Stock Market Breadth
The Fed has confirmed this week that they are not going to slow down the process of increasing the interest rate although traders believe that the Fed will remain data dependent. The economic numbers released this week have been dire, but earnings reports have been strong so far apart from Tesla. Tesla did surprise market players on many metrics, but overall sentiment shifted against the stock. Next week will be another tech heavy week for the US corporates and this means enormous volatility will continue.
The UK’s government is in absolute turmoil, the country will be waiting for a new Prime Minister, and this will be the third time that the nation will be going through this. Having general elections is not only a resource intensive scenario, but it also adversely influences the FDI and economic climate for the country. Now investors are highly likely to remain on the side for the next three weeks because they will be eager to understand who the caretaker will be while the election process will take place.
From the Sterling and the Bank of England’s perspective, there is more uncertainty out there now as a new Prime Minister will have to make some promises to the public in order to be elected. This means a new fiscal plan and if it is not something the markets like, we are likely to see the British Pound weakening further.
In terms of the forex market, the dollar index gained strength this week. The Fed members are still very much maintaining that they want to continue to hike interest rates and there is little to no sign of the Fed not increasing the rate less than 75 basis points in their next meeting.
The Strength in the dollar index is creating a lot of issues for other central banks, especially for the BOJ whose currency is dropping significantly these days. It is anticipated that the BOJ will intervene but the question in the mind of traders will be if the potential intervention will be strong enough to support the currency.
On Friday, gold prices are on track to record another week of losses. A lot of this weakness is mainly due to the strength in the US economic data which keeps on telling us the same story that recession isn’t as imminent as many have been thinking. This is giving a lot of leverage to the Fed who is keen to increase the interest rate by 75 basis points during their next meeting. In addition, the US earnings season is also in full motion and the numbers that we have heard so far don’t indicate that an Armageddon is heading towards the US economy. This is keeping traders interested in the equity markets and there is less of an inflow in gold ETFs.
Brent and Crude oil are on track to record the week where they started from, and this means bulls and bears had a tough week. The situation with oil is immensely complex these days. For instance, tensions are ever growing between the United States and Saudi Arabia, and it seems that the United States’ biggest ally is slipping away as the Biden administration is taking wrong turns in terms of their polices. If the tensions continue between the two oil giants, there are limited chances of any serious sell off in oil prices, as this time Saudi Arabia will not wait around, and will cut the production pretty much straight away when the oil price curves go in contango.
The sentiment certainly seems to be shifting nowhere when it comes to the crypto market. This week we have seen the price of Bitcoin moving in one direction and one direction only, and that is to the downside. The price range has been immensely narrow and there is no doubt that capitulation is coming for Bitcoin. If we look at the current trend, then the odds are strong that the next move is likely to be the downside and that means that the price could drop all the way to the 15k price level. However, if bulls take control of the price action, and a breakout takes place to the upside, then the price of Bitcoin could easily reach the 32K mark.
In terms of fundamentals, it will be the Fed meeting which will play a key role in Bitcoin prices. Any hawkish comments especially, if the Fed’s next meeting indicates that the Fed will increase the interest rate by the same magnitude in their next two meetings, may cause us to see more weakness in the BTC price.
The Asian stock market traded in a varied manner on the last trading day of the week. The Nikkei index declined by 0.09%. The shanghai index increased by 0.28%, while the KOSPI index decreased by 0.51%. The Shanghai index fell by 0.27%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost further momentum. 58% 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. 59% 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 looking at the Canadian Retail Sales, which will be coming at 12:30 GMT. The forecast is 0.2%, while the previous reading was at -2.5%.
The Dow Jones futures are trading lower today. The index has challenged the 50-day SMA on the daily time frame this week, but it failed to break above this average which shows sign of weakness. The index continues to trade below the 200-day SMA and the 100-day SMA which is a sign that bears are in control of the price action.
The near-term support is 28,961, while the resistance is 32,104.
Stock Market Rally
The S&P 500 stock index closed lower on Thursday; the index decreased by 0.80%. The utility sector led the index lower; three sectors out of 11 closed higher yesterday.
The Dow index also fell on the second last trading day of the week; the Dow stocks moved the index higher by 0.30%. 9 shares advanced, while 21 shares closed lower.
The NASDAQ composite, the tech-heavy index, closed lower by 0.61% yesterday.