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NQ Bullish with Signs of a Potential Reversal in Early OctoberThe Nasdaq 100 ( CME_MINI:NQ1! ) futures continue to exhibit a strong uptrend, driven by market optimism and supportive economic factors. As seen on the chart, the Bonsai trend indicator remains bullish, signaling the ongoing upward momentum. However, caution is warranted as we approach a critical resistance zone, where multiple technical and external factors suggest the potential for a pullback. Key Technical Levels and Signals Resistance at 20,600 : The price is nearing a significant resistance zone between 20,500 and 20,600, where previous highs have been met with seller pressure. The market may struggle to break through this zone in the short term, leading to possible consolidation or retracement. Bearish Strength on Oscillators : The Bonsai OS is starting to signal an incoming bearish strength, where the oscillator fails to make new highs while the price continues to rise. This divergence suggests that the current bullish move may be losing momentum, increasing the probability of a reversal or correction in the near term. Short-Term Retracement : A retracement to the 19,800-20,000 region would be healthy for the overall trend, providing potential buying opportunities for traders waiting for a dip. This level aligns with previous support zones and retracement levels, making it a logical area for price to stabilize before another move upward. Geopolitical and Economic Factors Affecting NQ U.S. Elections and Tax Policy : The upcoming U.S. election between Vice President Harris and former President Trump is creating uncertainty around future tax policies, particularly regarding capital gains and unrealized gains taxation. Investors may start adjusting their portfolios as we get closer to October, historically a volatile month for the markets​. Global Conflicts and Economic Risks : Rising tensions in Ukraine, the Middle East, and Taiwan add further geopolitical risk. Market participants are keeping a close eye on potential escalations, as these conflicts could shift sentiment toward a risk-off environment, impacting indices like the Nasdaq 100​. Fed Policy and Economic Data : The Federal Reserve's recent rate cut has temporarily buoyed the markets, but upcoming data releases—particularly around inflation and employment—could change the tone. Economic surprises in early October could lead to volatility, especially if the data fails to support the current bullish narrative​. Conclusion: Bullish But Cautious The overall Bonsai indicator continues to signal an uptrend, and the market looks poised to push higher if it can break through the 20,600 resistance zone. However, the oscillator's bearish divergence and external political risks suggest a potential reversal or at least a short-term correction in the first week of October. Traders should monitor these signals closely and consider adjusting their positions accordingly. Keep an eye on the VIX as well, which has been known to spike during periods of heightened uncertainty, offering opportunities to hedge against increased volatility​.
CME_MINI:NQ1!
by bonsai_trade
The Euro SagaWelcome to our analysis of the EURUSD currency pair. We'll be examining the price actions captured on a 1-day (1D) candlestick chart, as well as a longer-term 6-month (6M) candlestick chart. On the 1D chart to the left, we can observe the trajectory of the Euro over the past year. The currency endured a steady decline throughout last year, eventually settling at a low around the 0.95 mark. However, in 2023, we witnessed a corrective rally that saw the Euro rebound to the 38.20% and 50% Fibonacci retracement levels, with the latter being tested twice. The current price action exhibits a certain level of neutrality, as corroborated by the Relative Strength Index (RSI) hovering around the 45 mark, which is typically interpreted as neutral. As we look to the week ahead, continuous upward momentum could potentially propel the Euro to revisit the 61.8% Fibonacci retracement level, which lies around the 1.127 mark. Transitioning to the 6M chart on the right, we see a broader picture that is quite revealing. The RSI trend over the decades has primarily been bearish, suggesting a persistent weakness in the Euro. This bearish divergence, characterized by the price reaching a high in 2008 while the RSI was recording lower highs, could indicate a lack of robustness and stability in the Euro. The implication of this analysis is not immediately clear but serves as an important consideration for investors. On this 6M chart, we've also highlighted the 61.8% Fibonacci level in yellow, which has acted as both a support and resistance level for the Euro multiple times over the past decades. This level demonstrates significant strength, and it could very likely be revisited in the upcoming weeks. Turning our attention to the fundamental aspect of this analysis, it's crucial to consider the latest news surrounding the Euro and European politics. It's been noted that the Eurozone's attempts to diversify its energy sources away from Russia will continue to face challenges due to unresolved geopolitical issues with the Kremlin into 2023. The threat of a complete cessation of Russian natural gas exports to Europe remains a significant risk. Also, despite Germany entering a recession, the European Central Bank (ECB) is still expected to raise interest rates further. The anticipation of more interest rate hikes by the ECB in the coming months is creating an expectation buffer for the EUR/USD pair, limiting any significant depreciating moves​. In conclusion, while the technical analysis presents a mid/short-term mixed outlook for the Euro, the undercurrents of the fundamental analysis provide additional depth to our understanding. Keep in mind that markets are dynamic and subject to change, and this analysis should be used as a guide rather than a guarantee. As always, it is recommended to use this information in conjunction with your own research and risk tolerance. Happy trading!
by bonsai_trade