Stock Market Breadth
US and European markets are trading lower as traders had some reality checks with respect to their anticipations of the Fed’s monetary policy. All three important stock indices, the S&P 500, the Dow Jones and Nasdaq 100, are on track to record some losses for the week. Traders will be paying close attention to the US existing home sales data, which will be coming out today at 15:00 GMT, and the anticipation is for a further slowdown in the momentum. The reading is expected to come in at 4.451 M, while the last number was 4.7 M. There is no surprise in seeing these numbers trading lower, given where the interest rates are moving.
In terms of the forex market, both the Euro and the Sterling failed to score significant gains, and the element caused was the number of commentaries by the Fed officials. For instance, Fed member James Bullard, president of the Federal Reserve Bank of St. Louis, made the following statement on Thursday: the policy rate is not yet in a zone that may be regarded appropriately restrictive. In his opinion, the acceptable range for the federal funds rate may be 5% to 7%, higher than what the market is currently pricing. This has brought the bulls back into the space for the dollar index, which has recouped its lost ground.
The precious metal is trading where it started the week, and this week’s gains have been minimal if any. The main reason has been profit-taking among traders who decided to cash in after the market recorded a decent rally last week. In addition to this, market players certainly did get ahead of themselves last week, thinking wrong about the Fed’s monetary policy. The fact is that the Fed is still on its hawkish monetary policy, and yes, they may not be increasing the interest rate by the same magnitude, but interest rate hikes are still in the pipeline, and they will continue to take place. This means that the dollar index will recoup its lost ground, and the chances are that we will see the dollar index moving higher. This week, we have seen signs of the dollar index fighting back and recovering some of its losses, pushing the gold price lower.
Brent and Crude oil prices didn’t have the best week; oil traders have been on the fence, and the ones who have been in the ring had a lot of nose bleed. The reason is that we had a lot of improvement in terms of geopolitical tensions, and this means that traders have felt less nervous about geopolitical tensions. The two biggest economic powers, China and the US have started to take steps in the right direction, de-escalating tensions. In addition, Russia had nothing to do about the missile in Poland. Most lawmakers believe it was unintentional, which is also positive news.
On the demand side, there are concerns about an economic slowdown. By that, we mean that the UK confirmed its economy is in a recession, and Chinese economic data has yet to paint the best or most optimistic picture this week. These factors have kept the oil prices in check, and the path of the least resistance seems skewed to the downside.
The cryptos industry is still feeling the after-effects of FTX, and all the negative news about the exchange still influences the price of Bitcoin. There is an exciting element to note here, and even though there has been so much bad news about the industry and some serious concerns about the domino effect, BTC prices are still trading above the 15000 price support. This is a highly encouraging sign for those who pay attention to price action. Another positive element that traders need to keep in mind is that individuals like Elon Musk are still very believers in Bitcoin, as he publicly said on a Twitter conversation that he believes that cryptocurrencies like BTC, Ethereum and Dogecoin will make out of this storm.
But for now, the focus continues on the aftermath of FTX, and investors are nervous about the next big company or project collapsing as the reality is that FTX had its fingers all over the place, and the exposure has been significant. At the same time, the silver lining is that most of the bad news is being flushed out, or it has already been flushed out, so there is less bad news left for the industry. In addition, one of the best signs of a bear market coming to an end is when bad news doesn’t influence the price as much as many had anticipated. Looking at the Bitcoin price, we are not far from reaching that level.
The Asian stock market mainly traded higher on the week’s last trading day. The Nikkei index increased by 0.15%. The Shanghai index soared by 0.06%, while the KOPSI index gained 0.05%. The HSI index moved higher by 0.26%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost further momentum. 68% of the Dow Jones stocks are trading above their 200-day moving average.
The S&P 500 stock breadth also confirmed some more weakness in its momentum. 53% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading lower today. In terms of economic data, investors will be the US CB Leading index data coming out at 15:00 GMT. The number is expected to print a reading of -0.4%, while the previous reading was the same.
The Dow Jones futures have experienced a minor sell-off this week and have given up some of the gains they scored in the past weeks. The price is still trading above the 50, 100, and 200-day SMA on the daily time frame, which confirms that it is bulls in the driving seat, and this sell-off is only a retracement. Given the optimism about de-escalating geopolitical tensions, we may see further gains for the Dow Jones’s price action in the coming days. However, the RSI is showing signs of being overbought, and that may exert more selling pressure.
The near-term support is 32,285, while the resistance is 35,871.
Stock Market Rally
The S&P 500 stock index closed lower on Thursday; the index moved lower by 0.31%. The real sector led the index lower, and only 4 out of 11 closed higher yesterday.
The Dow index fell on the second last trading day of the week; the Dow stocks moved the index lower by 0.02%. Two shares advanced, while 28 shares closed unchanged.
The NASDAQ composite, the tech-heavy index, closed lower by 0.35% yesterday.