Wall Street ends lower as Cisco and Apple sink

By Devik Jain and Noel Randewich

(Reuters) – Wall Street ended lower after a volatile session on Thursday, with Cisco Systems slumping after giving a dismal outlook, while investors fretted about inflation and rising interest rates.

Shares of Cisco slumped 13.7% after the networking gear maker lowered its 2022 revenue growth outlook, taking a hit from its Russia exit and component shortages related to COVID-19 lockdowns in China.

Apple and chipmaker Broadcom declined 2.5% and 4.3%, respectively, and weighed on the S&P 500.

“The reality is that inflation is running hot and interest rates are rising,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota. “Until you get that inflation rate to start slowing, we’re going to have increased volatility, and in our view that continues through throughout most of the summer months.”

Twitter climbed 1.2% after Bloomberg reported that company executives told staff that Elon Musk’s $44-billion deal was proceeding as expected and they would not renegotiate the price.

The S&P consumer staples index fell 2% to its lowest level since December as retail firms face the brunt of rising prices hurting the purchasing power of U.S. consumers.

Kohl’s Corp became the latest retailer to flag a hit from four-decades high inflation as the department store chain cut its full-year profit forecast.

Its shares, however, rebounded over 4% after slumping 11% in the previous session due to dismal results from Target Corp.

The S&P 500 is down about 18% from its record close on Jan. 3 as investors adjust to strong inflation, geopolitical uncertainty stemming from the war in Ukraine and tightening financial conditions with the U.S. Federal Reserve raising rates.

A close of 20% or more below its January record high would confirm the S&P 500 has been in a bear market since hitting that peak, according to a widely used definition.

GRAPHIC: S&P 500 bear markets (https://fingfx.thomsonreuters.com/gfx/mkt/egpbkwmlgvq/Pasted%20image%201652990180837.png)

Goldman Sachs strategists predicted a 35% chance of the U.S. economy entering a recession in the next two years, while the Wells Fargo Investment Institute expects a mild U.S. recession at the end of 2022 and early 2023.

The S&P 500 declined 0.58% to end the session at 3,900.79 points.

The Nasdaq declined 0.26% to 11,388.50 points, while the Dow Jones Industrial Average declined 0.75% to 31,253.13 points.

GRAPHIC: S&P 500’s busiest trades (https://fingfx.thomsonreuters.com/gfx/mkt/akvezranxpr/SPX_by_busiest_trades.png)

Thursday’s mixed performance followed a drop of over 4% in the S&P 500 on Wednesday, the benchmark’s worst one-day loss since June 2020.

The CBOE volatility index, also known as Wall Street’s fear gauge, fell to 29.5 points on Thursday, after hitting its highest level since May 12 earlier in the session.

Canada Goose Holdings Inc jumped almost 10% after it forecast upbeat annual earnings, encouraged by strong demand for its luxury parkas and jackets.

Volume on U.S. exchanges was 12.7 billion shares, compared with a 13.4 billion average over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.15-to-1 ratio; on Nasdaq, a 1.31-to-1 ratio favored advancers.

The S&P 500 posted 1 new 52-week highs and 43 new lows; the Nasdaq Composite recorded 12 new highs and 326 new lows.

(Reporting by Devik Jain and Amruta Khandekar in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Arun Koyyur and Grant McCool)

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Nearly Unchanged after Strong Rebound Rally

June E-mini NASDAQ-100 Index futures are trading lower late in the session on Thursday, but well off their earlier lows with Nvidia and other megacap growth stocks rebounding after recent losses. Helping to cap gains is slumping Cisco Systems, which fell following a dismal outlook for the company.

At 19:41 GMT, June E-mini NASDAQ-100 Index futures are at 11880.50, down 55.00 or -0.46%. The Invesco QQQ Trust ETF (QQQ) is trading $289.68, down $1.46 or -0.50%.

Some megacap growth stocks that have badly underperformed in recent months made gains and kept the NASDAQ in positive territory. Nvidia rose 2.9%, while Amazon and Tesla were each up around 1%.

Meanwhile, shares of Cisco dropped 14.4% after the networking gear maker lowered its 2022 revenue growth outlook, taking a hit from its Russia exit and component shortages related to COVID-19 lockdowns in China.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 11689.00 will signal a resumption of the downtrend. A move through 12594.00 will change the main trend to up.

The nearest support is a long-term 50% level at 11671.25.

On the upside, the nearest resistance is a 50% level at 12141.50. Another 50% level at 12622.25 is also potential resistance.

Short-Term Outlook

The direction of the June E-mini NASDAQ-100 Index into the close on Thursday and early Friday is likely to be determined by trader reaction to 11671.25.

Bearish Scenario

A sustained move under 11671.25 will indicate the presence of sellers. If this move creates enough downside momentum, we could see a near-term break into the November 2, 2020 bottom at 10913.75, followed by the long-term Fibonacci level at 10468.25.

Bullish Scenario

A sustained move over 11671.25 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into 12141.50. Taking out this level will indicate the buying is getting stronger with the next major target a resistance cluster at 12594.00 to 12622.25.

For a look at all of today’s economic events, check out our economic calendar.

Consumer Pressure – Is There An End In Sight?

The US stock market contracted sharply over the past 30+ days while traders attempted to identify the risks associated with the US Fed rate increase. Behind the scenes, consumer pressure is building due to higher costs on nearly everything. Gas, food, everyday items, credit card interest payments – almost everything costs more due to inflation and increasing fuel costs.

I remember in 2007-08 when Oil reached levels above $140ppb and the seemingly high costs of everything just before inflation peaked and the markets turned bearish. Back then, much like today, a period of extreme speculation seemed to permeate buyers and investors throughout the US.

What broke this trend was the Global Financial Crisis. When the economy started to unravel, excessive credit/debt levels suddenly became unmanageable for nearly everyone. What seemed like a reasonable and manageable amount of debt suddenly became excessive as the US Fed raised the Fed Funds rate from 1.0% to 5.5% – a 450% increase.

Recently, we’ve seen the US Federal Reserve raise rates from 0.25% to 1.0%. The Fed may raise rates again soon, trying to tame inflation. I don’t have a crystal ball, but it is not difficult to understand how inflation, higher consumer costs, and increased debt servicing costs are going to panic many consumers, especially after many years of Zero Interest-Rate Policy and low inflation.

Consumers Burdened By Higher Costs & Dwindling Incomes

US consumers are struggling to manage their finances as inflation and higher cost of living expenses continue to eat away their extra cash. Remember, what happens on a consumer/retail level is often the “canary in the coal mine” type of scenario related to broader economic trends.  As consumers shift their spending habits, news travels quickly to other consumers about how the economic conditions are threatening their future.

The extreme measures taken when COVID-19 hit in February 2020 helped many consumers survive the extreme economic contraction that took place. Now that we are beyond extreme measures, prices have risen more than 25% over the past 24+ months for almost everything. Consumers are struggling to manage their monthly expenses while still trying to enjoy their lifestyles.

A recent article highlighting former Federal Reserve Chairman Ben Bernanke suggests the current US Fed waited too long to address inflation issues. The steps now necessary to tame inflation could be very painful going forward. I see this as a very clear warning for traders/investors to keep their assets very liquid and to reduce their exposure to risk factors.

New Mortgage Demand Collapses As Consumers Are Priced Out Of Buying Homes

The sharp decline in mortgage demand is indicative of a collapse in consumer confidence and willingness to believe the economy is going to continue to grow. The warnings from the US Fed, as well as signs that international market conditions are deteriorating quickly, have US consumers on edge – watching for the next shoe to drop (again).

Consumer pressure - real estate

(Source: Investing.com)

US Fed On Target For An 1100%+ Rate Increase Over 4+ months – Fastest In Recent History

The US Federal Reserve has continued to suggest further rate increases are necessary to help tame current inflation trends. By many conservative estimates, the US Fed is targeting levels at or above 2.0%. These extremely aggressive targets would represent the fastest and potentially largest rate increase in recent history on a percentage basis.

If the US Fed next raises interest rates by 0.50%, that would represent a 1100%+ rate increase in just 90 days.  Rates moving to 2.0% or higher soon, will represent a 1500%+ increase over 4 to 5+ months.

Consumer pressure - Federal Funds Effective Rate

(Source: FRED database)

Extreme Post-COVID Speculative Wave May Have Extreme Consequences

Inflation and many other economic issues are suddenly front-n-center for central banks and consumers across the globe. News that China’s real estate price levels continue to decline may be a very clear sign that China/Asia has peaked ahead of the US and other global markets. We’ve never seen anything like the sharp rally in global real estate price levels except for a brief period from 2004 to 2008 (see chart below).

Consumer pressure - median sales prices in US

(Source: FRED database)

That rally ended with the Global Financial Crisis. Home prices declined nearly -20% from the peak in Q1:2007 to the bottom in Q1:2009. If history repeats, US home prices will fall more than -20% to -25% over the next 12+ months.

US Equity Market May Not Follow Asset Prices Downward As Economy Shifts

I want to urge you to consider how capital works in a shifting global market environment. Capital is always seeking out the best, most opportunistic, instruments for future gains and protection again risks.  Even when the markets were turning downward in 2009, a bottom set up in the US stock market long before other assets found their bottom in price. This same type of scenario may play out over the next 12 to 24+ months.

If my interpretation of market conditions is correct and the US Fed attempts to raise rates further to mitigate inflationary trends, it is likely that various asset classes, ETFs, and individual sectors will unwind risks (as we are now seeing) and will possibly turn into future opportunities. What was overvalued in the past may turn into an incredible opportunity as capital shifts towards sectors/trends showing opportunities for future ROI.

The current market trends will present incredible opportunities for traders/investors that are able to protect capital, see and understand the risks and opportunities unfolding, and time their investments/trades properly in the markets.

Learn From Our Team of Seasoned Traders

In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover
  • A 50% loss requires a 100% gain to recover
  • A 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months while a 50% drawdown may take years to recover.

Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.

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Sign up for my free trading newsletter so you don’t miss the next opportunity!

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Chief Market Strategist
Founder of TheTechnicalTraders.com

Daily Crypto Brew: Crypto Markets Reeling After Wall Street’s Worst Day Since 2020

Key Points

  • Crypto markets fell sharply on Wednesday as Wall Street experienced its worst day since June 2020.
  • Crypto sentiment has since stabilized, despite further downside in global equities on Thursday.
  • Bitcoin is currently around $29,000, having fallen back from the upper $30,000s on Wednesday.

State Of The Market

A series of grim earnings reports from US retailers, which most recently saw Target (TGT) drop over 20% on Wednesday, have put fears about US (and global) growth and inflation back in the limelight. As a result, Wednesday was the worst day for the US stock market since June 2020, with the S&P 500 dropping over 4.0% and the Nasdaq 100 dropping over 5.0%.

Given the close correlation to US stocks, Wednesday was also an ugly day for crypto, with the total market capitalization falling about 6.5% to around $1.21 trillion from above $1.30 trillion.

Stagflationary signals coming from major US retailers (Walmart and Home Depot also reported earnings this week) have negated this week’s stronger than anticipated US Retail Sales report for April and come against the backdrop of a Fed (and other major global central banks) that remains intent on continuing to tighten monetary policy aggressively.

Traders will recall remarks from Fed Chair Jerome Powell on Tuesday where he emphasized that the Fed’s top priority is inflation-fighting, even if that means slower growth, and, as a result, the Fed “will not hesitate” to take rates above the so-called “neutral” level (of around 2.5%) if required. Other Fed policymakers speaking that week have largely signaled the same message.

Expectations for slower growth (meaning weaker earnings) coupled with expectations for higher interest rates (meaning a higher discount rate) squeeze equity valuations from both directions. Many analysts are unsurprised that the bounce in US stocks earlier in the week proved to be short-lived.

In Thursday pre-market trade, US equity index futures are extending on Wednesday’s losses and look likely to break out to fresh annual lows before the week is out. Crypto is holding up a little better for now, with the total market cap for now consolidating around the $1.225 trillion mark and slightly in the green on the day.

Tier two US data in the form of the May Philadelphia Manufacturing survey, the weekly initial jobless claims report, and April Existing Home Sales probably won’t move markets much, with focus set to remain on the overarching themes of slowing growth, inflation, and central bank tightening.

Expect cryptocurrencies to continue taking their cue from stocks and, if that is the case, be prepared for further downside. A break below support at $1.20 trillion could see the crypto market cap drop back towards annual lows under $1.1 trillion.

Crypto Price Action

Bitcoin fell nearly 6.0% on Wednesday in tandem with the downside in equities, dropping from the upper $30,000s to the mid-$28,000s. However, despite continued US equity downside in pre-market trade, bitcoin has stabilized in the $29,000 area and remains a good 14% above last week’s sub-$26,000 lows (unlike S&P 500 futures, which are only a whisker above last week’s lows).

If bitcoin can continue to consolidate around the $30,000 level as has been the case over the past six or so sessions despite a breakout to fresh annual lows in US equities, that would be impressive. But the aforementioned negative themes of growth and central bank tightening fears suggest that it remains too soon to bet on a substantial bitcoin rebound.

At current levels, bitcoin has a market cap of around $550 billion, giving it a market dominance of around 45% (up from under 44.5% on Wednesday). In times of market turmoil, bitcoin’s market dominance tends to expand given its status as the largest/most durable cryptocurrency (many think).

Ethereum, meanwhile, dropped closer to 9.0% on Wednesday from around $2,100 per token to around $1,900. At present, the second-largest cryptocurrency by market cap is trading a tad higher on the day in the low $1900s but also remains vulnerable to further US equity market downside.

At current levels, ethereum has a market cap of around $230 billion, giving it a crypto market dominance of around 19% (down from 19.4% on Wednesday).

Non-stablecoin altcoins unsurprisingly underperformed versus bitcoin on Wednesday.

Of the majors, Ripple’s XRP dropped around 7.5% on Wednesday and is a further more than 1.0% lower on Thursday. Solana’s SOL dropped 12.5% on Wednesday and is down nearly 2.0% more on Thursday.

Binance’s BNB was down 6.0% on Wednesday, though has since bounced about 2.5% on Thursday. Cardano’s ADA lost about 12.5% on Wednesday and is flat on Thursday.

DeFi

The total value locked (TVL) of the entire Decentralised Finance space dropped by about $4.0 billion on Wednesday to around $98 billion, which is unsurprising really given the resoundingly risk-off broader market conditions.

Even though various DeFi protocols offer attractive yields on various stablecoins which are supposed to be immune to broader market conditions, investing in DeFi is still seen as highly speculative. This is even more so the case in wake of last week’s UST (and LUNA) crash.

At the start of 2022, the TVL of the total DeFi space was well above $200 billion. Amid the broader risk-off conditions in crypto and financial markets, it is difficult to imagine flows returning anytime soon.

In other notable DeFi news, early voting indicates majority support within the Terra community/validators for founder Do Kwon’s proposed fork. The fork, which could happen as soon as 27 May, would see the creation of a new Terra blockchain alongside the original one.

The new blockchain will scrap the UST stablecoin. The old Terra blockchain will be called Terra Classic and governed by the native token LUNA classic. LUNA’s market cap has fallen back under $1.0 billion as voting proceeds. UST/USD, meanwhile, continues to trade below the $0.10 level.

Crypto Flows

Exchange wallets saw net inflows of about $223 million worth of bitcoin on Wednesday, data from Glassnode showed, in fitting with the bearish market conditions. Crypto investors tend to move their investments back to exchange wallets where they can then be sold during difficult market conditions. During the same time period, ethereum exchange wallets saw a net inflow of just $7.1 million.

Elsewhere, there has been some hype across the crypto media landscape about the recent accumulation of more bitcoin by the richest non-exchange bitcoin wallet. The wallet has seemingly been using the recent downturn as an opportunity to buy the dip, having bought about 3,015 bitcoins over the last three weeks on net. That means the wallet now holds 127,067 bitcoins, worth about $3.685 billion based on Thursday prices.

Regulatory Landscape

US Securities and Exchange Commission (SEC) Chair Gary Gensler said in a Congressional hearing on Wednesday that a majority of initial coin offerings come under the SEC’s securities law, and that these tokens will be brought into the regulatory framework with the deployment of the SEC’s existing securities laws. A very small number of tokens, including bitcoin, are considered commodity tokens, he added, and would therefore fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

Russian Industry and Trade Minister Denis Manturov said on Thursday that, “sooner or later”, Russia will legalize cryptocurrencies as a means of payment. Speaking at a forum, Manturov was questioned on the matter of crypto legalization as a means of payment. “The question is, when this occurs, how it will be regulated, given that the central bank and government are actively working on it,” he stated. “The general consensus is that… sooner or later, this will be implemented in some form,” he said.

Bitcoin (BTC) Sinks to sub-$29,000 as Risk Aversion Spreads

Key Insights:

  • On Wednesday, bitcoin (BTC) slid by 5.75% to sub-$29,000 as investors reacted to Fed Chair Powell’s comments from Tuesday in a delayed fashion.
  • The downside came despite the Bitcoin Fear & Greed Index recovering from 8/100, the lowest level since a March 14, 2020 low of 8/100.
  • Bitcoin (BTC) technical indicators flash red, with bitcoin sitting below the 50-day EMA.

Bitcoin (BTC) slid by 5.75% on Wednesday, weighed by Fed Chair Powell commentary. Reversing a 1.93% gain from Tuesday, bitcoin ended the day at $28,667.

A mixed session saw bitcoin rise to an early high of $30,674 before hitting reverse.

Falling short of Tuesday’s high of $30,744, bitcoin slid to a late intraday low of $28,610 before steadying.

Bearish sentiment from the US equity markets spilled over to the crypto market, with the bitcoin-NASDAQ correlation strengthening.

The sell-off stemmed from a delayed market reaction to Fed Chair Powell’s speech on Tuesday.

Several drivers are currently in play to test crypto investor appetite. These include the threat of a shift in the regulatory landscape, the fear of a recession, Fed monetary policy, and the risk of another stablecoin collapse.

The Bitcoin Fear & Greed Index Remains Deep in the Extreme Fear Zone

This morning, the Fear & Greed Index rose from 12/100 to 13/100. While continuing to recover from Tuesday’s 8/100, the Index remained deep in the “Extreme Fear” zone, reflecting the bearish sentiment across the crypto market.

BTC Fear & Greed Index still in extreme fear.
Fear & Greed 190522

The Fear & Greed Index move northward had a muted impact on investor sentiment, with the US equity markets hitting reverse mid-week. The NASDAQ 100 led the way, sliding by 4.73% as investors responded to Fed Chair Powell’s comments from Tuesday.

After providing the markets with assurances about larger rate hikes in the week prior, the Fed Chair talked of a willingness to move policy beyond neutral to curb inflation. Powell also discussed some possible pain ahead for the labor market, while acknowledging that the Fed should have lifted rates sooner.

NASDAQ - BTC correlation strengthens as a result of hawkish Powell chatter.
BTCNASDAQ 1905 Correlation Chart

Bitcoin (BTC) Price Action

At the time of writing, BTC was up 1.02% to $28,959.

Fed Chair Powell and the NASDAQ sink BTC.
BTCUSD 190522 Daily Chart

Technical Indicators

BTC will need to move through the $29,315 pivot to target the First Major Resistance Level at $30,026 and Wednesday’s high of $30,674.

BTC would need the broader crypto market to support a return to $30,000.

An extended rally would test the Second Major Resistance Level at $31,383 and resistance at $32,000. The Third Major Resistance Level sits at $33,445.

Failure to move through the pivot would test the First Major Support Level at $27,959. Barring another extended sell-off, BTC should steer clear of sub-$27,000 levels. The Second Major Support Level at $27,252 should limit the downside.

A BTC move through to $30,000 would ease the pressure.
BTCUSD 190522 Hourly Chart.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. BTC sits below the 50-day EMA, currently at $30,541. This morning, the 50-day pulled back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA; BTC negative.

A move through the 50-day EMA would support a run at $32,500.

Failure to move through the 50-day EMA would leave BTC under pressure.
BTCUSD 190522 4 Hourly Chart

Wall Street ends sharply lower as Target and growth stocks sink

By Noel Randewich and Amruta Khandekar

(Reuters) – Wall Street ended sharply lower on Wednesday, with Target losing around a quarter of its stock market value and highlighting worries about the U.S. economy after the retailer became the latest victim of surging prices.

It was the worst one-day loss for the S&P 500 and Dow Jones Industrial Average since June 2020.

Target Corp’s first-quarter profit fell by half and the company warned of a bigger margin hit on rising fuel and freight costs. Its shares fell about 25%, losing about $25 billion in market capitalization, in their worst session since the Black Monday crash on Oct. 19, 1987.

The retailer’s results come a day after rival Walmart Inc trimmed its profit forecast. The SPDR S&P Retail ETF dropped 8.3%.

“We think the developing impact on retail spending as inflation outpaces wages for even longer than people might have expected is a principal factor in causing the market sell-off today,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute. “Retailers are starting to reveal the impact of eroding consumer purchasing power.”

Interest-rate sensitive megacap growth stocks added to recent declines and pulled the S&P 500 and Nasdaq lower. Amazon, Nvidia and Tesla Inc dropped close to 7%, while Apple fell 5.6%.

“The cons outweigh the pros for growth stocks at this particular moment, and the market is trying to decide how bad it’s going to get,” said Liz Young, head of investment strategy at SoFi. “The market is fearful of the next six months. We may find out that it doesn’t need to be as fearful as this, and markets do tend to overreact on the downside.”

All of the 11 S&P 500 sector indexes declined, with consumer discretionary and consumer staples leading the way lower, both down more than 6%.

Rising inflation, the conflict in Ukraine, prolonged supply chain snarls, pandemic-related lockdowns in China and monetary policy tightening by central banks have weighed on financial markets recently, stoking concerns about a global economic slowdown.

Wells Fargo Investment Institute on Wednesday said it expects a mild U.S. recession at the end of 2022 and early 2023.

Federal Reserve Chair Jerome Powell vowed on Tuesday that the U.S central bank will raise rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy.

Traders are pricing in 50-basis point interest rate hikes by the Fed in June and July.

Unofficially, the S&P 500 declined 4.04% to end the session at 3,923.68 points.

The Nasdaq declined 4.73% to 11,418.15 points, while Dow Jones Industrial Average declined 3.57% to 31,490.07 points.

GRAPHIC-The S&P 500’s busiest trades (https://fingfx.thomsonreuters.com/gfx/mkt/zdvxowdgapx/SPX_by_busiest_trades.png)

The S&P 500 is down about 18% so far in 2022 and the Nasdaq has fallen about 27%, hit by tumbling growth stocks. Almost two-thirds of S&P 500 stocks are down 20% or more from their 52-week highs, according to Refinitiv data.

Wall Street’s recent sell-off has left the S&P 500 trading at around 17 times expected earnings, its lowest PE valuation since the 2020 sell-off caused by the coronavirus pandemic, according to Refinitiv data.

GRAPHIC-S&P 500’s forward PE dips below 10-year average (https://fingfx.thomsonreuters.com/gfx/mkt/gkplgzwqlvb/Pasted%20image%201652888821996.png)

The CBOE volatility index, also known as Wall Street’s fear gauge, rose to 31 points after falling for six straight sessions.

Volume on U.S. exchanges was 12.5 billion shares, compared with a 13.4 billion average over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 5.09-to-1 ratio; on Nasdaq, a 3.52-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 37 new lows; the Nasdaq Composite recorded 25 new highs and 242 new lows.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru and by Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and Lisa Shumaker)

Crypto Winter Ending Says Veteran Trader

Key Points

  • After calling the top last November, Yves Lamoureux sees the “crypto winter” ending.
  • “I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” he said.
  • At current levels just under $30,000, bitcoin is down over 56% from last year’s record peaks.

Bear Market

Just over six months ago, and just days after bitcoin had hit its highest levels on record around the $69,000 mark, Yves Lamoureux made the now-famous call that cryptocurrencies were headed into a bear market.

Lamoureux, who is president of macroeconomic research company Lamoureux & Co and sometimes referred to as the “Canadian Whale”, got his call last November spot on. Since the record peaks in November, bitcoin has crumbled more than 56% to current levels just below the $30,000 mark.

Over the same time period, the broader market cap of cryptocurrencies has tanked from record highs just above $3.0 trillion to current levels around $1.28 trillion, a drawdown of around 58%.

Cryptocurrencies have been hit hard by a sharp rise in both short- and long-term US yields (which raises the opportunity cost of holding non-yielding assets like precious metals and crypto), as well as a sharp pullback in US tech stock valuations (crypto has become increasingly correlated to US tech in recent months).

Sparking these unfavorable macro trends has been a rapid hawkish shift from the US Federal Reserve. Where last November the central bank was holding onto the belief that inflation would prove “transitory” and no rate hikes would be needed into 2023, the bank has realized the error of its ways.

The bank kicked off a hiking cycle with a 25 bps move back in March followed by a 50 bps hike earlier this month and officials are vowing to press ahead with further rate hikes in order to tackle inflation that is currently running at an annual rate more than four times higher than the bank’s 2.0% target (according to last week’s CPI data for April).

Crypto Winter Set To End?

Despite the ongoing threat of further/faster monetary tightening from the Fed, which many strategists think could result in further pain in crypto and equity markets and further moves higher in US yields, Lamoureux this week called for an end to the so-called “crypto winter”, Yahoo Finance reported on Wednesday.

“I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” Lamoureux reportedly said, adding that the 80% drawdowns seen in bitcoin’s past are no longer now required to shake out weak hands.

Describing the stages of the recent bear market, Lamoureux said “instead of one big swoon down, bitcoin broke that in two parts — creating less downside than a traditional drawdown”.

Much of bitcoin’s drawdown since last November had taken place by mid/late January, with the cryptocurrency only recently breaking below these lows and under $30,000 in wake of the collapse of TerraUST and LUNA.

“It looks complete in terms of a bear market,” Lamoureux stated.

Given the tight correlation between the beleaguered US tech sector and cryptocurrencies, some respite in the Nasdaq 100 index will likely be needed if bitcoin and other cryptocurrencies are to mount a meaningful recovery.

But Lamoureux is bullish on US tech. “It’s not often I am fully invested… (but) I am now,” he said, before adding that “as inflation drops, techs will reflate hard… Watch the FOMO”.

Lamoureux recently called for a three-year equity bull market.

Daily Crypto Brew: Bitcoin Consolidates, Pivots $30K As Traders Digest Hawkish Powell Commentary

Key Points

  • Crypto markets are a tad weaker on Wednesday but within recent ranges, as markets digest Fed Chair Powell’s hawkish commentary.
  • The Fed won’t hesitate to take rates above neutral, said Powell, deterring crypto bulls from chasing prices higher.
  • Total crypto market cap was last around $1.27 trillion with bitcoin last trading just under $30,000.

State Of The Market

While constructive updates out of China regarding a potential easing of Shanghai lockdowns and of the ongoing big tech crackdown got a rally in US and global equities started on Tuesday, the gains accelerated in US trade following robust US Retail Sales and Industrial Production data. In the end, the S&P 500 and Nasdaq 100 indices ended the day higher by 2.0% and 2.6% respectively, with traders shrugging off the hawkish tone to US Federal Reserve Chair Jerome Powell’s remarks towards the end of the day.

This unsurprisingly helped give risk-sensitive cryptocurrency markets a boost at the time, with the total crypto market capitalization rising to close Tuesday trade higher by about 2.5% and back above the $1.3 trillion mark.

However, as US equity index futures hand back some gains in pre-market trade, crypto markets have also come under some modest pressure. Total market cap has now more or less already given up all of Tuesday’s gains and is back to trading just above $1.27 trillion.

The more time markets have had to digest Powell’s remarks, the more the crypto bulls seem deterred from chasing prices higher. To recap, the main message from the Fed Chair was that the central bank remains hyper-focused on tackling sky-high inflation and will not hesitate to move rates above so-called neutral (i.e. the 2.5% area) if required.

For now, markets do not seem to be betting on interest rates moving well beyond neutral, which has facilitated stabilization in equities and crypto, and explains why bonds are consolidating below recent highs (10-year yields are still below 3.0%). Hence, the total crypto market cap continues to trade within the $1.25-35 trillion range established over the past four sessions.

But should the inflation figures fail to moderate as much as hoped for in the next few months, recent trends (weaker equities and crypto plus higher yields) could return as markets up their Fed tightening bets. In this bearish scenario, a break lower to annual sub-$1.1 trillion lows and perhaps below $1.0 trillion would very likely be on the table.

Looking ahead, it should be a quiet day on the economic calendar with no notable US data aside from some US housing data, which shouldn’t impact crypto. Any further Fed speak would be notable, as ever.

Price Action

In fitting with the broader stabilization of crypto markets, bitcoin continues to pivot on either side of the $30,000 per token mark, with its market cap near $570 billion, giving it a market dominance of still close to 44.5%. BTC/USD was last down about 1.5% on Wednesday.

Ethereum, meanwhile, continues to consolidate just above the $2,000 per token mark, giving it a market cap of around $250 billion and a dominance of around 19.2%. ETH/USD was last down about 2.6% on Wednesday.

In terms of some of the other major altcoins, Ripple’s XRP was last down around 2.0% but remained within recent ranges in the low-$0.40s per token. Likewise, Binance’s BNB was down about 1.4% but stable within recent intra-day ranges in the $300 per token area.

Solana’s SOL was last down closer to 5.0% on the day, but also within recent ranges around the mid-$50s per token, while Cardano’s ADA was last down about 2.5% in the mid-$0.50s, also within recent ranges.

DeFi, NFT Update

The chilling impact of the collapse of Terra’s ecosystem remains apparent across the Decentralised Finance (DeFi) space. Trade value locked (TVL) across all major chains was around $170 billion at the start of the month, but is now at around $100 billion, where it has remained for the last few days.

Prior to that, attractive yields on many assets including stablecoins across the DeFi space had supported TVL despite a broader downturn in cryptocurrency prices since the start of the year. But UST’s woes have hit confidence badly. A sustained upturn in crypto prices is likely going to be required for TVL to recover back to $200 billion once again, a prospect that doesn’t seem likely any time soon.

In tandem with the recent stabilization of the TVL across DeFi, the market cap of major DeFi governance and stablecoin tokens has remained stable in the mid-$50 billions area on Wednesday, according to CoinGecko data.

In terms of DeFi news, the Terra community has rejected a proposal from founder Do Kwon to revive the ecosystem with a blockchain fork. The community instead seems to favor an aggressive burn mechanism to address the flood of LUNA supply. As of Wednesday, LUNA’s market cap was just above $1.1 billion, making it the 12th largest of the major DeFi tokens.

Meanwhile, the UST token was last trading just under 10 cents on the dollar and had a market cap of around $1.4 billion.

Turning to the non-fungible token (NFT) market, in fitting with the broader crypto theme this week, the price floor of major NFT collections have been stabilizing. The price floor to bag one of Yuga Labs’ Bored Ape Yacht Club NFTs, having reached above $400,000 in late April, has stabilized around the $200,000 mark in recent days.

Meanwhile, after trading around $200,000 for most of 2022 but then falling towards $100,000 in early May, the price floor to own a Crypto Punk NFT has stabilized near the $110,000 mark in recent days.

In terms of NFT news, Spotify is reportedly testing the addition of NFT galleries on artist profiles, as the company explores ways to “improve artist and fan experiences”. Meanwhile, Robinhood is reportedly on the cusp of launching a new self-custody crypto wallet that will support NFTs, a move hailed as a significant stride in the right direction by Web3 advocates.

Crypto Flows

Glassnode data showed that, as of Wednesday morning, there had been modest outflows of $38.7 million worth of bitcoin and $64.5 million worth of ethereum from exchange wallets to private wallets over the last 24 hours, in fitting with the broader theme of continued stabilization.

According to blockchain transaction tracker Whale Alerts, a massive 2,447 bitcoins worth over $70 million at the time were transferred into a private wallet from a Coinbase wallet on Wednesday, indicative of Whale dip-buying.

Data from Glassnode on Wednesday also highlighted a shift in flows in the stablecoin market, with money leaving USDT (USDT tokens being redeemed for their cash equivalent) and going into the likes of USDC and BUSD. Since the collapse of algorithmic stablecoin TerraUST, around $7.5 billion in USDT tokens have been redeemed, taking the coin’s market capitalization to around $74 billion.

Meanwhile, close to $4.0 billion in USDC has been issued, taking the second largest stablecoin to a market cap of around $52 billion, making it the fourth-largest cryptocurrency by market cap. Similarly, BUSD’s market cap has risen from under $17 billion to around $18.2 billion over the same time period.

“What we are potentially watching is a changing preference for which stablecoins the market prefers,” said James Check, an analyst at Glassnode. Check speculated that a large trader or group of traders attempted to utilize heightened concerns after UST’s collapse to exert pressure on the USDT and perhaps trigger a similar de-pegging event last week.

Traders will recall that USDT did briefly come under pressure, though has maintained its peg well. Nonetheless, amid the heightened focus on USDT losing its peg, investors have been redeeming their USDT tokens and allocating towards other potentially “safer” stablecoins.

Regulatory Landscape

South Korea has reportedly launched an emergency investigation into the collapse of the Terra ecosystem and the downfall of its native governance token LUNA and algorithmic stablecoin UST. The country is reportedly considering implementing a licensing system for coin issuers and crypto exchanges, which it thinks might be able to mitigate investor losses from bad actors.

Meanwhile, the South Korean government reportedly wants to summon Terra founder Do Kwon to a hearing before parliament over Terra’s recent crash. Yoon Chang-Hyeon, a representative of the ruling People Power Party, said that “we should bring related exchange officials, including CEO Do Kwon of Terra, which has become a recent problem, to the national assembly to hold a hearing on the cause of the situation and measures to protect investors”.

Ahead of the meeting of G7 finance ministers later this week, Bank of France head and European Central Bank governing council member Francois Villeroy de Galhau has issued fresh calls for more crypto regulation. “What happened in the recent past is a wake-up call for the urgent need for global regulation… Europe paved the way with MICA (regulatory framework for crypto-assets), we will probably… discuss these issues among many others at the G7 meeting in Germany this week”, he said on Tuesday.

Meanwhile, over in the US, the Congressional Research Service, a legislative research agency that supports Congress, described the recent downfall of UST and the broader LUNA ecosystem as like a bank run.

Bitcoin (BTC) Remains Under Pressure Despite a Bullish Tuesday Session

Key Insights:

  • On Tuesday, bitcoin (BTC) rose by 1.93% to end the day at $30,416. Resistance at $31,000 continued to be the key resistance level.
  • The upside came despite the Bitcoin Fear & Greed Index falling to 8/100, the lowest level since a March 14, 2020 low of 8/100.
  • Bitcoin (BTC) technical indicators flash red, with bitcoin sitting below the 50-day EMA.

The NASDAQ supported a bitcoin (BTC) rise of 1.93% on Tuesday. Partially reversing a 4.66% slide from Monday, bitcoin ended the day at $30,416.

A mixed session saw bitcoin rise to a day high of $30,744 before hitting reverse.

Falling short of $31,000 and Monday’s high of $31,296, bitcoin eased back to sub-$30,500.

The upside came despite bearish sentiment lingering from the TerraUSD (UST) and Terra LUNA meltdowns of last week.

Throughout the day, the NASDAQ 100 mini delivered support ahead of upbeat stats from the US that were also positive for riskier assets.

Several key drivers are currently in play to test investor appetite. These include the threat of a shift in the regulatory landscape, the fear of a recession, Fed monetary policy, and the risk of another stablecoin collapse.

The Bitcoin Fear & Greed Index Recovers from a 2022 Low of 8/100

This morning, the Fear & Greed Index rose from 8/100 to 12/100. While recovering from the lowest level since March 14, 2020, the Index remained deep in the “Extreme Fear” zone, reflecting the bearish sentiment across the crypto market.

BTC Fear & Greed Index climbs after a fall to 8/100.
Fear & Greed Index

While the demise of Terra LUNA and TerraUSD led to a weaker correlation between the NASDAQ 100 and bitcoin, a correlation remains in place.

Bitcoin also responded to upbeat US retail sales and industrial production figures before easing back.

Bitcoin finds NASDAQ support.
BTCNASDAQ Daily Chart 1805

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.83% to $30,162.

A mixed start to the day saw bitcoin rise to an early morning high of $30,674 before falling to a low of $30,158.

Bitcoin found NASDAQ support on Tuesday.
BTCUSD 180522 Daily Chart

Technical Indicators

BTC will need to move through the $30,192 pivot to target the First Major Resistance Level at $30,969.

BTC would need the broader crypto market to support a breakout from Tuesday’s high of $30,744.

An extended rally would test the Second Major Resistance Level at $31,510 and resistance at $32,000. The Third Major Resistance Level sits at $32,816.

Failure to move through the pivot would test the First Major Support Level at $29,651. Barring another extended sell-off, BTC should steer clear of sub-$28,500 levels. The Second Major Support Level at $28,885 should limit the downside.

BTC struggles at $30,500.
BTCUSD 180522 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. BTC sits below the 50-day EMA, currently at $30,837. This morning, the 50-day pulled back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA; BTC negative.

A move through the 50-day EMA would support a run at $35,000.

A move through the 50-day would support a run at $35,000.
BTCUSD 180522 4 Hourly Chart.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Megacap Growth Stocks Post Impressive Gains

June E-mini NASDAQ-100 Index futures are trading higher shortly before the cash market close on Tuesday as the tech-heavy index tries to recover from its bear market.

Semiconductor stocks are a few of the best performers. Shares of Advanced Micro Devices jumped more than 8% following an upgrade from Piper Sandler, which said the stock looked attractive after falling 34.5% this year. Nvidia’s stock price rose 5%, Qualcomm jumped 4% and Micron Technology rose nearly 6%.

At 19:55 GM%, June E-mini NASDAQ-100 Index futures are trading 12541.00, up 296.25 or +2.42%. The Invesco QQQ Trust ETF (QQQ) is trading $306.00, up $7.56 or +2.53%.

Other top performers were Microsoft Corp, Apple Inc, and Tesla Inc which gained between 1.5% and 4.8%, providing the biggest boost to the NASDAQ Composite.

In economic news, retail sales numbers came in about as expected. Consumer spending on retail rose 0.9% in April, according to the U.S. Census Bureau. Retail sales excluding autos rose 0.6% in April.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 13555.25 will change the main trend to up, while a move through 11689.00 will signal a resumption of the downtrend.

The minor trend turned up when buyers took out the previous minor top at 12553.25. This shifted momentum to the upside.

The minor range is 13555.25 to 11689.00. Its pivot at 12622.25 is the first upside target.

The short-term range is 14298.00 to 11689.00. Its retracement zone at 12993.50 to 13301.50 is the next target.

Daily Swing Chart Technical Forecast

Trader reaction to 12622.25 will likely determine the direction of the June E-mini NASDAQ-100 Index into the close on Tuesday or early Wednesday.

Bullish Scenario

A sustained move over 12622.25 will indicate the buying is getting stronger into the close. This would put the index in a position to open higher on Wednesday and possibly lead to an early test of 12993.50.

Bearish Scenario

A sustained move under 12622.25 will signal the presence of sellers. If this generates some late session pressure then look for an early pullback on Wednesday into the pivot at 12133.50.

For a look at all of today’s economic events, check out our economic calendar.

Wall Street ends sharply higher, fueled by Apple

By Noel Randewich and Amruta Khandekar

(Reuters) – Wall Street finished sharply higher on Tuesday, lifted by Apple, Tesla and other megacap growth stocks after strong retail sales in April eased worries about slowing economic growth.

Ten of the 11 major S&P sector indexes advanced, with financials, materials, consumer discretionary and technology all gaining more than 2%.

Investors were cheered by data showing U.S. retail sales increased 0.9% in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants.

Recently punished shares of Microsoft Corp, Apple Inc, Tesla Inc and Amazon gained between 2% and 5.1%, driving the S&P 500 and the Nasdaq higher.

Tuesday’s broad rally followed weeks of selling on the U.S. stock market that last week saw the S&P 500 sink to its lowest level since March 2021.

“The largest pockets of stocks that investors tend to buy have been essentially beaten up. They’re either in correction or bear market territory,” said Sylvia Jablonski, chief investment officer of Defiance ETF. “I think investors are looking at these opportunities to buy on the dip, and I suspect that today is a good day to do that.”

The S&P 500 Banks index jumped 3.8%, with Citigroup climbing almost 8% after Warren Buffett’s Berkshire Hathaway disclosed a nearly $3 billion investment in the U.S. lender.

Another set of economic data showed industrial production accelerated 1.1% last month, higher than estimates of 0.5%, and faster than a 0.9% advance in March.

“This is consistent with continued economic growth in the second quarter and not a recession underway,” said Bill Adams, chief economist for Comerica Bank in Dallas.

The U.S. Federal Reserve will “keep pushing” to tighten U.S. monetary policy until it is clear inflation is declining, Fed Chair Jerome Powell said at an event on Tuesday.

Traders are pricing in an 85% chance of a 50-basis point rate hike in June.

The S&P 500 climbed 2.02% to end the session at 4,088.85 points.

The Nasdaq gained 2.76% to 11,984.52 points, while Dow Jones Industrial Average rose 1.34% to 32,654.59 points.

Underscoring Wall Street’s recent volatility, the S&P 500 has gained or lost 2% or more in a session some 39 times so far in 2022, compared to 24 times in all of 2021.

GRAPHIC-S&P 500’s busiest trades – https://fingfx.thomsonreuters.com/gfx/mkt/zgpomemlwpd/SPX_by_busiest_trades.png

Walmart Inc tumbled 11.4% after the retail giant cut its annual profit forecast, signaling a hit to its margins. That marked the biggest one-day percentage drop for Walmart’s stock since 1987.

Retailers Costco, Target and Dollar Tree fell between 0.8% and 3.2%.

United Airlines Holdings Inc gained 7.9% after the carrier lifted its current-quarter revenue forecast, boosting shares of Delta Air, American Airlines and Spirit Airlines.

A positive first-quarter earnings season has been overshadowed by worries about the conflict in Ukraine, soaring inflation, COVID-19 lockdowns in China and aggressive policy tightening by central banks.

The S&P 500 is down about 14% so far in 2022, and the Nasdaq is off around 23%, hit by tumbling growth stocks.

U.S.-listed Chinese stocks jumped on hopes that China will ease its crackdown on the technology sector.

Advancing issues outnumbered declining ones on the NYSE by a 2.92-to-1 ratio; on Nasdaq, a 3.19-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and 30 new lows; the Nasdaq Composite recorded 24 new highs and 126 new lows.

Volume on U.S. exchanges was 12.0 billion shares, compared with a 13.3 billion average over the last 20 trading days.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru, and Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and Lisa Shumaker)

Crypto Market Daily Highlights – May 17

Key Insights:

  • The global crypto market cap is back above the $1.3trillion mark. 
  • BTC’s price has tested the $30,300 resistance. 
  • Both bullish and bearish news is driving market volatility higher.

 The larger cryptocurrency market has been rangebound for most of this month, as the global crypto market cap oscillated between the $1.2 trillion low and $1.34 trillion. 

Data from Coin Market Cap top 100 suggested that Kadena (KDA) jumped by 14.70%, and Algorand (ALGO) saw 11% daily gains leading market the crypto majors. 

It has been an eventful 24 hours for the crypto market, with BTC jumping back above the $30,000 mark and several altcoins in the top 100 making gains. Sustained gains, however, still remain in question as the market continues to be volatile. 

BTC risks falling to $20,000

According to some market experts, BTC’s chances of revisiting the lower levels are still high. The Luna Foundation Guard (LFG) recently revealed that it had sold almost all of its BTC reserves during last week’s Terra (LUNA) and TerraUSD meltdown. The higher amount of circulation BTC in the market added to price volatility. 

Famous trader Phoenix said in a recent Twitter post that if bitcoin’s price falls below the $29,494 mark, the next price range to watch would be $21,800-23,800. 

As highlighted in an FXEmpire article earlier this morning, the Bitcoin Fear & Greed Index fell from 10/100 to 8/100, its lowest level since March 14, 2020. 

The early-week BTC losses witnessed this week could be blamed on global investors in the equity markets and the crypto market responding to dire economic data from China.

Despite short-term price gains, weak technical signals and low buying pressure left bitcoin’s price in a rangebound movement. That said, in the traditional market, weak stats coupled with the threat of a recession left the NASDAQ 100 down 1.20%.

Even though Federal Reserve chair Jerome Powell’s assurances on the rate hike front have delivered support, the same has failed to change the larger economic outlook. Furthermore, the correlation between bitcoin and the NASDAQ strengthened marginally on Monday.

On a one-day chart, BTC’s price made some positive progress; however, high gains didn’t seem to be on bitcoin’s cards as RSI highlighted high selling pressure in the market. 

FXempire, BTC, Crypto, Bitcoin
BTC 1-day price | Source: FXEmpire

Analyst Rekt Capital pointed out that the $20,000 zone is an area of interest should current levels fail to hold and buyers not materialize.

LUNA and UST Debacle Continues

The South Korean Conservative Party has requested a parliamentary hearing on the dramatic fall of Terra’s LUNA and its algorithmic stablecoin UST. 

On Tuesday, the South Korean National Assembly’s Political Affairs Committee summoned Terraform Labs co-founder Do Kwon for a parliamentary hearing regarding the issue. The committee’s representative, People’s Power’s Yoon Chang-Hyeon, said,

“There is a part that raises questions about the behavior of exchanges during the crash. Coinone, Korbit, and Gopax stopped trading on May 10, Bithumb on May 11 stopped trading daily, but Upbit did not stop trading until May 13.”

However, amid the negative commentary, TerraUSD’s price managed to register 11.83% gains trading at $0.1216 at the time of writing. 

High Volatility Sends Altcoin Prices Up

A recent Santiment report highlighted that for those ‘expecting less volatility for crypto markets in the first weeks of May after the rocky first four months of 2022, a continued pattern of downswings shook even crypto’s optimistic traders to their cores.’

After the second FOMC meeting that resulted in the US Fed increasing interest rates by another 0.5%, crypto markets showed some life for 24 hours. At press time, some of the top gainers were altcoins like Elrond (EGLD), Kava (KAVA), Aave (AAVE), and Kadena (KDA)

Algorand (ALGO) also gained close to 7.82% as the token traded at $0.49 at the time of writing. On the other hand, BAYC’s ApeCoin (APE) also noted 7% gains, trading at $8.73. 

Interestingly, Litecoin’s price saw a bounce of over 6% in the last 24-hours as it traded at $70.83. 

One of the most interesting news came from China, as bitcoin mining was back in the news this week, with new data showing China as the second-largest bitcoin mining nation, despite an outright ban.

A recent, FXEmpire article also highlighted that the world’s largest digital currency asset manager, Grayscale, confirmed that it would be bringing its first European ETF called the Grayscale Future of Finance UCITS ETF (GFOF).

Thus, with both bullish and bearish developments taking place in the crypto market, volatility could continue to push BTC and the global crypto market’s boat in the near term. 

Daily Crypto Brew: Global Equity Rebound Lifts Crypto Ahead Of US Retail Data, Fed Speak

Key Points

  • A rebound in global equity markets is helping lift crypto markets from Monday’s lows.
  • But cryptocurrencies are still mostly lower on the week as focus shifts to US retail data and Fed speak.
  • Bitcoin has rebounded to the mid-$30,000s from Monday’s lows around $29,000.

State Of The Market

Global equities are on the front foot following a strong Asia Pacific session, where sentiment was boosted amid positive reporting on a decline in Covid-19 cases and easing restrictions in Shanghai and on the possibility that China might soon ease its crackdown on big tech, thus (modestly) easing fears about the current slowdown in global growth.

S&P 500 index futures are currently trading about 1.75% higher in pre-market trade, while Nasdaq 100 futures are more than 2.0% higher. This is giving a lift to cryptocurrency markets, which have shown to be tightly correlated to US equities in particular as of late.

The total market capitalization of cryptocurrencies was last up about 2.5% in the $1.3 trillion area, up around 5.0% from Monday’s dip to $1.24 trillion. But that still leaves total market capitalization lower by around 2.5% on the week and around 56% below last November’s record highs above $3.0 trillion.

Concerns about aggressive monetary policy tightening from major central banks (most notably from the US Federal Reserve) continue to dampen the prospect of a more meaningful crypto (and equity) market rebound.

NY Fed President and influential FOMC member John Williams gave no indications that the Fed is looking to slow the pace of monetary tightening in the month ahead, instead emphasizing the Fed’s stance that controlling rampant inflation remains its number 1 priority.

Plenty more Fed policymakers will be speaking on Tuesday, most notable of which is remarks from Fed Chair Jerome Powell from 1800GMT. Markets currently expect the Fed to hike rates by 50 bps at its next three meetings in a bid to get interest rates to around 2.5% by the end of the year.

While there is room for more of a relief rally in crypto if equities continue recent positive momentum, traders should be cautious about assuming the bottom is in. For the bottom to truly be in, we will likely need to see inflation in the US (and elsewhere) moderate, the Fed soften its rhetoric on the need for tightening and global growth fears abate somewhat.

US retail giant Walmart will both be posting their Q1 earnings results, whilst US Retail Sales data for April is also out at 1230GMT, meaning there will be a lot of focus on the underlying strength of the US consumer. Given consumption is the major growth engine of the US economy, this data could impact broader macro and crypto market sentiment, so will be worth monitoring.

Bitcoin, Ethereum, Altcoins

In tandem with the broader improvement in macro and crypto risk appetite, bitcoin is trading higher by about 2.5% on Tuesday just above the $30,500 level per token, taking its gains versus Monday’s lows around $29,000 to around 5.0%.

That gives the cryptocurrency a market cap of around $580 billion, while its crypto market dominance is stable at around 45%. Nonetheless, BTC/USD is still trading lower on the week by about 2.0%, meaning it is currently on course for a record eighth successive weekly decline.

Eight weeks ago (i.e. the end of March/the start of April), bitcoin went as high as $48,000, and so has dropped by more than 35% during this time.

Ethereum, meanwhile, is trading higher by about 3.5% near the $2,100 level, up around 6.0% versus Monday’s sub-$2,000 per token lows, but still down by about 2.2% on the week. That puts ethereum on course for a seventh successive weekly loss, during which time it has dropped roughly 40% back from the $3,500 area.

According to Bloomberg commodity strategist Mike McGlone, bitcoin and ethereum will outperform equities in the future as their volatility continues to decline. Referring to bitcoin in an interview with Yahoo Finance, McGlone said “asset that went up the most in the last 5-10 years is going to come back as the Fed hammers down.”

Elsewhere, traders in Brazil will be able to trade bitcoin and ethereum futures in the next three to six months on the B3 stock exchange.

Brazilian Stock Exchange B3 will offer Bitcoin and Ethereum futures in three to six months. The exchange is also planning to offer studies for asset tokenization and crypto trading, among others.

In other news, China was still the second-largest bitcoin hash rate providing country in the world in January despite banning cryptocurrency mining last year, according to data released by the Cambridge Bitcoin Electricity Consumption Index (CBECI) on Tuesday. Bitcoin miners in China still accounted for about 21.1% of the network’s global hash rate, while the US accounted for 37.8% of the global hash rate.

An index of the top ten altcoins was up more than 3.0% on Tuesday in tandem with the broader uptick in crypto market sentiment. Top ten non-stablecoin cryptocurrencies including Solana’s SOL (+5.3%) and Cardano’s ADA (+5.5%) for the most part outperformed the likes of bitcoin.

DeFi Markets

The market cap of the major DeFi tokens fell to around $53.7 billion as of the early hours of Tuesday trade, CoinGecko data showed. It has been relatively stable in the $50-60 billion area over the past few days after dropping back from above $100 billion at the start of the month following the collapse of Terra’s LUNA and UST tokens.

As of Tuesday, the total value locked in the entire DeFi space remained close to $100 billion, data from DeFi Llama showed. It has been stable at around $100 billion in recent days after collapsing lower from above $180 billion in wake of Terra’s downfall.

There has been a lot of focus on the outperformance of MakerDAO’s governance token MKR as of late. MakerDAO is the creator of US dollar-pegged stablecoin DAI which has held up well despite turbulence across stablecoin markets.

MKR/USD is up more than 75% from a brief dip below $1,000 per token in the immediate aftermath of TerraUST’s initial de-pegging from the US dollar.

The token currently trades in the upper $1600s, giving it a market cap of around $1.64 billion, making it the seventh-largest of the major DeFi tokens. MKR’s recent strong performance comes despite investors pulling money out of DAI in recent weeks.

At the start of May and prior to UST’s crash, DAI had a market cap of around $8.7 billion, compared to now being around $6.5 billion. DAI still has the second-largest market cap of the major DeFi tokens.

In terms of notable news stories related to the DeFi space, Coinbase is reportedly testing a new in-app browser that will allow users to access ethereum-based decentralized Apps (or dApps).  Users will be able to exchange funds into these dApps through a new co-custodial hot wallet.

Terra Founder Do Kwon proposed on Monday proposed forking Terra onto a new chain that gets rid of its failed UST algorithmic stablecoin, with the new chain to instead be focused on the development of DeFi applications.

Kwon said the current chain would continue and be called Terra “Classic”. LUNA holders on the current and soon-to-be “Classic” Terra chain will receive a token airdrop on the new chain. The proposal is at the moment just that, but Kwon said that, if approved by Terra’s network validators and community, the fork could take place as soon as 27 May.

Exchange Flows

As of 0500GMT on Tuesday, exchanges had seen a net outflow of $326.5 worth of bitcoin in the last 24 hours, a sign of improving investor confidence, Glassnode data showed. Ethereum, meanwhile, saw an even heftier net outflow from exchange wallets worth around $977.7 million. USDT saw a net inflow to exchange wallets of around $430 million, a sign confidence in stablecoins is yet to fully recover.

Regulatory Landscape

US Securities and Exchange Commission Chair Gary Gensler took aim at cryptocurrency markets once again on Monday, saying that investors need to be provided with more protections. According to Gensler, those who invest in cryptocurrencies don’t normally get the same disclosures about their investment that come with investments in other asset classes.

Elsewhere, the US launched its first case involving the use of bitcoin to evade sanctions. The defendant in the case stands accused of creating a payments platform that moved approximately $10 million worth of bitcoin through it, with the defendant allegedly boasting that the service could be used to evade sanctions.

Meanwhile, European Central Bank officials are calling for regulation in wake of Terra’s collapse last week. According to Bank of France Governor Francois Villeroy de Galhau, “crypto-assets could disrupt the international financial system if they are not regulated, overseen and inter-operable in a consistent and appropriate manner across jurisdictions”. Separately, ECB executive board member Fabio Panettarecently warned that “stablecoins are vulnerable to runs”.

Portuguese Finance Minister Fernando Medina stated that Portugal is building a framework that tees up the taxation of cryptocurrency income gains. Portugal has up until now been seen as something of a European crypto tax haven given its lack of crypto-related taxation.

Meanwhile, over in Australia, the Australian Taxation Office (ATO) has warned cryptocurrency investors that they must report capital gains/losses from digital assets, including non-fungible tokens (NFTs), in an announcement on Sunday. Australia’s next tax season begins on 1 July.

Bitcoin (BTC) Rallies Despite the Fear & Greed Index at a 2022 Low

Key Insights:

  • On Monday, Bitcoin (BTC) fell by 4.66% to end a 3-day winning streak and reverse a 4.15% gain from Sunday.
  • Monday’s pullback left the Bitcoin Fear & Greed Index at 8/100, the lowest level since a March 14, 2020 low of 8/100.
  • Bitcoin (BTC) technical indicators flash red, with bitcoin sitting below the 50-day EMA.

Bitcoin (BTC) slid by 4.66% on Monday. Reversing a 4.15% gain from Sunday, bitcoin ended the day at $29,839.

A choppy session saw bitcoin rise to an early high of $31,296 before sliding to a day low of $29,104.

While resistance at $29,000 proved key to preventing heavier losses, the Fear & Greed Index sends a bearish signal.

The Bitcoin Fear & Greed Index Falls to a 2022 Low of 8/100

This morning, the Bitcoin Fear & Greed Index fell from 10/100 to 8/100, its lowest level since March 14, 2020, when the Index also stood at 8/100.

The Index falls to lowest level since March 2020.
Fear & Greed 170522

Monday’s BTC loss came as investors across the global equity markets and the crypto market responded to dire economic data from China.

The weak stats coupled with the threat of a recession left the NASDAQ 100 down 1.20%. Fed Chair Powell’s assurances on the rate hike front have delivered support. There has been little chatter on the economic outlook, however.

While the correlation between bitcoin and the NASDAQ strengthened marginally on Monday, the knock-on effects from last week’s TerraUSD (UST) de-pegging remain an area of focus.

In the aftermath of the TerraUSD collapse, the market will need to consider a shift in the regulatory landscape and investor sensitivity to any adverse news that could send another crypto into a tailspin.

TerraUSD breaks BTC correlation with the NASDAQ.
BTCNASDAQ 1705 Daily Chart

At the time of writing, the NASDAQ Mini was up 147 points to deliver BTC support.

Bitcoin (BTC) Price Action

At the time of writing, BTC was up 2.10% to $30,465.

A mixed start to the day saw bitcoin fall to an early morning low of $29,757 before striking a high of $30,508.

Bitcoin finds early support despite Fear & Greed Index slide.
BTCUSD 170522 Daily Chart

Technical Indicators

BTC will need to avoid the $30,083 pivot to target the First Major Resistance Level at $31,058.

BTC would need the broader crypto market to support a breakout from this morning’s high of $30,508.

An extended rally would test the Second Major Resistance Level at $32,272 and resistance at $32,500. The Third Major Resistance Level sits at $34,464.

A fall through the pivot would test the First Major Support Level at $28,860. Barring another extended sell-off, BTC should steer clear of sub-$28,000 levels. The Second Major Support Level sits at $27,889.

A BTC move through $30,500 would support a breakout.
BTCUSD 170522 Hourly Chart.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. BTC sits below the 50-day EMA, currently at $30,980. This morning, the 50-day pulled back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA; BTC negative.

A move through the 50-day EMA would support a run at $35,000.

A move through the 50-day EMA would support a run at $35,000.
BTCUSD 170522 4 Hourly Chart.

Markets Remain in Fight or Flight Mode While Rolling the Dice on Recession Odds

Global Macro and Stock Markets Analysis

US equities fell .4 % in a choppy session to start the week with little change to the broader macro or recessionary narrative.

Markets remain in fight or flight mode while rolling the dice on recession odds.

Still, traders seem to be in the mood to stay bearish until proven otherwise. However, there is still a lingering risk- on tone despite horrific Chinese data.

Investors’ hopes remain elevated that yesterday’s worse than expected Chinese outruns could prove to be a ‘whatever it takes” moment, and local policymakers will step hard on the stimulus pedal.

Oil Fundamental Analysis

Oil prices are up near 2.5 % on a confluence of anticipated Chinese demand returning amid Russian supply concerns. But China’s covid slowdown is music to oil bull’s ears as the breadth of the shift is where the surprise lies.

In addition, Shanghai has announced a gradual reopening starting immediately. It aims to return to everyday life by June 1, so we should expect mobility to return to its usual post haste.

But importantly, this could mean more stimulus down the pipe as even a gradual reopening increases the prospects for policy easing.

China’s official institutions have been reluctant to enact an adequate stimulus program as the locked-down economy is not giving policymakers bang for their buck via the multiplier effect.

Oil investors will continue watching the China covid curve while playing the China rebound story through Oil futures and XLE.

FOREX Fundamental Analysis

Chinese Yuan CNH

Traders have moved off, at least this one has, the CNH/JPY competitive advantage trade as a motive to sell the Yuan. And are now looking at the typical RMB correlation associated with local equity markets.

While a depreciating RMB is theoretically positive for export-oriented firms, it is generally associated with lacklustre overall share market performances.

With a good chance, policymakers could use yesterday’s economic data low point as a watershed moment to release a flood-like stimulus once the economy opens. There should be a positive bounce in Chinese equities and possibly change the tide for USDCNH. But mainland stocks will need to do the heavy lifting, not the PBoC

Japanese Yen

For the yen, the tide may be starting to turn. The Japanese currency broke nine successive weeks of losses against the US dollar last week.

There has been a notable change in how the pair operates in the last week.

US rates had been behind the currency moves – pushing the US dollar higher against the yen, euro, franc, and Aussie.

Now the drivers are more technical. When rates go up and equities go down – the S&P 500 had fallen 6.4% since May 4 when the Federal Reserve lifted rates by 0.5 percentage points – dollar-yen is not rallying as much. Instead, it is now trending down.

Traders want to buy the yen – and the classic ‘risk-off’ hedge of holding yen calls. Again, this is rolling the dice on US recession odds which could cause a significant spill across the global markets.

For a look at all of today’s economic events, check out our economic calendar.

Bitcoin Holds Support, Will the Levy Break?

Bitcoin Price Action Comparison With Last Year

The Price of BTC moved back above the critical support level of $29,000 last Friday (May 13th) after dipping as low as $25,500 on the previous day. While BTC has yet to show signs that a recovery is on its way, the pause in the major selling pressure after an extended low seems to mirror the action seen exactly one year ago.

Last year in mid-May, Bitcoin fell roughly $30,000 in just two weeks, losing about 50% of its value in that short, brutal time frame. What followed two months of loose consolidation at prices comparable to the current market print before rallying to a new ATH. While it is indeed much too early to say that a base has formed at the $29,000 – $30,000 level, the price action is shockingly similar to what we saw precisely one year ago.

What Is Different Now?

The big difference between then and now is that the underlying macro fundamentals in markets with a strong correlation have changed. As such, those markets, mainly big tech which can be viewed through the Nasdaq Composite, have an uphill battle with the Fed’s monetary tightening already straining the industry.

This is happening when the Fed funds rate still remains historically low. The effective Fed funds rate currently at 0.83% is still lower than any other time than the recent pandemic over the last 64 years, matching the lowest rate pre-pandemic on record from May 1958.

If we look back over the past 70 years and compare what the Fed funds rate climbed to in order to battle the many rises in inflation, you will notice that nearly every period of rampant inflation required a Fed funds rate that was equal to or greater than the year over the year inflation rate. We are a very long way away from reaching that threshold. In fact, over the past seventy-plus years, has the difference between those two metrics been farther apart. Inflation on a yearly basis still outweighs the Fed funds rate by nearly 7%.

What Does This Mean for BTC?

Unfortunately, it is this fundamental difference that will likely be the cement shoes that drag Bitcoin down to the depths of the economic ocean. The Nasdaq will likely only continue to fall, and with it a lot of institutional investment dollars will be moved out of Bitcoin and big tech or simply mass liquidated by institutional investors.

The same investors that we all praised for helping Bitcoin’s previous rallies are the same investors who will bring about a new extended bear market. So unlike the previous two times bitcoin was trading at this price level (January and Summer of 2021) Bitcoin will likely not have a major rally from this point, but instead this is likely a stopping point on the way down.

BTC Technical Analysis and Price Forecast

For now, Bitcoin is holding on precariously above $29,000 support but with the equities sell-off likely just beginning how long will it last? Bellow $29k, the next support level is $24,500, below that major support lies at $18k, which is where I believe this correction could lead us to over the next six to twelve months. Current resistance is at $32k and above that major resistance at $37,500.

For anyone interested in viewing more articles on Bitcoin, simply click this link.

S&P 500 ends lower as Tesla falls, while energy rallies

By Amruta Khandekar and Noel Randewich

(Reuters) – The S&P 500 ended lower on Monday, with Tesla and other growth stocks losing ground after downbeat Chinese economic data added to worries about a global slowdown and rising interest rates.

China’s economic activity cooled sharply in April as widening COVID-19 lockdowns took a heavy toll on consumption, industrial production and employment, adding to fears the economy could shrink in the second quarter.

However, energy stocks got a lift from optimism that China would see significant demand recovery after positive signs that coronavirus pandemic was receding in the hardest-hit areas.

The S&P 500 energy index rallied to a 2014 intra-day high, and it closed up 2.6%, making it the strongest performer among 11 sector indexes.

Investors questioned whether a strong day on Wall Street last Friday might signal the end of a recent sell-off that has left the S&P 500 down about 16% from its record high close in January.

“After the big rally on Friday, people are looking around and asking whether it feels sustainable,” said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky. “Does it feel like the momentum thrust you would see coming off of a low, or is there still more of a capitulation to be worked out?”

Many of Wall Street’s megacap growth stocks were lower, with Amazon and Google-owner Alphabet losing more than 1% and weighing on the S&P 500 and Nasdaq.

Twitter fell more than 8% after Bloomberg reported that Elon Musk said a deal to buy the social media company at a lower price than his previously agreed $44 billion was “not out of the question.”

Tesla, which Musk leads, fell almost 6%.

The S&P 500 healthcare sector index rose 0.7%, lifted by a 2.7% jump in Eli Lilly & Co after the drugmaker won U.S. approval for tirzepatide, to treat adults with type 2 diabetes.

Graphic: S&P 500 components – https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwemagvo/SPX_by_marketcap.png

Investors have been worried that aggressive interest rate hikes by the U.S. Federal Reserve to combat decades-high inflation could tip the economy into a recession, with the conflict in Ukraine, supply chain snarls and the pandemic-related lockdowns in China exacerbating the economic troubles.

Data on Monday showed factory activity in New York state slumped in May for the third time this year amid a collapse in new orders and shipments.

Traders are now pricing a near 86% chance of a 50-basis-point hike by the Fed in June.

Unofficially, the S&P 500 declined 0.39% to end the session at 4,008.01 points.

The Nasdaq declined 1.20% to 11,662.79 points, while Dow Jones Industrial Average rose 0.08% to 32,223.42 points.

Investors are focused on retail sales data due on Tuesday, following worrying inflation and consumer sentiment data last week.

Retailers including Walmart Inc, Home Depot and Target Corp are due to report their quarterly results this week.

Spirit Airlines rallied 13.5% after JetBlue Airways launched a hostile takeover bid for the discount carrier. JetBlue shares slipped 6.1%, while shares of rival bidder Frontier Group gained almost 6%.

Advancing issues outnumbered declining ones on the NYSE by a 1.08-to-1 ratio; on Nasdaq, a 1.35-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and 31 new lows; the Nasdaq Composite recorded 17 new highs and 190 new lows.

Volume on U.S. exchanges was 11.3 billion shares, compared with a 13.2 billion average over the last 20 trading days.

(Reporting by Amruta Khandekar and Devik Jain in Bengaluru and Noel Randewich in San Francisco; Additional reporting by Devik Jain in Bengaluru; Editing by Shounak Dasgupta and Lisa Shumaker)

US Stock Markets – Following Price One Page At A Time to Understand The Full Story

The same is true of the market, as each day is like the reading of another page. The pages of a book make up chapters. These chapters in trading represent bull markets, bear markets, distribution and accumulation, and time frames of high and low volatility.

Unfortunately, in trading, we cannot skip to the end of the book to learn how everything turns out. However, as traders, we have learned that studying and remembering the past can pay great dividends.

Trading price in its rawest form is simply plotting and studying price without the use of moving averages, stochastics, RSI, or other technical indicators. This simplified but often overlooked methodology can offer everything a trader needs to be successful.

NASDAQ 100 Lower Lows & Lower High

QQQ – The Nasdaq 100 ETF has been making lower lows and lower highs. A longer-term analysis of price is showing us that the 2022 low is lower than the lowest price that the QQQ had traded in 2021. The QQQ in 2021 had a peak to trough range of 26.03%. So far in 2022, the QQQ has had a peak to trough range of 28.71%.

Therefore: Price is showing that QQQ is breaking down and volatility is expanding as it is greater than last year.

QQQ • INVESCO QQQ TRUST ETF • NASDAQ • 4-HOUR

QQQ Trading Price chart

S&P 500 Lower Lows & Lower Highs

SPY – The S&P 500 ETF has been making lower lows and lower highs. The SPY in 2022 has had a peak to trough range of 18.74%.

Therefore: Price is showing us SPY is breaking down and it appears to have put in a major top with confirmation being a new swing low.

SPY • SPDR S&P 500 ETR TRUST • ARCA • 4-HOUR

SPY Trading Price Chart

DOW 30 Lower Lows & Lower Highs

DIA – The Dow Jones Industrials 30 ETF has been making lower lows and lower highs. The DIA in 2022 has had a peak to trough range of 15.02%.

Therefore: Price is showing us DIA is breaking down and appears to have put in a major top with confirmation being a new swing low.

Note: the DIA is doing better than the QQQ or SPY as money flow is rotating out of previously high-performing stocks and seeking safety in blue-chip lower performing stocks.

DIA • SPDR DOW JONES INDUSTRIAL AVERAGE ETF •ARCA • 4-HOUR

DIA Trading Price chart

US Dollar Higher Highs & Higher Lows

UUP – The US Dollar ETF has been making higher highs and higher lows. The UUP in 2022 has had a peak to trough range of 10.43%. UUP has also taken out the highest high that it made in 2021.

Therefore: The price is showing us UUP has broken out to the upside and is in a bull market with confirmation being a new swing high.

According to the 2019 Triennial Central Bank Survey conducted every three years by the Bank of International Settlements: trading in FX markets reached $6.6 trillion per day in April 2019. The BIS report further noted the USD is associated with 88% of all trades, which is $5.8+ trillion in USD daily transactional volume.

The US Dollar continues to attract capital from investors all over the world. But this may prove to be a double-edged sword for US stocks. As capital flocks to the USD, this, in turn, hurts US multinationals as they need to convert their weak foreign currency profits back into USD.

The USD safe-haven trade may eventually trigger a broad and deep selloff in US stocks. As the USD continues to strengthen, corporate profits for US multinationals will shrink or disappear.

UUP • INVESCO DB USD INDEX BULLISH FUND ETF • ARCA • 4-HOUR

UUP Trading Price Chart

Learn From Our Team of Seasoned Traders

In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover
  • A 50% loss requires a 100% gain to recover
  • A 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or a few months, while a 50% drawdown may take several years to recover.

Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason, as most of them learned this principle the hard way.

At TheTechnicalTraders.com, my team and I can do these things:

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We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

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Chief Market Strategist
Founder of TheTechnicalTraders.com

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Strengthens Over 12622.25, Weakens Under 12121.00

June E-mini NASDAQ-100 Index futures are trading lower during the pre-market session on Monday, after oil prices slid and riskier currencies took a hit during the Asian and European sessions as unexpectedly weak economic data from China highlighted fears about a slowdown in growth.

At 09:11 GMT, June E-mini NASDAQ-100 Index futures are trading 12341.00, down 41.75 or -0.34%. On Friday, the Invesco QQQ Trust ETF (QQQ) settled at $301.89, up $10.74 or +3.69%.

China’s April retail sales plunged 11.1% on the year, almost twice the fall forecast, as full or partial COVID-19 lockdowns were imposed in dozens of cities. Industrial output dropped 2.9% when analysts had looked for a slight increase.

NASDAQ component earnings highlights this week include Take-Two Interactive Software on Monday, Cisco Systems and Analog Devices on Wednesday, and Applied Materials on Thursday.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 11689.00 will signal a resumption of the downtrend. A move through 13555.25 will change the main trend to up.

The minor trend is also down. A trade through 12553.25 will change the minor trend to up. This will also shift momentum to the upside.

The major support is a long-term 50% level at 11671.25. This is followed by a long-term Fibonacci level at 10468.25.

The first minor range is 12553.25 to 11689.00. The index is currently trading on the strong side of its pivot at 12121.00, making it support.

The second minor range is 13555.25 to 11689.00. Its pivot at 12622.25 is the next upside target and potential resistance.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the June E-mini NASDAQ-100 futures contract on Monday is likely to be determined by trader reaction to 12121.00.

Bullish Scenario

A sustained move over 12121.25 will indicate the presence of counter-trend buyers.

If this move creates enough upside momentum then look for a surge into the minor top at 12553.25, followed by the second pivot at 12622.25.

Sellers could come in on the first test of this level, but overtaking it with conviction could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 12121.00 will signal the return of sellers.

If this generates enough downside momentum then look for the selling to possibly extend into the main bottom at 11689.00, followed by the major 50% level at 11671.25.

The latter is a potential trigger point for an acceleration to the downside with the November 2, 2020 main bottom at 10913.75 the next major target.

For a look at all of today’s economic events, check out our economic calendar.

Stock Market Bottom Or Bull Trap? The Wyckoff Method Reveals Insights

Last week S&P 500, Dow Jones, Nasdaq and Russell 2000 all broke below the major support and dropped sharply into an oversold condition. This sharp move was anticipated just right before it happened based on the bear market leading indicator as I discussed in the video at the bottom of the post.

Using Stock Market Breadth As Market Timing

On Friday all the 4 indices had a strong rebound off the oversold condition. This is significant not because of the magnitude of the rally, but the market breadth because the difference between the number of stocks hit 52 Weeks High and 52 Weeks Low spiked from -1600 to -160. This is a sharp turn from a very bearish market breadth to almost neutral as majority of the stocks participated the reversal. Refer to the market breadth chart below:

From the chart above, the spike of the market breadth after 24 January 2022 and 24 February 2022 (circled in orange) corresponded to a swing low in S&P 500. A market rally can be expected based on the current market breadth. Next, we need to determine the quality of the potential rally to anticipate how far it can go.

Wyckoff Method To Identify Bear Market Bottom

Let’s apply the Wyckoff method to find out if this is likely a stock market bottom or a bull trap by focusing on the price action and the volume. Refer to the chart of S&P 500 Futures below:

The bearish bias of S&P 500 was formed after the selloff happened in January 2022. Subsequently, a Wyckoff re-distribution pattern was formed (as highlighted in orange). After the upthrust after distribution (annotated as UTAD), the rallies were of poor quality and the down swings were impulsive and volatile with increasing of supply. These are the key characteristics of a bear market leading to a sign of weakness (annotated as SOW).

The confirmation of the strong down swing was identified after the weak rally on 18 April 2022 (annotated as LPSY 0) where I explained in detail about the bearish signal detected from the Wyckoff distribution pattern in the video.

Last week S&P 500 broke below the major support at 4100 followed by a sharp move down below 3900 within 4 days, which marked a sign of weakness from the re-distribution structure. Despite the sharp move down, climatic price action and volume did not show up, suggested pending institution capitulation. This is a key difference when comparing to the selling climax low formed on 24 January 2022.

There was presence of demand on last Thursday as reflected on the demand tail and the slight increase of volume while the price hit the oversold of the down channel. This was confirmed by Friday’s price action. This is likely the relief rally to test the axis line near 4050-4100 where the support-turned-resistance.

The resistance zone coincides with the supply line of the down channel, which could potentially form the last point of supply (annotated as LPSY 2) where the supply will be attracted for institutions to sell into strength (as annotated in green arrow) followed by lower price target at 3600 (and lower). This could be similar to the bear market in 2008 from the price structure to the market rotation sequence as discussed in the video 2 weeks ago.

The Leading Indicator In Bear Market

As mentioned earlier, watch the video below find out how to use this leading indicator in the bear market as early warning before the sharp move happened last week (and beyond) in S&P 500.

Based on the characteristics of the price action and volume, selling into strength to avoid bull trap is a better bet. Under a more bullish scenario where the current rally is strong enough to test 4200, a trading range could be anticipated rather than a continuation of the selloff to test 3600 in the short-term. Visit TradePrecise.com to get more stock market insights in email for free.