Stock Market Breadth
US futures and European futures are trading lower, and they are on track to post their firstly weekly loss as investors calibrate their assessments about riskier assets. The Federal Chairman has delivered a somewhat mixed message this week, but he has been very clear that the market players must expect further rate hikes. The new expectations are that perhaps the US terminal Fed fund rate will be close to 5.25%. An aggressive increase in the interest rate represents a massive threat for the US economy and traders believe that the Fed hasn’t priced in this element. The reality that the Fed pays close attention to economic data which entails that the US job market is robust; however there is a possibility the economic numbers may not telling us the full picture here as the current earnings season has flagged many potential threats for the US economy.
All eyes are now going to be focused on one thing only and that is the US CPI reading which is coming out next week. If the data impresses Wall Street, then we could see some new buying pressure coming for the US equity market. On the flip side, if the numbers come in short of expectations, we could potentially see serious turmoil in the US equity market.
In terms of the forex market, the dollar index is back, and this week 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. A fresh UK CPI number will be released next week. 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 hawkish comments from the Fed chairman who believes more interest rate hikes are necessary. This has brought back some life to the dollar index, and it has been 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 have staged some recovery this week and prices are well off from the lows of the last 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 Chinese demand. Traders are hoping to see a strong recovery in oil demand in China and at the same time they do expect OPEC to keep a tight lid on the supply side.
On the technical side, there is no doubt that both Crude and Brent Oil prices are moving away from their oversold region. We may see the Crude oil price flirting with the 100-day SMA on the daily time frame which could act as a resistance level, and if the price breaks above this level, we are likely to see more bulls coming to the market.
The crypto industry continues to face new challenges. This week we have seen traders becoming largely worried about the potential ruling by the SEC which could ban staking for retail investors in the United States. Market players believe that this could really hurt the industry, and this is nothing more than another bad piece of news for the crypto market.
In terms of the BTC price action, the price mark which matters the most is the 20K support level. This is an important support level which the price needs to respect and stay above.
The Asian stock market mainly traded mostly lower on the week’s last trading day. The Nikkei index increased by 0.23%. The Shanghai index declined by 0.54%, while the KOSPI index dropped by 0.94%. The Hang Seng index moved lower by 1.92%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost some momentum yesterday. 54% of the Dow Jones stocks are trading above their 200-day moving average.
The S&P 500 stock breadth also confirmed some weakness in its momentum. 53% of the shares traded above their 200-day moving average.