think that selling rallies that show signs of exhaustion will continue to be that way going forward, or perhaps even buying puts. The Federal Reserve is not going to loosen its monetary policy anytime soon. Because of this, the market is likely to see a lot of volatility, but I still think there are plenty of sellers out there. Ultimately, the economic conditions do not warrant higher stock pricing, and of course, it seems like Wall Street has finally caught on to the economic reality.

Ultimately, it’s a situation where you look for signs of exhaustion that you can get involved with, and at this point, until the growth starts to pick back up, I think we’re going to see a lot of concerns when it comes to most risk assets, including stocks. I look at this as an opportunity every time we rally.

The market is likely to see volatility, but it should offer plenty of opportunity.

Gold markets went back and forth on Friday as we continue to see a lot of noise in the markets. The 200-day EMA is sitting at the $1856 level, offering a bit of resistance. At this point, if we see any hint of selling pressure, then it is likely that we could go back down to the lows again. That being said, the $1800 level is like a major floor in the market, and an area where we would see a lot of interest.

If we break down below the lows of the Friday session, it is likely that we could go back down to the $1800 level, an area that will attract a lot of attention. If we break down below the $1800 level, then it is possible that we could drop towards the uptrend line that has been so important for the last couple of years. Breaking below there could open up the floodgates to much lower levels, but at this point, it seems as if gold continues to fight at a crucial level. This suggests that we are going to turn around and rally.

Alternately, if we were to break above the 200-day EMA, then it is likely that we would go looking to the $1900 level. The $1900 level is an area where we have seen a lot of previous support, so it should act as significant resistance according to “market memory.” Expect a lot of volatility, but at this point, I think we are trying to build some type of floor in the market, which does take a certain amount of effort and time. Because of this, do not be surprised at all if we remain somewhat resilient, but more than anything else you need to look at this through the prism of the short-term market and recognize that things will be noisy. The only thing you can do in that scenario is trade shorter-term charts, and keep your position size as reasonable as possible. Keep in mind that gold does tend to be very volatile, so trading small positions in more of a range-bound system might be the best way over the next couple of days. With this being the case, the market is likely to see volatility, but it should offer plenty of opportunity.