Is Bitcoin Decoupling From Stocks?If we learned anything in March, it’s that Bitcoin can be susceptible to selloffs in the broader market. However it’s been bucking that tide recently.
This chart compares BTCUSD with the S&P 500. Notice how it’s advanced since October 12, while SPX has skidded lower over the same period.
This pushed the 10-day correlation down to -0.7. That’s the lowest since late August, but even that moment wasn’t very comparable because stocks were climbing and volatility was calm. The correlation ended simply because BTCUSD paused as the broader market rose. Most other correlation breakdowns historically are similar: BTCUSD fell or stalled as stocks rallied.
The current price action is much less common: BTCUSD is actually going up as SPX goes down.
It follows a potentially bullish supply/demand dynamic. Rising coronavirus cases and a lack of stimulus increase the odds of more central-bank easing. (Just this week the ECB took a dovish turn.) Meanwhile, institutional adoption has accelerated.
BTCUSD continues to consolidate at its highest levels since the bear-market peak in June 2019. Interestingly, the current range closely matches the shooting-star tail from June 26, 2019. (The space between the high and close, shaded on this chart.) Unlike before, BTCUSD is holding this price range and apparently squeezing into a range, with an outside day on Wednesday and an inside candle yesterday.
So far, it seems to indicate the leading crypto is holding up much better than the stock market. This might not remain the case for long, but it is now.
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Intermarketanalysis
Weekly Market recap 5: Still at the crossroads of the sentimentsWhere we are, and "if-thens"
Since the last week, the sentiment hasn't changed too dramatically, looking at the technical picture of DXY, I still see it as a range in a medium-term. Although, DXY crept down, closer to the "orange" line of defence (see the orange long-term trendline). Along with the stabilizing S&P500 index (The stock index has had the classic negative correlation with the DXY since the crash in March), DXY gives me reasons to have a short-term bearish bias, hence likely transition to risk appetite.
If DXY closes below the orange trendline (around 92.2), it will be a strong sign of the beginning of a bearish market in USD. The last line of defence is around 91.7 (Sep 1 low).
On the contrary, if DXY manages to close above the long-term trendline of the downtrend which started in March, I'd consider buying USD. I would need additional confirmations of course, as it is still a range market. Such confirmations may include reaching 94.00 level.
The highlighters of sentiments
A)If we bet on risk
Say DXY would continue the downtrend, and we enter the risk appetite sentiment. What do we short USD against? Let's look at the most common risk duet of AUD and NZD (see the AUDNZD chart). If you zoom out a bit, the first thing you notice is the range, gradually descending channel. It tells us that AUD has been weaker in the long term and it's better to be long NZD in general.
MA(100) is playing the role of the "mean" here. For short-term trading, it's nice to take into account how far the pair is from the mean. A good AUD-short would be after the candle reversal pattern (I marked the last one with the grey area) was formed near the upper border of the channel. Generally speaking, the further AUDNZD from the mean, the clearer it is what to buy to ride the risk appetite sentiment.
B) If we bet on safe-havens
Look at the long-term chart of USDJPY. USD has been pressured since 2015. Therefore I'd prefer going long JPY if risk aversion activates. However, I may still consider buying USD if USDJPY breaks the 5 years descending trendline.
Summing up
Eventually, follow the hints of DXY and then choose the most diverged currencies by their relative strength or weakness. For example, if risk aversion starts, I'd focus on shorting the weakest one (most likely USD) against relatively strongest one (let's say NZD). Adjust it to the short-term sentiments of European currencies and CAD, and you have a road map to find numerous additional setups.
Pharma looks fugly on a relative basisBreaking down through support, this is what kept me out of trading PFE to the long-side even though it looked bullish. With the elections coming up and democrats leading the polls, I'd stay away from pharma and insurers. Lean towards medical devices if you need healthcare exposure.
JPMorgan Holds the 50-day as Curve SteepensTechnology stocks have undeniably led the market for several months. However the banks are showing signs of strength.
JPMorgan Chase has been quietly making higher lows along its 50-day and 100-day simple moving averages (SMAs). That suggests its intermediate-term trend is at least neutral, and possibly nearing a bullish state.
In and of itself, the chart is still inconclusive. But another chart, 30-year Treasury Yields , could add a fundamental reason to consider the banks. As we highlighted on August 10, bond prices were slamming into resistance as the economy showed signs of rebounding from coronavirus. (That pushes yields higher.) Jerome Powell’s new commitment to hotter inflation might also keep upward pressure on long-term rates.
The result could be a push/pull from the Fed. Inflation pushes long rates higher as the FOMC's target range pulls short rates lower.
That’s potentially a positive environment for banks like JPM that profit from a steeper yield curve. It could also get a cyclical boost if the economy continues to recover. (The second item on Powell’s agenda was a recovery in the job market.)
Still not buying the cyclical rotation to financials theme Still under the 2009 relative low, so no I'm not buying the whole rotation to financials theme just yet.
Dow Jones be ready for 30K. 1/80% 2/20%Hopefully, the full recovery of the market will be confirmed at 30K
Doomsayers Beware: Potential Resistance on Bond PricesAs most people know, sentiment has been running uber-bearish. That’s lifted gold and depressed interest rates. But now the action in bond prices may be showing an end to the move.
The iShares 20+ year Treasury Bond ETF tracks the prices of long-dated bonds. And they may have recently hit a peak around $172, near the same level where it was rejected in April.
There could be several implications if this potential double-top holds.
First, and most obviously, it would boost longer-term bond yields. That, in turn, would steepen the curve and could help banks and financials.
It could also lift some economic forecasts using bond yields as indicators.
That, in turn, could make it harder to own high-multiple “growth” stocks and keep money flowing toward cyclical “value” names like small caps, industrials and financials.
Higher rates could also support the U.S. dollar and make precious metals a little less precious.
The news flow today is consistent with this kind of shift:
1-TSA data shows air travel back to its highest levels since March.
2-China is moving to reopen visits to Macau.
3-Washington is inching toward a stimulus bill.
Top Stock Trading IdeasThe S&P has broken relative highs. We have to go back to March for levels from above which it will test before retracing. The relative strength of stocks with respect to safe havens is not nearly as strong as measured by the Kovach OBV. Thus the break in intermarket correlations is suspect and we may anticipate a retracement soon. The next target would be 3357. We are currently in a vacuum zone right now. You would be fomo-ing into a trade if you entered now. It seems reasonable to wait for a morning squeeze before entering anything. The level 3293 seems reasonable.
Is Bitcoin Dominance Following the Dollar Index?The U.S. dollar has been sliding, with at least three major catalysts now weighing on the greenback:
1-Better economic numbers overseas, especially Chinese GDP last week
2-No QE boost from the European Central Bank last week, or the People’s Bank of China this week
3-A key stimulus deal by EU leaders this week
Meanwhile back in the U.S., politicians are pointing fingers and central bankers are considering more stimulus. This keeps DXY in focus into the next Fed meeting on July 29. Will the dollar break its March low of 94.65? This could be a big story to watch, especially now that buyers are piling into precious metals. Yesterday the iShares Silver ETF traded over 2 million options contracts, the most in nine years. It also had its biggest one-day gain (+9%) since late 2008.
This is classic risk-on behavior associated with a weak dollar.
Interestingly, Bitcoin Dominance seems to be following a similar trajectory as the Dollar Index. Both are seen as “safe havens” that do well in times of volatility but slide when risk appetite increases. Last week, correlation between the two charts was the highest in 4+ years.
Notice on the chart how BTC.D had slid under 64 and failed to rebound. This resembles other consolidation phases like January 2020, April 2017 and April-June 2016. In each case, Bitcoin was gaining, but higher-velocity altcoins rose even quicker.
This decline of Bitcoin dominance comes as decentralized finance keeps spreading (up more than 100% in the last month according to DeFi Pulse). Crypto enthusiasts may want to keep an eye on this relationship – especially if the trend of dollar weakness continues. It’s potentially bullish for altcoins like Ethereum .
Euro Testing Trendline Support; Be Aware Of BreakdownGood morning traders,
Markets are slow because of holiday in the US, so we may not see any big changes in flows through the day. However, we should pay attention to BREXIT especially after latest Merkel comments, that they are preparing on every level for a no-deal Brexit. This cannot be positive for the euro or gbp, so be aware for a potential weakness on these two, especially against the commodity currencies while stocks remains strong. Regarding the euro we also need to look at German bund, where reversal from the recent June low is in five waves followed by A-B-C flat meaning that bulls can see more upside while euro may break that red trendline support. A daily close is important for weakness; below trendline can open room for 1.1.
GH
Growth Stocks Are Taking Back LeadershipStocks fell hard after the June 10 Federal Reserve meeting. The S&P 500 bounced after holding 3,000, and some interesting changes have occurred amid the volatility.
Simply put, money is rotating back to “growth” and away from “value.” Recent weeks saw a big surge of interest in beaten-down “reopening” stocks like airlines, banks, industrials, energy. But now it’s fading.
A comparison between the Russell 2000 ETF (IWM) against the Invesco QQQ Trust (QQQ) is a good proxy for this trend. IWM, heavy on smaller industrial and financial companies, rose 30 percent between the lows of May 14 and the June 8 high. QQQ, loaded with large technology companies, rose just 15 percent over that period.
But now everything is changing. IWM is down about 6 percent from its pre-Fed highs, while QQQ is 1 percent higher. IWM hasn’t even benefited much from strong economic numbers recently, like the New York Fed’s Empire State Manufacturing Index or retail sales. (Those should have lifted cyclical value stocks more.)
The technicals of each ETF also speak volumes because QQQ is above its February highs, while IWM is stuck below its 200-day simple moving average (SMA).
This growth-versus-value debate has occurred a few times in recent years. Value briefly outperformed in late 2016, and again late last year. Both times, it faded and the dominant theme of large-cap technology returned. Based on the current price action, the same thing could be happening again.
VRTX - UP and Up and UPHi traders,
I have picked another market for today´s analysis. Our best shot for today can be VRTX (we just have to wait for the entry bar).
It´s a pharmaceutical company that increased the price of its stock during the Coronavirus crisis. If we compare the price with the SPY market and take the correlation into the consideration we can see that VRTX has more power to the upside than the whole Stock Market (SPY).
Correlation - negative or positive - is an important part of portfolio management. If you are LONG in 100 markets that correlates closely to the SPY, it´s almost the same as opening one big position in the SPY market. Be careful!
Good trading.
Jakub
FINEIGHT
Facebook Exits Triangle as Nasdaq Takes the Lead AgainFor several weeks, value stocks like airlines, energy , financials and industrials have outperformed. Coronavirus hammered these companies the most because they’re very sensitive to the economy, so it’s not a surprise that they enjoyed strong bounces as the social lockdowns ended.
The Nasdaq-100 underperformed during the same time, but didn’t roll over. In fact, it snuck to new record highs last week as Apple broke out of a triangle. Amazon.com also broke out, while other megacap technology names like Microsoft and Alphabet squeezed into tight ranges.
And then there’s Facebook, which broke out on May 20.
FB’s catalyst at the time was the launch of its new Shops service catering to small businesses. It then formed a high and tight consolidation pattern above its January highs. Last week it formed a bullish inside candle, and today it’s breaking through the top of that range.
This could be a positive sign for FB and the Nasdaq-100 in general. “FANG” stocks and other large growth names have been the backbone of this market for years. Now that the value bounce in energy and financials is pausing, will money flow back into the established leaders?
By the way, GOOGL is flirting with a trillion dollar market cap just now. FB follows on the list with a valuation around $680 billion. How long before the social media-giant is viewed as the next member of the club?
Chinese Tech Stocks Are Ripping AgainRecent weeks saw a brief flareup between the U.S. and China. But tensions haven’t escalated, and now Chinese stocks have exploded higher as things calm.
The Nasdaq Golden Dragon Index is back to its highest levels since July 2018 and price action in the currency market may favor more gains in coming months.
The U.S. dollar-Chinese Yuan pair seems to have formed a double-top at 7.18. That was a peak last September and again in late May. (Remember USDCNY moves opposite the yuan, so lower prices mean the yuan is gaining.)
That may suggest the greenback is set for downside against the Chinese currency, which in turn could make investors more willing to own Chinese stocks.
This is important because it matches the bigger trend of indexes rebalancing toward the Asian giant. It also makes sense because China’s economy is recovering from coronavirus. But even more important, Beijing is determined to evolve from being a manufacturing center to more of a financial hub. Most times in history, that means a country’s currency gains value. (Think of the U.S. dollar in the 1990s.)
All these forces, combined with the double top in USDCNY, suggest a longer-term rotation is taking place. There aren’t any obvious setups right now in Chinese stocks, but the shift toward names like Alibaba and JD.com could just be getting started. This could also favor semiconductors , solar energy and the Nasdaq in general.
Stay tuned for opportunities as they arise. There could be many!
AMEX:KWEB
Intermarket analysis expects SHORT in the INDEXES!Hi traders,
today´s video combines educational content and analysis of 4 major Indexes. BUT!
We do not analyze them separately, but together - WE DO THE INTERMARKET ANALYSIS.
It is this approach that will show you whether an index is overvalued or undervalued. How is that possible? There is a great correlation between them.
Look a the NASDAQ guys. That´s the only one, who reached the last Highest High! Again - THE ONLY ONE!
What we can expect? SHORT, because NASDAQ is too extended.
Have good trading,
Jakub
FINEIGHT
Silver Takes Out 200-day SMAPrecious metals have been the strongest corner of the market this year. It’s not a surprise when you consider the coronavirus pandemic, the resulting economic crash and now hefty monetary stimulus from central banks. Precious metals might not have controlled supply like Bitcoin , but it’s definitely MORE controlled than fiat currencies.
Gold and silver both took a hit when volatility hammered all financial markets in March but they’ve stabilized more recently.
Silver in particular is important because it’s normally the high-beta stepchild of gold. It’s often compared to gold in a ratio, which recently hit its highest extreme in at least a century. That means silver was historically super cheap.
The gold/silver ratio is also interesting as a sentiment indicator because it can peak at times of bearishness in precious metals. Then, as it fades, both silver and gold tend to advance in price – with silver leading he charge on a relative basis. This occurred between November 2008 and March 2011, and again January-July 2016.
Getting back to the simple price of silver in U.S. dollars. It formed a triangle in April and early May. It quickly overtook the 200-day simple moving average (SMA) and spent the last two weeks consolidating above it. Now with the prospect of more geopolitical risk (China), more weak economic news (payrolls next week) and more money printing (FOMC on June 10) the backdrop could be favorable as well.
On the flipside, if conditions get more bullish and precious metals fade, the 200-day SMA becomes an effective risk-management zone.
FANG vs SPY, signs of a topThe FANGM close below the 10-day average could signal a bearish shift, which would be amplified by a bearish trend reading on ADX. Note that the FANGM bottomed before the SPY, blue line, in March.
Gauging USDINR based on EURUSD!!We tried to gauge the USDINR based on the World's most tradable currency i.e EURUSD . Below are the following reasons
(1) EURUSD trading near its rock solid weekly support of 1.0746 i.e forming a falling wedge
(2) Below RSI is trading at its monthly support levels
(3) USDINR is facing a stiff resistance at rising resistance line near 76.32 levels.
(4) We assume a minor retracement of 3% in USDINR i.e till 75.30-74.70, which will be positive for Indian Markets.
(5) EURUSD to rise till 1.1034 levels which means positive for Gold price.
Above analysis is purely for an educational purpose only
GBPJPY Cross Pair: 🐻 Bear In Action Matter of fact knowing poor equity market performance from last night we got a strong dollar and yen. This two currencies had gain against other currencies well through out the day. Lower risk appetites market situation favored the yen leading this cross pair price further lower. Bear 🐻 has already weighed over this pair and I think if market players aren't willing for risk bets and dumb their moolahs in yen. This cross pair will continue it's bearish trend until the risk sentiment favor for risk bets. Also pound isn't doing well seeing the GBPUSD we can know that bears are weighing slowly over that market and knowing the huge plunge over EURJPY cross pair makes us think that GBPJPY may take advantage equally.
Is Alibaba Immune to Coronavirus? RS Suggests It May BeRelative Strength shows when a stock is outperforming peers. It can be very useful when the market corrects, like we saw last week. Crisis often turns into opportunity once the dust settles.
One of the biggest surprises from RS recently is the strength in Chinese names. Despite coronavirus originating on the Mainland, many of the country's big liquid stocks have corrected less than the broader market.
Alibaba is a case in point. When the S&P 500 and Nasdaq-100 were crashing down toward their 200-day simple moving averages (SMA) last week, BABA didn't even come close to dropping that much. That's a classic sign of relative strength.
The e-commerce giant broke out of a long basing pattern in late 2019 and quickly surged to new highs. It then consolidated in price, and now is completing an ABC flat pattern, or double bottom. Its swings have also been much tamer than the rest of the market.
Another positive last Friday was the slight undercut of January's support around $199.50. When a stock undercuts support it often takes out obvious stops and shakes out the weak hands. The result is a false breakdown.
Traders looking for an entry in BABA may want to look for a breakout above the 21-day and 50-day SMAs, which are slightly above the current price range.
Elliott Wave & Intermarket Analysis For NIKKEI And USDJPYHello traders!
Today we will talk about stocks, specifically Nikkei and why USDJPY can see higher prices.
Well, as you may already know, in EW theory after a three-wave corrective decline, the trend should remain to the upside. This is what we see in the stock market all the time. However, Nikkei got our attention, because we can see a nice five-wave rally after that three-wave a-b-c correction, which means that Nikkei remains in uptrend, but after another three-wave correction in the lower degree, where ideal support would be here around 21450 - 21250 levels, just keep in mind that bullish confirmed can be only if it manages to turn back above 21770 region!
In the right picture you can see tight positive correlation between NIKKEI and USDJPY, which means that if NIKKEI points higher, then even USDJPY can see higher prices, so don't be surprised if USDJPY remains bullish towards 109 area or higher!
So, seems like risk-on sentiment may continue and when we are in risk-on, we usually see bullish stocks, which are followed by recovery on XXX/JPY crosses. That being said, be aware of a bullish continuation on stocks, while XXX/JPY cross pairs may see a bigger recovery!
Be humble, trade smart and wait for the right sentiment to enter the market!
Disclosure: Please be informed that information we provide is NOT a trading recommendation or investment advice. All of our work is for educational purposes only.
Sum up of Gold and Intermarket analysis of April-2019April 2019 is coming to an end so I want to sum up the current market situation so far.
From the 4 assets classes chart below...
Two asset classes are approaching resistance.
The currency TVC:DXY has rally last week and now is approaching the resistance.
Also, AMEX:SPY is almost at its all time high and long term resistance at around 3000 (also a psychological point).
The opposite is seen in commodity and bonds
TVC:TRJEFFCRB has broken through its long term resistance and now is on the way to test the broken trend line.
We can see the same situation here for 10 year T-Note CBOE:TNX
Now, let's look at S&P500 here.
We are almost at the all time high which is also a long term resistance and 2.618 fib of 2009 decline.
Are we going to rip right through the overhead supply?
Or will the market reverse like when the exact same situation that happened in 2000 when we reach 2.618 fib of 1998 decline?
Only time will tell.
But by the behaviour of Bonds and Commodity that is evident on the chart, it looks like investors are concerned and starting to move into these assets.
Since we see a break out in commodity, let's talk about Gold AMEX:GLD
Relative performance of Gold vs Dollar
It's very clear that we are on the trading range here and soon we will see a break out in some direction. Right now we are above 200 days MA.
Relative performance of Gold and S&P500
Something is going on here!
We can see that this is the first time since 2012 that we finally see the yellow metal outperform the S&P500. If the relative performance can stand above the broken resistance, and at the same time, when currency and S&P500 are approaching key resistance, we may see a significant move to the upside.
Only time will tell and I think it will be soon.
Let's go back to 2007.
I can see the similarity here.
In term of absolute performance of GOLD
We have, again, broke down from support and a head and shoulder pattern at 1290 usd. In upcoming days we might see a rebound to test the neck line at 1290.
It is a weird looking head and shoulder pattern, and when everyone thinks it is a crystal clear, textbook H&S (which appear to be so given the volume profile where people are waiting to sell at rebound to the neck line at 1290 and waiting to buy at 1230 which is a target of H&S), it could fail miserably.
Clear pattern often fail! So be careful!
But, what if it is not a head and shoulder like everybody think?
Let's look at alternative scenario below.
This is a scenario that could happen given the structure of the supposed falling wedge here, and also an elliot wave count.
It is always good to have alternative plan in mind and be flexible in trading.
I think FOMC meeting next month would give a clearer movement direction. So, let's see what will happen.
EURJPY consolidated on support.
Monthly overview, we are on the middle of the range here with support at 123.8-9. Price had bounced there twice last week and is now consolidated in vague descending triangle pattern with height of 1000 points.
if it breaks 123.9 we would see price go down to 122.8-123.0,
if it breaks up, expect selling pressure to continue at 125.4-5
Looking at XETR:DAX below, the uptrend line in 4hr timeframe has broken and price has been trying to get back above the trend line.
Now wait for confirmation either OANDA:EURJPY break up or down, keep an eye on XETR:DAX
