Bitcoin: No Moon Anytime Soon.Bitcoin: My previous week's anticipated scenario flailed to play out but in all fairness was never confirmed by the market on this time frame (short setup off 60K). Price is now flirting within the upper boundaries of the 64-66K resistance AREA which was previously a support. With this in mind, I anticipate a bearish retrace scenario over the coming week which can take price back into the low 63K to 64K area. This is ideal for swing trades and day trades on the short side. Expecting greater moves one way or the other is not reasonable within this context.
Narrowing a range of scenarios is the best we can do when it comes to "forecasting" the future. Since the markets are HIGHLY random and any piece of unexpected news can change everything dramatically, we can only assign a loose probability based on a historical reference (like a previous support/resistance level). Once we can narrow a range of scenarios, it HELPS to have a framework to CONFIRM the scenario, otherwise the outcome is more likely to be RANDOM. When a scenario is confirmed, it INCREASES the chances of a positive outcome but does NOT guarantee one. Probability means there is always a chance of failure and in this game, is the reason why RISK most be well defined and respected since its one of the few things we can control.
A trade idea often begins with one of two possibilities: momentum continuation OR reversal. Which one you choose is going to shape how you filter information and what criteria you place on it to confirm. In the case of Bitcoin now, since the 64 to 66K area is an anticipated point of resistance (see arrows), it would make sense to look for the confirmation of reversals or short signals (Trade Scanner Pro). Once confirmed the next step is to be able to gauge reasonable potential and this is a function of your chosen time frame. For example, the profit objective and associated risk on a 1 minute chart will NOT be the same compared to a one hour chart. The larger the time frame, the greater the reward/risk.
In the case of the time frame on my chart, I am measuring short potential based upon the previous support level around the 63 to 64K area (now previous resistance). It may or may not reach the profit objective, the point is it would be unreasonable to expect more although ANYTHING is possible. Since the broader trend of Bitcoin continues to be BULLISH, in my opinion it is better to expect supports to generally hold and less from shorts.
One important thing to be cognizant of is the herd mentality of "experts". Typically in situations where there is a dramatic movement, the herd of experts usually "forecasts" continuation of that move since it is a typical reaction to think in a "linear" sense. You may notice calls for 100K etc. When Bitcoin was testing 53K they were calling for much lower prices. if you regularly consume and value such misinformation, that is a liability that only you can contend with.
Profit in this game usually comes from the mistakes of others. In order to capitalize you have to recognize where common errors are made (like buying highs). Without a framework to shape decisions in a more objective way, you are much more likely to rely on your "intuition" (greed/fear) and following others who pretend to know more than you. I say it all the time: follow PRICE not people.
Thank you for considering my analysis and perspective.
Community ideas
The Semiconductor Bubble is Finally PoppingI believe it is time for one of the biggest bubbles in history to be popped. I'm talking about semiconductors here, but really I would call this entire situation an "everything bubble." i think it all starts with semiconductors though, once the bubble pops it's going to get ugly quick and shorts will pay. However, timing such a move is difficult, but with some good TA you can increase the odds quite a bit. As always, it's only worth risking so much, top picking is a fool's game. Don't short just because of me. If anything, it might just be best to reduce long exposure for the time being rather than shorting.
I go over some charts for SOXX NVDA and more, which I have individual ideas for also. All of these charts feature bearish patterns and major trend breaks. It is all adding up, every single semiconductor I see has a major downside break and NQ is on the edge of breaking its uptrend as well.
We'll have to see how it goes, if I knew what was going to happen for sure I'd be on my yacht right now.
Why Using Charts Can Help You with Your TradingImagine you've decided to buy a particular stock. Your position starts to make money, and you're thrilled. But what do you do now? Should you hold onto your position or cash it in? Has it made enough profit, or will it go further? It's painful to lose money, but it's also frustrating to take profits only to see your original investment quadruple in price after you've cashed out too early.
Is there something that can help you make these decisions? Yes, there is! It's called technical analysis. But what if you're a complete novice to technical analysis? It may look complicated and difficult, but don't worry.
The beauty of technical analysis is that it can help with your decision-making, and once you learn the rules, it's easy to apply.
I have attached a short video explaining the steps I go through when I first look at a chart. Do you know how to determine a trend? Do you know how to apply trend lines? Do you know what a momentum indicator is? Do you know why and how to use moving averages? Do you understand continuation and reversal signals?
Optimizing Technical Analysis with Logarithmic Scales▮ Introduction
In the realm of technical analysis, making sense of market behavior is crucial for traders and investors. One foundational aspect is selecting the right scale to view price charts. This educational piece delves into the significance of logarithmic scaling and how it can enhance your technical analysis.
▮ Understanding Scales
- Linear Scale
This is a common graphing approach where each unit change on the vertical axis represents the same absolute value.
- Logarithmic Scale
Unlike the linear scale, the logarithmic scale adjusts intervals to represent percentage changes.
Here, each step up/down the axis signifies a constant percentage increase/decrease.
▮ Why Use the Logarithmic Scale?
The logarithmic scale offers a more insightful way to analyze price movements, especially when the price range varies significantly.
By focusing on percentage changes rather than absolute values, long-term trends and patterns become more apparent, making it easier to make informed trading decisions.
▮ Comparative Examples
Consider the Bitcoin price movement:
- On a linear scale, a 343% increase from $3,124 to $13,870 looks smaller compared to the same percentage increase from $13,870 to $61,769. This disparity occurs because the linear scale emphasizes absolute changes.
- On the logarithmic scale, both 343% increases appear proportional, giving a clearer representation.
Additionally, in a falling price scenario, a linear graph might show a smaller box for an 84% drop compared to a 77% drop, simply because of absolute values' significance. The logarithmic scale corrects this, showing the true extent of percentage declines.
▮ Advantages and Disadvantages
Advantages:
- Fairer comparison of price movements.
- Consistent representation of percentage changes.
- More reliable support and resistance lines.
Disadvantages:
- Potential misalignment of alerts (www.tradingview.com).
- Drawing inclined lines might create distortions when switching scales:
A possible solution is the use the "Object Tree" feature on TradingView to manage graphical elements distinctly for each scale.
▮ How to Apply Logarithmic Scale on TradingView
Enabling the logarithmic scale on TradingView is straightforward:
- Click on the letter "L" in the lower right corner of the graph (the column where prices are shown);
- Another option is use of the keyboard shortcut, pressing ALT + L .
▮ Conclusion
The logarithmic scale is an invaluable tool for technical analysis, providing a more accurate representation of percentage changes and simplifying long-term pattern recognition.
While it has its limitations, thoughtful application alongside other analytical tools can greatly enhance your market insights.
Volume Spread Analysis (VSA): Volume and Price DynamicsVolume Spread Analysis (VSA): Understanding Market Intentions through Volume and Price Dynamics.
█ Simple Explanation:
Volume Spread Analysis (VSA) is a trading technique that identifies key market patterns and trends by analyzing the relationship between volume and price spread, revealing traders' actions and market behavior.
Essentials in Volume Spread Analysis (VSA):
Laws.
VSA Indicator.
Signs of Strength.
Signs of Weakness.
Note that while the provided examples are excellent for illustrating the points, they are unlikely to play out perfectly in most scenarios.
█ Laws
Three basic laws forming the foundation of Volume Spread Analysis (VSA).
The Law of Supply and Demand
This law states that supply and demand balance each other over time. High demand and low supply lead to rising prices until demand falls to a level where supply can meet it. Conversely, low demand and high supply cause prices to fall until demand increases enough to absorb the excess supply.
The Law of Cause and Effect
This law assumes that a 'cause' will result in an 'effect' proportional to the 'cause'. A strong 'cause' will lead to a strong trend (effect), while a weak 'cause' will lead to a weak trend.
The Law of Effort vs Result
This law asserts that the result should reflect the effort exerted. In trading terms, a large volume should result in a significant price move (spread). If the spread is small, the volume should also be small. Any deviation from this pattern is considered an anomaly.
█ VSA Indicator
This indicator simplifies the identification of Volume and Spread Levels. It provides options to display volume and/or spread bars. An enhanced version of the indicator auto-scales both volume and spread for optimal chart presentation, reloading every time the chart is moved.
Levels: Representing the levels of both volume and spread using the terminalogy of low, normal, high, and ultra.
Indicator Version 1: Display volume and/or spread bars. When both are displayed, the spread bars are shown in a fixed quantity.
Indicator Version 2: Display both volume and spread bars, with the spread bars scaled to the volume bars.
█ Signs of Strength
Indicates that the market is likely to experience bullish behavior.
Down Thrust: Indicates strong buying interest at lower prices, suggesting a potential upward reversal.
Selling Climax: Signifies a reversal point as panic selling exhausts and smart money starts accumulating.
Bear Effort No Result: A large downward price move without strong selling effort (volume) indicates an anomaly where the result doesn't match the effort, suggesting the down move may be unsustained.
No Effort Bear Result: Strong selling effort (volume) fails to push prices down indicating an anomaly where the result doesn't match the effort, suggesting a potential lack of downward momentum.
Inverse Down Thrust: Shows buyers overpowering sellers, likely leading to a bullish market reversal.
Failed Selling Climax: Failed selling effort suggests strong buying support and a possible upward trend reversal.
Bull Outside Reversal: Indicates strong buying reversing a downtrend, confirmed by higher close.
End of Falling Market: Signifies strong buying absorbs panic selling at new lows, likely leading to stabilized price or reversal.
Pseudo Down Thrust: Suggests weakening of the downward momentum with a potential upward continuation if broken above high.
No Supply: Indicates a lack of selling interest at lower prices, potentially setting up for a price rise.
█ Signs of Weakness
Indicates that the market is likely to experience bearish behavior.
Up Thrust: Indicates sellers overpowering buyers during a price rise, suggesting a potential downward reversal.
Buying Climax: Represents peak buying, typically at price highs, with potential for reversal as sellers take control.
No Effort Bull Result: A large upward price move without strong buying pressure (volume) indicates an anomaly where the result doesn't match the effort, suggesting the up move may be unsustained.
Bull Effort No Result: Strong buying (volume) fails to drive prices higher indicates an anomaly where the result doesn't match the effort, suggesting a potential lack of upward momentum.
Inverse Up Thrust: Increased selling pressure during an uptrend suggests a possible shift to a downtrend.
Failed Buying Climax: High buying volume fails to sustain higher prices, indicating a potential reversal to downtrend.
Bear Outside Reversal: Strong selling pressure reversing an uptrend, signaling a potential downtrend.
End of Rising Market: Indicates buying saturation at market peaks, suggesting a possible reversal as demand exhausts.
Pseudo Down Thrust: Indicates weakening upward momentum with potential for downward continuation if broken below low.
No Demand: Indicates reduced buying interest at higher prices, possibly leading to a price decline.
Charting the Markets: Top 10 Technical Analysis Terms to KnowWelcome, market watchers, traders, and influencers to yet another teaching session with your favorite finance and markets platform! Today, we learn how to marketspeak — are you ready to up your trading game and talk like a Wall Street pro? We’ve got you covered.
This guide will take you through the top technical analysis terms every trader should know. So, kick back, grab a drink, and let’s roll into the world of candlesticks, moving averages, and all things chart-tastic!
1. Candlestick Patterns
First up, we have candlesticks , the bread and butter of any chart enthusiast. These little bars show the opening, closing, high, and low prices of a stock over a set period. Here are some key patterns to recognize next time you pop open a chart:
Doji : Signals market indecision; looks like a plus sign.
Hammer : Indicates potential reversal; resembles, well, a hammer.
Engulfing : A larger candle engulfs the previous one, suggesting a momentum shift.
Want these automated? There's a TradingView indicator for that.
2. Moving Averages (MA)
Next, we glide into moving averages . These are practically lines that smooth out price data to help identify trends over time. Here are the big players:
Simple Moving Average (SMA) : A straightforward average of prices over a specific period of days.
Exponential Moving Average (EMA) : An average of prices but with more weight to recent prices, making it more responsive to new information.
3. Relative Strength Index (RSI)
The RSI is your go-to for spotting overbought and oversold conditions. Ranging from 0 to 100, a reading above 70 means a stock might be overbought (time to sell?), while below 30 suggests it could be oversold (time to buy?). Super common mainstay indicator among traders from all levels.
4. Bollinger Bands
Bollinger Bands consist of a moving average with two standard deviation lines above and below it. When the bands squeeze, it signals low volatility, and when they expand, high volatility is in play. Think of Bollinger Bands as the mood rings of the trading world!
5. MACD (Moving Average Convergence Divergence)
The MACD is all about momentum. It’s made up of two lines: the MACD line (difference between two EMAs) and the signal line (an EMA of the MACD line). When these lines cross, it can be a signal to buy or sell. Think of it as the heartbeat of the market.
6. Fibonacci Retracement
Named after a 13th-century mathematician, Fibonacci retracement levels are used to predict potential support and resistance levels. Traders use these golden ratios (23.6%, 38.2%, 50%, 61.8%, and 100%) to find points where an asset like a stock or a currency might reverse its direction.
7. Support and Resistance
Support and resistance are the battle lines drawn on your chart. Support is where the price tends to stop falling — finds enough buyers to support it — and resistance is where it tends to stop rising — finds enough sellers to resist it. Think of these two levels as the floor and ceiling of your trading room.
8. Volume
Volume is the fuel in your trading engine. It shows how much of a stock is being traded and can confirm trends. High volume means high interest, while low volume suggests the market is taking a nap from its responsibilities.
9. Trend Lines
Trend lines are your visual guide to understanding the market’s direction. Technical traders, generally, are big on trend lines. You can draw them by connecting at least a couple of lows in an uptrend or at least a couple of highs in a downtrend. They help you see where the market has been and where it might be headed.
10. Head and Shoulders
No, it’s not shampoo. The head and shoulders pattern is a classic reversal pattern. It consists of three peaks: a higher middle peak (head) between two lower peaks (shoulders). When you see this take shape in your chart, it might be time to rethink your position.
What’s Your Favorite?
So there you have it, a whirlwind tour of the top technical analysis terms that’ll help your trading yield better results and, as a bonus, make you sound like a trading guru. What’s your favorite among these 10 technical analysis tools? Share your thoughts in the comments below!
What Technical Analysis Says Nvidia Stock Might Do From HereNvidia NASDAQ:NVDA is an interesting stock in that it’s up almost 185% over 12 months as of July 17 -- but has rallied and sold off over the past two months. So, what now?
Let’s see what the stock’s chart as of July 17 might show us:
The first thing you might notice is that NVDA hit a “basing period” from March into May, as denoted by the two pink horizontal lines above.
The stock then broke out around May 21, although a sell-off followed beginning around June 21.
This sell-off has been supported by the 38.2% Fibonacci retracement level of the earlier breakout, as denoted by the thick purple line at right in the above chart. It also looks to the stock's 50-day Simple Moving Average (SMA), as denoted by the thin blue line above.
Meanwhile, Nvidia’s Relative Strength Index (RSI) has moved into the neutral zone -- not even close to being in technically overbought or oversold territory – as shown in the blue box above.
Lastly, Nvidia’s daily Moving Average Convergence/Divergence chart (or “MACD”) is coming off of extended levels in June, with the histogram of the stock’s nine-day Exponential Moving Average (EMA) in negative territory for about a month now, as denoted by the green box above.
Separately, the MACD’s 12-day EMA remains below the 26-day EMA, as also seen in the green box above. This is historically a bearish pattern.
All in, NVDA might be trying to develop a new base of consolidation at recent levels before deciding on whether it's time to break out above the $141.40 level or head back down to its 200-day Simple Moving Average (the thin red line in the chart above).
But a word of caution. The stock might also be developing a so-called “double top” pattern, which could be seen as a pattern of bearish reversal.
Full disclosure: The author of this article was long Nvidia stock and Nvidia calls as of the time of this writing.
This presentation discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. Specific security charts used are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. This presentation discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. Specific security charts used are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty as to its adequacy, completeness, accuracy or timeline for any particular purpose of the above content. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services on Moomoo are offered by Moomoo Financial Inc., Member FINRA/SIPC.
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Megacaps vs Small Caps: Has Nvidia Done This Before?Nvidia has embodied the megacap growth trend for more than a year. Now there could be signs of sentiment shifting -- at least for a little while.
Today’s idea uses two charts to consider potential changes in market conditions.
First, Jensen Huang’s semiconductor giant showed some potentially similar patterns in March and June. Both times, it jumped to a record high on strong results and peaked a few weeks later. Both tops had bearish outside days followed by lower highs. Then periods of consolidation set in.
MACD also turned lower and Wilder’s Relative Strength Index (RSI) slid from overbought conditions.
NVDA bottomed 29 sessions after its March 8 reversal day. If a similar period applies this time, it could suggest sideways movement will last through the start of August.
In the meantime, traders seem to be focusing on small caps and cyclical sectors like financials and industrials . That brings us to the second chart, a ratio of the Russell 2000 against the Nasdaq-100.
It clearly shows small caps’ relative underperformance, which began in mid-2006.
The lower study reveals that the ratio jumped 11.65 percent in the last two weeks. That’s the biggest two-week gain since 2002. Some chart watchers may also notice the ratio’s bullish outside candle after hitting an all-time low. Those patterns could also suggest a bottom has occurred.
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Gold Hits Record Highs! Skyrocket Further or Sharp Reversal?4-Hour Time Frame Analysis:
Higher Highs (HH) and Higher Lows (HL): The chart displays a clear upward trend with higher highs and higher lows. This indicates a bullish market structure.
Ascending Channel: The price is moving within an ascending channel, showing a steady increase in value.
Key Levels:
1-Hour LQZ / Reversal: 2429.940
4-Hour LQZ / Reversal Point: 2391.394
Potential Take Profit (TP) Levels:
TP 1: 2319.385
TP 2: 2288.085
TP 3: 2267.832
Current Price Action: The price has reached the upper boundary of the ascending channel, suggesting a potential reversal or breakout. Traders should watch for confirmation before taking action.
1-Hour Time Frame Analysis:
Higher High (HH): Similar to the 4-hour chart, the 1-hour chart also shows a higher high, indicating a bullish trend continuation.
Ascending Channel: The price is respecting the ascending channel, reinforcing the bullish sentiment.
Key Levels:
1-Hour LQZ / Reversal: 2429.940
4-Hour LQZ / Reversal Point: 2391.394
Current Price Action: The price is at the top of the ascending channel. Traders should look for signs of a reversal or a breakout above this level to gauge further price movements.
15-Minute Time Frame Analysis:
Ascending Channel: The 15-minute chart shows a detailed view of the ascending channel with the price closely following this structure.
Key Levels:
1-Hour LQZ / Reversal: 2429.940
4-Hour LQZ / Reversal Point: 2391.394
Current Price Action: The price is currently at the top of the channel, suggesting a potential short-term reversal or continuation depending on the breakout direction.
Summary:
Bullish Trend: All three time frames show a clear bullish trend with higher highs and higher lows.
Ascending Channel: The price is moving within an ascending channel on all time frames, which supports the bullish outlook.
Key Reversal Zones: Pay attention to the 1-hour and 4-hour LQZ / Reversal points at 2429.940 and 2391.394 respectively.
Potential Reversal: The price is currently at the upper boundary of the ascending channel on all time frames. This indicates a potential reversal if the price fails to break out. Traders should wait for confirmation before entering trades..
BTCUSD - $63,000 - $65,000 Imminent... This weekend, i was expecting a selloff into $52,000 but wat happened was a low resistance liquidity run into premium arrays.
Looking at the daily order block array @ $63,866 as the first point of interest.
We also have a weekly array just above that area which spans upto FWB:65K
Earnings Season to Show if Big Tech Stocks Can Justify AI HypeUpper echelon of tech realm is expected to report the most profits since early 2022 as the bar is set high thanks to the big promise of artificial intelligence.
Earnings season is about to hit fever pitch with the biggest names in the corporate world getting ready to deliver spring-quarter financial updates. The bar is set high thanks to the promise of artificial intelligence to rewire how businesses operate, spend and make money.
How high exactly? All S&P 500 companies collectively are predicted to knock out the biggest increase in profits in more than two years — year-on-year earnings growth is pinned at 8.8% for the quarter ended June, the highest since the first quarter of 2022.
Froth or Not?
Stakes are high. The upcoming string of earnings data will show whether big tech high-flyers can justify the AI hype that has propelled stocks to record after record . The S&P 500 has notched more than 36 all-time closing highs this year and is sitting on gains of more than 18% since it started trading in January.
The Big Dogs
Apparently, optimism is sweeping left and right, lifting valuations of companies big and small. A handful of them have been singled out as the biggest group of winners. And — you guessed it — they’re all involved in the AI narrative.
Chipmaking giant Nvidia (ticker: NVDA ) and a clique of big tech heavyweights are lined up to show if their earnings and revenue guidance will catch up to the sky-high valuations. Nvidia has more than doubled this year, soaring above $3 trillion in market value. Briefly, it became the world’s largest company . Its peers Microsoft (ticker: MSFT ), Facebook parent Meta (ticker: META ), Apple (ticker: AAPL ) and Alphabet (ticker: GOOGL ) have rocketed to records this year as well.
Heavy Concentration
The 10 biggest companies in the S&P 500 fill up about 37% of its worth, which presently gravitates toward $48 trillion. This said, these 10 titans of capitalism contribute 24% to the broad-based index’s earnings — the highest ratio since 1990.
To keep going with the numbers, before we dive into what’s coming over the next few weeks, the S&P 500 companies are trading at 21.4 times their projected earnings over the next 12 months. For comparison, the average multiple for a five-year stretch is 19.7.
It gets even more interesting when you zoom in and double click on five tech titans — Nvidia, Apple, Microsoft, Meta and Amazon. Their price/earnings multiples have ballooned to an average of 34 times projections, up from 28 times. The AI bellwether, Nvidia, has soared to 41 times, from 24 times in January.
Against that backdrop, analysts are quick to point out that a correction in stock prices may loom large if these corporate giants can’t beat out their earnings projections. Is there room for disappointment?
Stacked Up Against Expectations
Let’s go around the table and see what’s coming over the next few weeks. We’ll keep it tight so we’ll only look into the elite Magnificent Seven club .
July 23
Microsoft (ticker: MSFT )
Year-to-date performance: 23%
Revenue guidance: $64 billion
Alphabet (ticker: GOOGL )
Year-to-date performance: 33%
Revenue expectations: $79 billion
Tesla (ticker: TSLA )
Year-to-date performance: 0% ( find out the reasons ).
Revenue expectations: $20.16 billion
July 31
Meta (ticker: META )
Year-to-date performance: 44%
Revenue guidance: $36.5 billion to $39 billion
August 1
Apple (ticker: AAPL )
Year-to-date performance: 24%
Revenue expectations: $84 billion
Amazon (ticker: AMZN ) (date unconfirmed)
Year-to-date performance: 30%
Revenue guidance: $144 billion to $149 billion
August 21
Nvidia (ticker: NVDA ) (date unconfirmed)
Year-to-date performance: 168%
Revenue guidance: $28 billion
Let's Hear from You!
Are we going to see another blockbuster quarter of record revenue and profits? Or is the AI hype overblown and could this mean big tech may let us down? Share your thoughts below!
Gold analysis and trade idea 16 JulyConsolidation zone forming a bull flag pattern
Resistance area at 2449
Potential double top formation at 2445-50 level
Possibility of consolidation before breakout, with multiple attempts needed for a successful breakout
Buying opportunities seen for every dip within the channel
Resistance levels at 2434 and 2447 highlighted for potential selling opportunities.
Taking On Discipline In StagesOnce you have decided that you need discipline in your trading, knowing where to start can be difficult and overwhelming. There are many pieces to a trading plan, and it's easy to feel overwhelmed.
You can break the task into manageable sections and master one discipline at a time, or focus on the the discipline you need. This approach makes the process more manageable and ensures that each aspect of your trading strategy is given the attention it deserves.
Trading Plan Components: Each of these sections should have objective rules so there isn't any escape room.
Method Rules
Entry Rules
Stop Rules
trailing Stop Rules
Exit Rules
Journaling
Trade Plan for TME, COIN
Shane
XAUUSD Top-down analysis Hello traders, this is a complete multiple timeframe analysis of this pair. We see could find significant trading opportunities as per analysis upon price action confirmation we may take this trade. Smash the like button if you find value in this analysis and drop a comment if you have any questions or let me know which pair to cover in my next analysis.
What Is a Dead Cat Bounce Pattern, and How Can One Trade It?What Is a Dead Cat Bounce Pattern, and How Can One Trade It?
A dead cat bounce is a common pattern in financial markets, often confusing traders with its brief recovery followed by continued decline. Understanding this pattern is crucial for traders aiming to navigate market downturns. This article delves into what a dead cat bounce is, its causes, how to identify it, and strategies for trading it.
Understanding the Dead Cat Bounce Pattern
A dead cat bounce is a temporary recovery in the price of a declining asset, followed by a continuation of the downtrend. This phenomenon occurs in all types of financial markets, including stocks, forex, and crypto*, and can mislead traders into believing that a market or asset has started to recover, only to see prices fall again.
The term "dead cat bounce" originates from the saying that "even a dead cat will bounce if it falls from a great height." In financial terms, this means that a sharp decline is often followed by a brief, albeit false, recovery. For example, during the 2008 financial crisis, many stocks experienced dead cat bounces as they briefly recovered before continuing their downward trajectory.
Identifying a dead cat bounce requires careful analysis. For instance, in a dead cat bounce in a crypto* asset, a sudden 10% rise might appear promising. However, if this increase is followed by another decline surpassing the recent lows, it confirms a dead cat bounce.
Traders often use volume analysis and resistance levels to spot these patterns, noting that a true recovery is usually accompanied by sustained volume and breaking through significant resistance levels.
Characteristics of a Dead Cat Bounce
A dead cat bounce is characterised by specific market behaviours that signal a temporary recovery amidst a prolonged downtrend. Recognising these features can help traders avoid being misled by false recoveries.
- Sharp Decline Preceding the Bounce: A significant drop in asset prices that breaks through single or multiple support levels.
- Brief and Sudden Rebound: The asset experiences a quick, short-lived rise in price.
- Low Trading Volume: The bounce usually occurs with lower trading volume compared to the initial decline, indicating weak buyer interest.
- Continuation of Downtrend: After the brief rebound, the asset's price continues to fall, often reaching new lows.
- Lack of Strong Fundamentals: The recovery lacks strong fundamental support, often driven by short-covering or speculative buying rather than genuine positive news.
Causes of a Dead Cat Bounce
A dead cat bounce is typically caused by several common factors that create a temporary illusion of recovery in a declining market.
- Short-Covering: Traders who have previously sold the asset buy it back to cover their positions, causing a temporary price increase.
- Speculative Buying: Some investors buy into the declining asset, hoping to capitalise on what they perceive as a bargain, which briefly drives prices up.
- Technical Support Levels: The asset hits a technical support level, prompting a temporary rebound as traders react to these key price points.
- Positive News: Positive news related to the asset, such as cost-cutting measures in a company, strong country GDP growth, or even rumours can cause temporary optimism and buying interest.
However, while these factors may provide some support for the asset, it’s rare for the market to recover fully. Given that the sharp fall preceding the bounce is often due to a significant shift in fundamentals or indicative of strong selling pressure, the bearish trend is likely to prevail.
Identifying a Dead Cat Bounce
Identifying a dead cat bounce involves careful analysis of price movements, trading volume, resistance levels, momentum indicators, and market sentiment. Recognising these signals may help traders avoid being misled by temporary market recoveries.
Price Movements
A dead cat bounce typically follows a sharp decline that clears previous support levels with little resistance, often prompted by significant news releases. After this steep fall, the price may find a temporary base at another support level and begin to rise. However, this recovery generally regains less than 50% of the initial drop.
Volume
The rebound in a dead cat bounce often occurs on weaker volume, indicating less conviction behind the recovery. This is especially noticeable in assets traded on centralised exchanges, like stocks or crypto*. In forex, assessing volume can be challenging due to its decentralised nature.
It’s important to consider the timeframe; daily charts may be most effective for detecting volume patterns in a dead cat bounce, while intraday volumes can be misinterpreted due to natural ebbs and flows as trading sessions progress.
Resistance Levels
The rebound may fail to break through significant resistance levels, such as a prior support level turned resistance or the last swing high in the downtrend. If the price approaches but cannot surpass these levels and subsequently drops again, it's a strong indication of a dead cat bounce. Monitoring these resistance points helps validate the pattern.
Momentum Indicators
Using technical indicators like the Stochastic Oscillator or Awesome Oscillator (AO) can provide clues about a dead cat bounce. These indicators may show only a slight improvement or remain in bearish territory, indicating weak momentum.
It’s important to recognise that these indicators might show false bullish signals, such as an oversold Stochastic or a bullish AO zero-line crossover, as the bounce begins. Therefore, they may have the most value in detecting continuation, such as a bearish hidden divergence.
To explore these indicators among 1,200+ trading tools, head over to FXOpen’s free TickTrader platform.
Market Sentiment
If broader market conditions and sentiment remain negative or if the news driving the rebound is not substantial, the bounce is likely temporary. It’s important to consider the overall picture and what has fundamentally changed for the asset rather than reacting to temporary retracement.
How to Trade a Dead Cat Bounce
When a trader recognises a potential dead cat bounce, they might consider entering a short position to capitalise on the continuing downtrend. Here are some key strategies that may potentially help trade this pattern effectively.
Since a bounce may sometimes be genuine and lead to a quick recovery, it's prudent for traders to wait for confirmation that the downtrend is ready to continue. This cautious approach also allows for placing a stop loss in a defined area—specifically, just above the high of the bounce.
Key Trading Signals
Traders typically watch for the last higher low established during the bounce to be traded through. In other words, they wait for the short-term bullish trend to appear to falter with a lower low. As seen in the dead cat bounce chart above, this indicates that the most recent support level during the bounce has failed, signalling the downtrend might continue.
Greater confidence in the downtrend continuation can be achieved if the price fails to break through a prior area of resistance or a previous support level now acting as resistance.
Momentum Indicators
Momentum indicators can be used to confirm that the downtrend is ready to continue.
Specifically, a hidden bearish divergence, where the RSI makes a high higher than the high before or at the beginning of the downtrend; the RSI showing the asset is overbought; or the RSI struggling to break above 50 on a slightly higher timeframe (RSI < 50 indicates bearish conditions) can add confirmation.
With the MACD, the signal line may cross under the MACD line or struggle to break out of negative territory.
Chart Patterns and Candlestick Patterns
- Bearish Chart Patterns: Breaking out of patterns like a rising wedge, bearish quasimodo, or descending triangle can confirm the move lower.
- Bearish Candlestick Patterns: Patterns such as a shooting star, tweezer top, or marubozu candle can add confluence and confidence to the trade.
Setting Stop Loss and Take Profit
- Stop Loss: Traders usually set a stop loss just above the high of the dead cat bounce to potentially limit losses if the price unexpectedly rises.
- Take Profit: Given the likelihood of another significant downward leg, a take-profit order may be set at the next major support level. This potentially ensures capturing returns before the market finds new support and reverses.
Context-Dependent Strategy
Ultimately, there is no single way to trade a dead cat bounce in stocks or any other asset. However, using these factors to seek confirmation and waiting for a further breakdown before taking a position can help traders navigate and take advantage of trading on this pattern.
The Bottom Line
Recognising and understanding a dead cat bounce can potentially help traders avoid false recoveries and optimise their strategies. By carefully analysing market signals and using appropriate trading techniques, traders might better navigate downtrends. To apply these insights and enhance your trading experience, open an FXOpen account today.
FAQs
What Is a Dead Cat Bounce?
The dead cat bounce meaning refers to a temporary recovery in the price of a falling asset, followed by a continuation of the downtrend. It often misleads traders into believing that the market or asset is recovering, only to see prices fall again.
What Causes a Dead Cat Bounce?
Several factors can cause a dead cat bounce, including short-covering, speculative buying, and hitting technical support levels. Temporary improvements in market sentiment or positive news can also trigger these short-lived recoveries.
How to Spot a Dead Cat Bounce?
A dead cat bounce can be identified by a sharp decline followed by a brief recovery that regains less than 50% of the initial drop. Low trading volume during the rebound, failure to break significant resistance levels, and weak momentum indicators are key signals.
Is a Dead Cat Bounce Bullish or Bearish?
A dead cat bounce is a bearish pattern. It represents a brief, false recovery in a downtrend, followed by a continuation of the falling market.
How Long Does a Dead Cat Bounce Last?
The duration of a dead cat bounce varies depending on the timeframe but is typically short. On a daily chart, it may take between a few days and a few weeks; on a 5-minute chart, potentially less than a few hours.
How to Analyse a Dead Cat Bounce?
Analysing a dead cat bounce involves considering price action, volume, resistance levels, momentum indicators, and overall market sentiment. Recognising these factors can help identify the potential for a temporary recovery in a declining market.
*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Solana repeating historySo far Solana has moved nearly identically as the previous cycle, which leads me to believe we'll have a breakout soon, likely following the launch of the ETH ETF's. There's also a massive cup & handle forming. According to the Fib extension, we could see a new ATH of $550, or even $840. In case of a downtrend continuation, the bottom will be at the long term support trendline, ez all in if it gets there.
US100 Outlook ICT Concepts💰 Welcome to Your Channel!
Welcome to our channel where we delve into the intricacies of financial markets. Today, we focus on US100 , dissecting its current price action to uncover strategic trading opportunities. Join us as we analyze key levels and market dynamics, aiming to refine our trading strategies and maximize potential gains.
🔍 Identifying Key Levels
The chart highlights crucial levels and zones influencing the current market behavior:
• PMH: Previous Month High, a resistance level where liquidity might accumulate.
• PWL & EQL: Previous Week Low and Equal Lows, key levels for potential liquidity captures.
• BSL (ATH): Buy-side Liquidity at All-Time High, indicating where traders have placed their buy orders.
• SSL: Sell-side Liquidity, indicating where traders have placed their sell orders.
• FVG: Fair Value Gap, marking areas of market imbalance.
• SMT: Smart Money Technique, at lows with the pair ES.
📊 Key Considerations
• Swept PMH and Low Resistance Liquidity: The market has recently swept the previous month high and the low resistance liquidity created.
• Strong Displacement Lower: The price displaced strongly lower, creating a Fair Value Gap (FVG).
• SMT (Smart Money Technique): At lows with the pair ES, indicating potential bearish sentiment.
📉 Current Price Action
The market has swept the previous month high and the low resistance liquidity created, leading to a strong displacement lower. This displacement has resulted in the creation of a Fair Value Gap (FVG), which the price is likely to retrace back into before continuing lower.
📈 Bearish Scenario
Given the current market sentiment and the strong displacement lower, the bearish scenario is favored:
• Retrace into FVG: The price is expected to retrace back into the Fair Value Gap before continuing to move lower.
• Targeting Lower Levels: After retracing into the FVG, the price is likely to continue lower, targeting the PWL, EQL, and SSL for potential liquidity captures.
📊 Chart Analysis Summary
The market has shown a strong bearish sentiment by sweeping the previous month high and low resistance liquidity, followed by a strong displacement lower. The price is expected to retrace back into the Fair Value Gap before continuing its downward movement, targeting key levels such as the previous week low, equal lows, and sell-side liquidity. The presence of SMT (Smart Money Technique) at lows with the pair ES further supports the bearish sentiment. Understanding these key levels and the current market behavior helps in making informed trading decisions.
🙏 Thank you for joining us!
Exploring US100 today highlighted the importance of effective risk management in trading success. Prioritize research, implement robust strategies, and seek guidance for confident market navigation. Stay tuned for more insights on our channel. Here's to profitable trading and continuous learning!
⚠️ Disclaimer
The information provided here is for educational purposes only and should not be taken as financial advice. Always conduct your own research and consult a licensed financial advisor before making any investment decisions.
Technical Analysis vs. Fundamental Analysis: Why Not Both?Hey there, fellow traders and market mavens! Ever found yourself staring confused at the screen and not making sense of things that happen in trading?
So you decided to wander off deep into technical analysis shutting out its other half — fundamental analysis? Or vice versa — you digested every economic report that big media outlets churned out and yet failed to factor in some support and resistance levels?
Fear not, for we've got the lowdown on why you don't have to pick sides and go with either the Fibonacci sequence or the latest jobs data . In fact, we're here to tell you why embracing both might just be your secret to trading success. So, grab your charts and financial reports and let's dive into the world where candlesticks meet earnings reports!
Technical Analysis: The Lost Art of Tape Reading
Technical analysis is like the cool, intuitive friend who always seems to know what's going to happen next. It's all about reading the market's mood through price charts, patterns and indicators. Here's why tech analysis should be in your skill set:
Trend Spotting : Ever wished you could predict the next big trend? With moving averages, trend lines and momentum indicators like the MACD, you can ride the waves like a pro surfer and let the market carry your trades into a sea of profits.
Timing is Everything : Candlestick patterns and support/resistance levels are your besties when it comes to perfect timing. The more you study them, the more you elevate your chances of entering and exiting trades with ninja-like precision.
Market Sentiment : Tools like the Relative Strength Index (RSI) and Bollinger Bands give you the scoop on whether the market's feeling overbought, oversold or just right. Learn these if you want to increase the probability of correctly gauging the market’s mood.
But hold up, before you get lost in the charts, let's not forget about the fundamentals.
Fundamental Analysis: Making Sense of Things
If technical analysis is your go-to for instant market vibes, fundamental analysis is the place to figure out why things happened in the first place. Here’s why fundamentals are a big deal and can help you to a) learn what moves markets and b) become fluent in marketspeak and own every trading conversation:
Long-Term Vision : While technical analysis can sometimes feel like guesswork, fundamental analysis is spitting facts. Earnings reports, P/E ratios and economic indicators help you see the bigger picture and educate you into a better, more knowledgeable trader.
Value Hunting : Ever heard of value investing legends like Warren Buffett? They thrive on finding undervalued gems through rigorous fundamental analysis. And, some say, this approach to investing is not reserved for companies only. It works for crypto, too.
Economic Health Check : Understanding GDP growth, interest rates and inflation can feel like having a crystal ball for market trends. And, one big plus is that you’ll become a lot more interesting when you explain things like monetary policy or forward-looking guidance to your uncle at the Thanksgiving table.
The Power Couple: Combining Technical and Fundamental Analysis
Now, here’s the kicker: Why choose one when you can have both? Imagine the synergy when you combine the swift foresightedness of technical analysis with the solid foundation of fundamental analysis. Here’s how to make this dynamic duo work for you:
Double-Check Your Entries and Exits : Use technical analysis for pinpointing your entry and exit points but back it up with fundamental analysis to build a convincing narrative of the asset’s long-term potential.
Confirm the Trend : Spot a promising trend with technical indicators? Validate it with strong fundamentals to make sure it’s not just a flash in the pan.
Risk Management : Technical analysis can help set your stop-loss levels, while fundamental analysis keeps you informed about any potential game-changers in the market.
Diversification : Fundamental analysis might show you the hottest sectors right now, while technical analysis can help you call tops and bottoms if an indicator you trust is showing oversold or overbought levels.
Wrapping Up
So, there you have it, folks! Technical analysis and fundamental analysis don’t have to be opposite camps. Think of them as your dynamic duo, Batman and Robin, peanut butter and jelly — better together. By blending the best of both worlds, you’ll increase your chances of success in trading and do yourself a favor — you’ll get to know a lot and become more interesting!
Ready to take your trading game to the next level? Start combining technical and fundamental analysis and watch as your trading strategies transform into a market-crushing masterpiece. Happy trading and may your profits be ever in your favor!
Why Are Bonds Still Crashing?Why are US, UK, and EU bonds still crashing since March 2020?
In this video, we are going to study the relationship between bonds, yields, and interest rates, which many of us find confusing. How can we understand them, and why are bond prices leading the yield, followed by interest rates this season?
10 Year Yield Futures
Ticker: 10Y
Minimum fluctuation:
0.001 Index points (1/10th basis point per annum) = $1.00
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
$NKE Nike, Inc is finally back to CHEAP-ENOUGH levelsMany years ago I had drawn this 1.7-1.3 level in the PSR (or Price-to-Sales Ratio) for NYSE:NKE and the recent smack down for NYSE:NKE stock has put it within reach of the 1.7-1.3 X Sales zone.
The RETURN for shareholders has been negative for the last 7 years in NYSE:NKE when adjusted for inflation. The stock is basically unchanged back to 2018 here (not factoring dividends).
What is the point of this?
When a stock gets sold down on bad news, there is an underlying level of value which will support it from that point forward. There are always portfolio managers looking to invest in stocks that have had solid long term fundamentals with rising sales and earnings and a nearly recession-proof business model.
The opposite is also true that there are NO BUYERS for a stock once it gets ridiculously overpriced and no one can justify buying shares are high prices. The only hope you have at that point is for momentum to attract new buyers who aren't paying attention to valuation and because of tax laws that encourage people to hold on for long term capital gains tax rates to kick in for holding periods greater than 1 year.
Thanks to TradingView for providing all of this high quality fundamental information AND for the ability to graph this data so we can visualize and see where the value is in the marketplace.
The value is down here in NYSE:NKE shares so it is a good time to start buying.
Cheers,
Tim
3:47PM July 1, 2024 76.67 last +1.30 +1.72%
Do Not Overwhelm Your Price Chart!
In this article, we will discuss a very important term in trading psychology - paralysis by analysis in trading.
Paralysis by analysis occurs when the trader is overwhelmed by a complexity of the data that he is working with. Most of the time, it happens when one is relying on wide spectra of non correlated metrics. That can be various trading indicators, different news outlets and analytical articles and multiple technical tools.
Relying on such a mixed basket, one will inevitably be stuck with the contradictory data.
For example, the technical indicators may show very bearish clues while the fundamental data is very bullish. Or it can be even worse, when the traders have dozens of indicators on his chart and half of them dictates to open a long position, while another half dictates to sell.
Above, you can see an example of a EURUSD price chart that is overwhelmed by
various technical indicators: Ichimoku, MA, Volume, ATR
support and resistance levels
fundamental data
As a result, the one becomes paralyzed , not being able to make a decision. Moreover, each attempt to comprehend the data leads to deeper and deeper overthinking, driving into a vicious circle.
The paralysis breeds the inaction that necessarily means the missed trading opportunities and profits.
How to deal with that?
The best option is to limit the number of data sources used for a decision-making. The rule here is simple - the fewer indicators you use, the easier it is to make a decision.
EURUSD chart that we discussed earlier can look much better. Removing a bunch of tools will make the analysis easier and more accurate.
There is a common fallacy among traders, that complexity breeds the profit. With so many years of trading, I realized, however, that the opposite is true...
Keep the things simple, and you will be impressed how accurate your predictions will become.
❤️Please, support my work with like, thank you!❤️
Nasdaq's Stellar Returns, Potential Risks AheadThe Nasdaq-100 has been a stellar performer since its debut in 1985, rising 22,900% (with dividends reinvested) for a 14.8% compounded annual total rate of return. By comparison, the S&P 500 returned 7,200% over the same period with dividends reinvested, an 11.5% compounded return (Figure 1).
Figure 1: Since the inception of the Nasdaq-100 index in 1985, it has outperformed the S&P
Source: Bloomberg Professional (XNDX and SPXT)
However, the Nasdaq’s outperformance can partly be attributed to higher risk levels. It has been consistently more volatile than the S&P 500 (Figure 2) and has been subject to much greater drawdowns. On March 28, 2000, Nasdaq began a drawdown that reached -81.76% on August 5, 2002 (Figure 3). The total return index didn’t hit a new high-water mark until February 12, 2015. It also had a sharper drawdown during the 2022 bear market.
Figure 2: The Nasdaq-100 has nearly always been more volatile than the S&P 500
Source: Bloomberg Professional (XNDX and SPXT), CME Economic Research Calculations
Figure 3: From 2000 to 2002, the Nasdaq-100 fell by nearly 82% and didn’t recover until 2015.
Source: Bloomberg Professional (XNDX and SPXT), CME Economic Research Calculations
A large part of the reason for the Nasdaq’s greater overall return, higher volatility and its heightened susceptibility to deep and long drawdowns is its dependence on one sector: information technology. Since at least the 1990s, Nasdaq has been nearly synonymous with the tech sector.
While nearly every sector has at least some presence in the Nasdaq, since its launch in 1999 it has always had a near-perfect correlation with the S&P 500 Information Technology Index (the basis for the S&P E-Mini Technology Select Sector futures launched in 2011). That correlation has never fallen below +0.9 and has sometimes been as high as +0.98. In the past 12 months the correlation has been +0.95 (Figure 4).
Figure 4: The Nasdaq-100 has always had extremely high correlations with the tech sector
Source: Bloomberg Professional (NDX, S5INFT, S5UTIL, S5ENRS, S5FINL, S5HLTH, S5CONS, S5COND, S5MATR, S5INDU, S5TELS)
The preponderance of technology stocks in the Nasdaq is largely a function of history. Nasdaq was founded in 1971 as the world’s first electronic stock market and it began to attract technology companies, in part, because it had more flexible listing requirements regarding revenue and profitability than other venues. Over time the technology ecosystem settled largely on this market and came to dominate the Nasdaq-100 Index.
Those who need to minimize tracking risks with respect to the S&P 500 Information Technology Index can do so with the Select Sector futures. However, those who wish to increase or decrease exposure to the technology sector more generally, and for whom tracking risks is a less of a concern can easily increase or reduce their exposure with the Nasdaq-100 futures.
Also launched in June 1999 were E-mini Nasdaq-100 futures, which are now turning 25 years old. The contracts caught on quickly, and today trade at more than 668K contracts or $60 billion in notional value each day.
E-mini Nasdaq-100 futures offer capital-efficient exposure to the Nasdaq-100 index, and allow investors to trade and track one NQ futures contract versus 100 stocks to achieve nearly identical exposure. These futures also help mitigate risk against the top-heavy nature of the Nasdaq-100 index, where the so-called Magnificent Seven companies—Microsoft, Apple, Nvidia, Amazon.com, Meta Platforms, Google-parent Alphabet and Tesla—have dominated recently. Broad exposure to this index acts as a hedge if the Magnificent Seven stocks decline.
The Nasdaq has also correlated highly in recent years with consumer discretionary stocks as well as telecoms. By contrast, it has typically low correlations with traditional high-dividend sectors such as consumer staples, energy and utilities which tend to be listed on other exchanges. The exception to this rule is during down markets, when stocks tend to become more highly correlated.
The Nasdaq also has very different interest rate sensitivities than its peers. For starters, high short-term interest rates seem to benefit the Nasdaq-100 companies as many of them have large reserves of cash that are earning high rates of return by sitting in T-Bills and other short-term maturities. This is a sharp contrast to the Russell 2000 index, which has suffered as Federal Reserve (Fed) rate hikes have increased the cost of financing for smaller and mid-sized firms, which borrow from banks rather than bond holders and don’t usually have substantial cash reserves.
By contrast, the Nasdaq has shown a very negative sensitivity to higher long-term bond yields. Many of the technology stocks in the Nasdaq-100 are trading at high earnings multiples. Some have market capitalization exceeding $1 trillion. Higher long-term bond yields are a potential threat because much the value of these corporations is what equity analysts might refer to as their “value in perpetuity,” meaning beyond any reasonable forecast horizon. Typically, such earnings are discounted using long-term bond yields and the higher those yields go, the lower the net present value of those future earnings. Additionally, higher long-term bond yields can also induce investors to switch out of highly volatile and expensive equity portfolios into the relatively less volatile, fixed- income securities.
The Nasdaq’s high sensitivity to long-term bond yields may explain why the index sold off so sharply in 2022 alongside a steep fall in the price of long-dated U.S. Treasuries, whose yields were rising in anticipation of Fed tightening and due to concerns about the persistence of inflation. By contrast, the Nasdaq has done well since October 2022 despite the Fed continuing to raise short-term rates through July 2023 and subsequently keeping those rates high. On the one hand, many of the cash-rich Nasdaq companies are benefitting from higher returns on their holdings of short-term securities. On the other hand, they are also benefitting from the fact that higher short-term rates have steadied long-term bond yields by making it clear that the Fed is taking inflation seriously.
This isn’t to suggest that the Nasdaq is immune from downside risks. History shows that the risks are very real, especially in the event of an economic downturn. In the 2001 tech wreck recession, the Fed cut short-term rates from 6.5% to 1% but long-term bond yields remained relatively high, which was not a helpful combination for the tech sector. In addition to its 82% decline during the tech wreck recession, it also fell sharply during the global financial crisis, though not as badly as the S&P 500, which had a far larger weighting to bank stocks.
This time around, potential threats to the Nasdaq include:
The possibility of an economic downturn which could crimp corporate profits.
Rate cuts which would reduce the return on cash positions.
Large budget deficits and quantitative tightening which could push up long-term bond yields.
Possibly tighter regulation of the tech sector in the U.S. and abroad.
If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
By Erik Norland, Executive Director and Senior Economist, CME Group
*CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
NZDJPY Is Showing Weakness after RBNZ Kept Rates UnchangedNZDJPY Is Showing Weakness after RBNZ Kept Rates Unchanged
🚨RBNZ kept the interest rate steady at 5.50%, as expected.
After this decision, NZDJPY faced a strong sell-off and appreciated by nearly 88 pips
NZDJPY also confirmed a bearish wedge pattern showing further downward movement.
However, as I explained previously selling XXXJPY pairs carries a high level of risk.
They will begin the bearish wave only when BOJ intervenes in the market.
But with the current data, this is what NZDJPY is showing...a small bearish move.
You may find more details in the chart!
Thank you and Good Luck!
❤️PS: Please support with a like or comment if you find this analysis useful for your trading day❤️
