Stock Market Breadth
US futures and European futures are trading higher, and they are on track to post solid gains for this week. The US GDP data released yesterday gave investors and traders a lot of confidence about the United States as they believe now that it is possible that the US economy may experience a soft landing. If the data would have been underwhelming and the GDP number would have shown that the US economy is actually suffering terribly due to consumers scaling back from spending, then the situation would have been very different and difficult today. However, the GDP data has confirmed now that US consumers are still in good shape and despite the fact that we have experienced record inflation, meaning it is a scenario that we have not seen in nearly 40 years, and a monetary policy which is immensely hawkish, and yet consumers are still doing okay.
In terms of the stock market, this US GDP data brought a lot of good news and traders know that the Fed will be a lot more confident with their approach when they will meet next week to decide on their monetary policy.
In terms of the forex market, the dollar index is back, and yesterday we saw some decent moves in the dollar. The strength in the dollar index pushed other currencies lower such as the Euro and the Sterling. Although, it is important to keep in mind that both the ECB and BOE are far from being done with their job of controlling inflation in their regions. In fact, there are serious concerns about the ongoing situation in the UK as inflation is still very much anchored in place. As for the ECB, the official members have said a few times that the bank is likely to raise the interest rate by 50 basis points a few times before it can reduce the pace of interest rate hikes. This means that the current weakness in the Sterling and Euro against the dollar index could be an opportunity to explore some potential bargains while the opportunity is on the table.
Gold prices are on track to post some losses this week, and this is mainly because of two reasons. Firstly, this week, we have seen strong US economic data which indicates that the US economy is faring much better than many anticipated. Secondly, we have also seen some life coming back for the dollar index which is off its lows. Although, traders do believe that the current weakness in the gold price is very much temporary as the Fed is more than likely to slow down the pace of the interest rate hike. In addition to this, technical analysis shows that the shinning metal’s price is trading above the 50, 100 and 200-day SMA on the daily time frame which shows that bulls are in full control of the price action. The 50-day SMA is also trading above the 100-day SMA, which is another sign of confidence that the current trend could pick up more steam.
Brent and Crude Oil prices are trading pretty much where they started the week. The important thing to note here is that the price is off its lows of the week and the focus now is on one important factor, the OPEC meeting taking place next week. It is anticipated that the cartel will not change its supply next week but rumours have already started to flow giving mixed signals.
On the technical side, there is no doubt that both Crude and Brent Oil prices are moving away from there over the oversold region. The RSI is approaching near the oversold area, and this means that we may see some buyers coming back into the market. Crude oil price is flirting with the 100-day SMA on the daily time frame and if the price breaks above this level, we are likely to see more bulls coming to the market.
The crypto industry continues to attract some attraction from the industry while investors are wondering how strong this recovery is going to be. The reason that we have seen crypto prices recording decent gains is mainly due to the weakness in the dollar index. The change in the Fed’s monetary stance brought weakness in the dollar index. In addition, speculators believe that Bitcoin’s winter is over. One important factor that traders do need to pay attention to is that Elon Musk didn’t sell any Bitcoins that he bought in Tesla’s balance sheet, which means that the billionaire is hodling, and the reason for that may well be that he is a believer of this insane technology.
In terms of the BTC price action, the price mark which matters the most is the 30K price level. This is an important resistance level which the price needs to break and move to the upside.
The Asian stock market mainly traded higher on the week’s last trading day. The Nikkei index increased by 0.03%. The Shanghai index soared by 0.76%, while the KOSPI index soared by 0.94%. The Hang Seng index moved lower by 0.12%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth gained some momentum yesterday. 59% of the Dow Jones stocks are trading above their 200-day moving average.
The S&P 500 stock breadth also confirmed some strength in its momentum. 58% of the shares traded above their 200-day moving average.
Stock Market Rally
The S&P 500 stock index closed higher on Thursday; the index moved lower by 1.10%. The industrial sector led the index lower, and 9 out of 11 closed lower yesterday.
The Dow index soared on the second last trading day of the week; the Dow stocks moved the index lower by 0.61%. 11 shares advanced, while 19 shares closed lower.
The NASDAQ composite, the tech-heavy index, closed higher by 1.76% yesterday.