Bitcoin and Ripple’s XRP Weekly Technical Analysis – August 3rd, 2020

Bitcoin

Bitcoin rallied by 11.11% in the week ending 2nd August. Following on from a 7.77% gain from the previous week, Bitcoin ended the week at $11,053.8.

It was a bullish week for Bitcoin and the broader market. Bitcoin slipped to a Monday intraweek low $9,944.9 before making a move.

Steering clear of the first major support level at $9,339, Bitcoin rallied to a Sunday intraweek high $12,097.0.

Bitcoin broke through the week’s major resistance levels before sliding back to sub-$11,000 levels.

Bitcoin fell back through the third major resistance level at $11,835 and the second major resistance level at $10,800.

Steering well clear of the first major support level at $9,339, however, Bitcoin broke back through the first major resistance level.

5 days in the green that included an 11.01% rally on Monday and 4.01% gain on Saturday delivered the upside for the week. A 6.36% slide on Sunday reversed some of the gains, however.

For the week ahead

Bitcoin would need to avoid a fall through $11,032 pivot to bring the first major resistance level at $12,119 into play.

Support from the broader market would be needed for Bitcoin to break out from last week’s high $12,097.

Barring another extended crypto rally, the first major resistance level would likely cap any upside.

In the event of a breakout, Bitcoin could take a run at the second major resistance level at $13,184.

Failure to avoid a fall through the $11,032 pivot would bring support levels into play.

Barring a broad-based sell-off, Bitcoin should avoid sub-$10,500 levels and the first major support level at $9,967.

At the time of writing, Bitcoin was up by 0.87% to $11,150.0. A mixed start to the week saw Bitcoin fall to an early morning low $10,943 before rising to a high $11,200 on Monday.

Bitcoin left the major support and resistance levels untested at the start of the week.

BTC/USD 03/08/20 Weekly Chart

Ripple’s XRP

Ripple’s XRP surged by 33.50% in the week ending 2nd August. Following on from a 7.8% gain from the previous week, Ripple’s XRP ended the week at $0.28764.

A mixed start to the week saw Ripple’s XRP fall to a Monday intraweek low $0.20949 before making a move.

Steering clear of the first major support level at $0.19669, Ripple’s XRP rallied to a Sunday intraweek high $0.32620.

Ripple’s XRP broke through the major resistance levels sliding back to sub-$0.25 levels.

The pullback saw Ripple’s XRP fall through the third major resistance level at $0.27739 and the second major resistance level at $0.24422.

Finding late support, however, Ripple’s XRP broke back through the second major resistance level to end the week at $0.28 levels.

6-days in the green that included a 12.01% rally on Saturday delivered the upside for the week.

For the week ahead

Ripple’s XRP would need to avoid a fall through the $0.27434 pivot to support a run at the first major resistance level at $0.33950.

Support from the broader market would be needed, however, for Ripple’s XRP to break out from last week’s high $0.32620.

Barring another extended crypto rally, the first major resistance level would likely cap any upside.

In the event of another breakout, the second major resistance level at $0.39135 and $0.40 levels could come into play.

Failure to avoid a fall through the $0.27434 pivot would bring the first major support level at $0.22249 into play.

Barring an extended broader-market sell-off, however, Ripple’s XRP should steer of sub-$0.24 levels in the week.

At the time of writing, Ripple’s XRP was up by 2.59% to $0.29510. A mixed start to the week saw Ripple’s XRP fall to an early Monday low $0.28383 before rising to a high $0.29958.

Ripple’s XRP left the major support and resistance levels untested at the start of the week.

XRP/USD 03/08/20 Daily Chart

The Week Ahead – COVID-19, Economic Data and US Politics in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 7th August. In the week prior, just 57 stats had been in focus.

For the Dollar:

It’s another busy week ahead on the economic data front.

In the 1st half, the ISM’s July private sector PMIs, ADP nonfarm employment change figures, and June factory orders are in focus.

We would expect Wednesday’s ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change to have the greatest impact.

The focus will then to Thursday’s initial jobless claims and Friday’s nonfarm payroll numbers and unemployment rate.

Following some disappointing weekly jobless claims figures and the rise in COVID-19 cases, the labor market figures will be key.

For the service sector, any contraction in July, following a jump in productivity in June, would also weigh on riskier assets.

The Dollar Spot Index ended the week down by 1.15% to 93.349.

For the EUR:

It’s also another busy week ahead on the economic data front.

On Monday and Wednesday, July’s manufacturing and services PMIs are due out of Italy and Spain.

Finalized PMIs are also due out of France, Germany, and the Eurozone.

With Spain seeing a spike in new COVID-19 cases, expect some attention to the PMIs. Ultimately, however, the Eurozone’s services and composite will likely have the greatest impact.

The focus will then shift German factory orders for June, due out on Thursday.

At the end of the week, Germany remains in focus, with June’s industrial production and trade figures due out.

Barring disappointing numbers, June retail sales figures for the Eurozone should have a muted impact on Thursday.

The EUR/USD ended the week up by 1.05% to $1.1778.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. July’s finalized private sector PMIs are due out and will garner plenty of interest.

Expect any downward revision to the Services PMI on Wednesday to have the greatest impact.

On Thursday, the focus will then shift to the BoE. More action is expected and the Bank may consider an extension to the suspension of banks paying dividends and buybacks.

While the BoE is in action, we can also expect any further updates on Brexit to also influence in the week.

The GBP/USD ended the week up by 2.27% to $1.3085.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Wednesday, June’s trade figures are due out ahead of July employment numbers on Friday.

Expect the employment figures to have the greatest impact, however.

Barring dire numbers, the Ivey PMI for July should have a muted impact on the Loonie on Friday.

Away from the stats, COVID-19 and geopolitics will continue to influence crude oil prices and risk sentiment.

The Loonie ended the week up by 0.02% to C$1.3412 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

At the start of the week, the Manufacturing Index figures are due out ahead of a busy Tuesday.

We would expect manufacturing PMIs from China, the EU, and the U.S to have a greater impact, however, on Monday.

The focus will then shift June trade and retail sales figures due out on Tuesday. Expect the retail sales figures to have the greatest impact. The RBA continues to rely on consumer spending to support the economy. Weak numbers will be a test for the Aussie Dollar.

For the week, however, the main event is the RBA monetary policy decision on Tuesday.

Following the spike in new COVID-19 cases, will the RBA remain optimistic about the economic recovery?\

Any dovish chatter and the Aussie Dollar could eye sub-$0.70 levels. At the end of the week, the RBA’s statement on monetary policy will also draw interest.

The Aussie Dollar ended the week up by 0.53% to $0.7143.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic calendar.

2nd quarter employment figures are due out on Wednesday. The markets will likely be forgiving to an extent, with COVID-19 expected to have an impact on employment.

With economic data on the lighter side, private sector PMIs from China, the EU, and the U.S will influence.

Expect geopolitics and COVID-19 news to also have an impact in the week. Any signs of a slowdown in new cases globally and expect support to kick in.

The Kiwi Dollar ended the week down by 0.18% to $0.6629.

For the Japanese Yen:

It is a busy week ahead on the economic calendar.

Finalized 2nd quarter GDP and July’s manufacturing PMI numbers are due out on Monday.

The focus will then shift to July’s service PMI on Wednesday and June household spending figures on Friday.

While the stats will influence sentiment towards BoJ monetary policy, the Yen will remain at the mercy of COVID-19 and geopolitics.

The Japanese Yen ended the week up by 0.29% to ¥105.83 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead on the economic data front.

July’s private sector PMIs are due out on Monday and Wednesday. Expect the figures to influence risk appetite in the week.

On Friday, July trade figures will also garner plenty of attention. While exports remain the main area of focus, any sizeable fall in imports would test risk appetite on the day.

Away from the economic calendar, any chatter from Beijing will also need monitoring.

The Chinese Yuan ended the week up 0.62% to CNY6.9752 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus. Talks are set to continue through August and September ahead of an EU Summit in October.

60 days may sound like a lot but when considering the lack of progress over 4-years…

A light economic calendar and Brexit chatter have provided the Pound with support. We may even see the markets brush off the chances of a hard Brexit.

Getting on with it seems to be the key desire now rather than dragging it out any longer. Either way, we’re not expecting Johnson and the team to give too much away…

U.S Politics:

Last week, the Republicans showed signs of fragmentation. As Presidential Election stress builds, we could see more fractures as Trump attempts to distract voters.

The immediate issue at hand, however, is the COVID-19 stimulus package. Any failure to deliver will weigh on the Dollar. Labor market conditions have not improved and the 2nd wave has shown little sign of slowing. A lack of benefits for the unemployed will raise more issues than a fall in household spending. We have already seen social unrest…

The Coronavirus:

It was yet another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw a number of countries including Hong Kong and the UK reintroduce containment measures. Hopes of progress towards a vaccine had limited the damage last week. In the week ahead, however, the numbers will need to ease off to avoid spooking the markets.

At the time of writing, the total number of coronavirus cases stood at 17,981,937. Monday to Saturday, the total number of new cases increased by 1,782,490. Over the same period in the previous week, the total number had risen by 1,531,149.

Monday through Saturday, the U.S reported 447,236 new cases to take the total to 4,762,945. This was up marginally from the previous week’s 417,070

For Germany, Italy, and Spain, there were 22,814 new cases Monday through Saturday. This took the total to 793,804. In the previous week, there had been 17,083 cases over the same period. Spain accounted for 16,101 of the total new cases in the week.

U.S Mortgage Rates Slipped Back to sub-3% as Economic Uncertainty Lingered

Mortgage rates returned to sub-3% levels to sit just above an all-time low 2.98% from back in the week ending 16th July.

The 6th weekly decline in 7-weeks saw 30-year fixed rates fall by 2 basis points to 2.99% in the week ending 30th July. In the previous week, 30-year fixed rates had risen by 3 basis points to 3.01%.

Compared to this time last year, 30-year fixed rates were down by 76 basis points.

30-year fixed rates were also down by 195 basis points since November 2018’s most recent peak of 4.94%.

Economic Data from the Week

Economic data was on the busier side through the 1st half of the week.

Key stats included June durable and core durable goods orders and July consumer confidence figures.

While durable and core durable goods were on the rise, consumer confidence weakened in July. The decline was as a result of the 2nd wave of the COVID-19 pandemic.

Economic uncertainty has built up as a result of a reintroduction of containment measures that contributed to the previous week’s rise in jobless claims.

Away from the economic calendar, the FED was in action, delivering an anticipated dovish tone.

Freddie Mac Rates

The weekly average rates for new mortgages as of 30th July were quoted by Freddie Mac to be:

  • 30-year fixed rates slipped by 2 basis points to 3.01% in the week. Rates were down from 3.75% from a year ago. The average fee remained unchanged at 0.8 points.
  • 15-year fixed rates fell by 3 basis points to 2.51% in the week. Rates were down from 3.20% compared with a year ago. The average fee remained unchanged at 0.7 points.
  • 5-year fixed rates slid by 15 basis points to 2.94% in the week. Rates were down by 52 points from last year’s 3.46%. The average fee increased from 0.3 points to 0.4 points.

According to Freddie Mac,

  • Mortgage rates continue to remain near historic lows, driving purchase demand over 20% above a year ago.
  • The real estate sector is one of the bright spots in the economy, with strong demand and a modest slowdown in house prices heading into the late summer.
  • House sales should remain strong for the next few months going into the early fall.

Mortgage Bankers’ Association Rates

For the week ending 24th July, rates were quoted to be:

  • Average interest rates for 30-year fixed, backed by the FHA, increased from 3.13% to 3.27%. Points increased from 0.29 to 0.35 (incl. origination fee) for 80% LTV loans.
  • Average interest rates for 30-year fixed with conforming loan balances remained unchanged at 3.20%. Points rose from 0.35 to 0.37 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.51% to 3.52. Points increased from 0.29 to 0.30 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, decreased by 0.8% in the week ending 24th July. In the week prior, the index had increased by 4.1%.

The Refinance Index slipped by 0.4% and was 121% higher than the same week a year ago. In the week prior, the index had risen by 5%.

The refinance share of mortgage activity increased from 64.8% to 65.1% in the week ending 24th July. In the week prior, the share had increased from 64.2 to 64.8%.

According to the MBA,

  • Mortgage rates remained near record lows for conventional loans and refinance in the conventional sector continued to see moderate increases.
  • Rates on FHA loans rose, however, leading to an almost 18% fall in FHA refinances.
  • Homebuyers stepped back slightly, and there was a larger drop in purchase application volume for FHA, VA, and USDA loans.
  • This trend, along with a rising average loan size, indicates that prospective first-time buyers are being impacted more by rising economic stress.
  • Uncertainty over how the next round of government support will take shape was also viewed to be a factor in demand.

For the week ahead

It’s a relatively busy 1st half of the week on the U.S economic calendar.

Key stats in the 1st half of the week include July’s ISM private sector PMIs and ADP nonfarm employment change figures. June factory orders and trade data are also due out.

From elsewhere, private sector PMIs from China will also garner attention early in the week.

Away from the economic calendar, COVID-19, the COVID-19 stimulus package, and Trump will also impact yields and mortgage rates.

The Weekly Wrap – Economic Data, the FED, and Trump Sank the Dollar

The Stats

It was a busy week on the economic calendar, in the week ending 31st July.

A total of 56 stats were monitored, following the 41 stats from the week prior.

Of the 56 stats, 31 came in ahead forecasts, with 24 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 37, 35 stats reflected a deterioration from previous.

For the Greenback, it was a 6th consecutive week in the red. In the week ending 31st July, the Dollar Spot Index fell by 1.15% to 93.349. In the week prior, the Dollar had fallen by 1.57%.

The continued slide through the month of July left the Dollar Spot Index down by 4.15% for the month.

Dire economic data, the continued spread of COVID-19, and a dovish FED delivered the loss. Adding to the Dollar angst in the week was Trump’s Presidential Election delay tweet on Thursday…

According to a Reuters report, U.S Dollar net shorts surged to the highest in 9-years, delivering the largest monthly loss Since Sept-2010.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 17,731,750 for Friday, rising from last Friday’s 15,930,779 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,801,071 on a global basis. This was higher than the previous week’s increase of 1,741,556 in new cases.

In the U.S, the total rose by 454,463 to 4,702,774. In the week prior, the total number of new cases had risen by 478,299.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 22,753 to bring total infections to 793,804. In the previous week, the total number of new cases had risen by 17,404. Spain alone reported 16,101 new cases in the week.

Out of the U.S

It was a busy week on the economic data front.

Key stats included July consumer confidence, the weekly jobless claims, and 2nd quarter GDP figures.

The stats were skewed to the negative. Consumer confidence deteriorated in July, as a result of the 2nd wave of the pandemic. Initial jobless claims increased for a 2nd consecutive week, with the U.S economy contracting by 32.9% in the 2nd quarter.

At the end of the week, July consumer sentiment figures were also revised down.

There were some positives, however. Durable and core durable goods continued to rise in June.

Chicago’s PMI returned to expansion in July, with personal spending rising for a 2nd consecutive month in June. These were good enough to give the Dollar much-needed support at the end of the week.

In the equity markets, the NASDAQ and S&P500 rose by 3.69% and by 1.73% respectively. The Dow bucked the trend, however, falling by 0.16%.

Out of the UK

It was a particularly quiet week on the economic calendar, with no material stats to provide the Pound with direction.

A lack of economic data contributed to the upside in the Pound that benefitted from Dollar weakness. News of the government reintroducing lockdown measures in the North weighed at the end of the week, however.

In the week, the Pound rallied by 2.27% to $1.3085 in the week, following on from a 1.80% gain from the previous week. The FTSE100 ended the week down by 3.69%, following on from a 2.65% loss from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

In a quiet 1st half of the week, Germany’s IFO Business Climate Index figures for July provided support on Monday.

The focus then shifted to 2nd quarter GDP numbers. France, Germany, and the Eurozone reported particularly dire 2nd quarter numbers.

The German economy contracted by 10.1%, the French economy by 13.8%, and the Eurozone economy by 12.1%.

It wasn’t enough to send the EUR into the red, however, as the U.S delivered darker numbers.

For the week, the EUR rose by 1.05% to $1.1778, following a 2.00% rally from the previous week. A 0.58% pullback on Friday limited the upside for the week.

For the European major indexes, it was another bearish week. The DAX30 slid by 4.09%, with the CAC40 and EuroStoxx600 falling by 3.49% and by 2.98% respectively.

For the Loonie

It was a quiet week on the economic calendar.

Economic data included May GDP and June RMPI numbers at the end of the week.

The stats were positive, with the Canadian economy expanding by 4.5% in May, following April’s 11.7% contraction. In June, the RMPI rose by a further 7.5%, following a 16.4% jump in May.

While the other majors lost ground against the Greenback on Friday, the stats delivered support at the end of the week.

The Loonie rose by 0.02% to end the week at C$1.3412 against the Greenback. In the week prior, the Loonie had rallied by 1.22% to C$1.3415.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 31st July, the Aussie Dollar rose by 0.53% to $0.7143, while the Kiwi Dollar fell by 0.18% to $0.6629. A 1.04% slide on Friday, left the Kiwi in the red for the week.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Inflation and private sector credit figures delivered mixed results in the week.

In the 2nd quarter, consumer prices slid by 1.9%, with prices down by 0.30% year-on-year.

Final delivery numbers were not much better, with the Producer Price Index falling by 1.20% in the 2nd quarter. Year-on-year, the index fell by 0.40%.

The numbers were better than forecasts, which propped up the Aussie Dollar.

Private sector credit disappointed, however, falling by 0.3% in June.

While the Aussie Dollar found support against the Greenback, the latest COVID-19 outbreak pinned back the Aussie.

For the Kiwi Dollar

It was another relatively quiet week on the economic data front.

While stats included building consent and business confidence figures, the focus was on the business confidence figures.

A marginal improvement in business confidence did little to support the Kiwi, however.

In July, the ANZ Business Confidence Index rose from -34.4 to -31.8.

According to the latest ANZ Report,

  • A net 9% of firms expect weaker economic activity in their own business, rising from -26% in June.
  • The retail sector drove the recovery, while the agriculture sector was the most negative.
  • 31% of firms say they intend to lay off staff, and 24% say they have less staff than a year ago.

For the Japanese Yen

It was a relatively quiet week on the economic calendar.

Retail sales continued to fall in June. Following a 12.5% slump in May, retail sales fell by 1.20%.

Industrial production delivered hope, however, rising by 2.7% in June, according to prelim figures. In May, production had tumbled by 8.9%.

A weakening U.S Dollar stemming from particularly dire economic data and a dovish FED supported the Yen.

The Japanese Yen rose by 0.29% to end the week at ¥105.83 against the Greenback. A 1.05% slide on Friday, cut the gains from earlier in the week. In the week prior, the Yen had risen by 0.82%.

Out of China

It was a quiet week on the economic data front.

July’s NBS private sector PMI figures delivered mixed results on Friday.

While the Non-Manufacturing PMI slipped from 54.4 to 54.2, the Manufacturing PMI rose from 50.9 to 51.1.

With Beijing and Washington silent, following the previous week’s diplomatic spat, the Yuan recovered to sub-CNY7 levels.

In the week ending 24th July, the Chinese Yuan rose by 0.62% to CNY6.9752 against the Dollar. In the week prior, the Yuan had fallen by 0.37%.

The CSI300 rallied by 4.20%, while the Hang Seng falling 0.45%, as a 2nd wave of the pandemic hit HK.

European Equities: A Week in Review – 01/08/20

The Majors

It was another bearish week for the European majors in the week ending 31st July. The DAX30 slid by 4.09% to lead the way down. It wasn’t much better for the CAC40 and EuroStoxx600, which saw losses of 3.49% and 2.98% respectively.

4 days in the red, including a heavy sell-off on Thursday, did the damage as economic data from Germany and the U.S weighed.

A continued rise in COVID-19 cases and a mixed bag on the corporate earnings front added to the market angst in the week.

The Stats

It was a busy week on the Eurozone economic calendar.

In a quiet first half of the week, however, stats were limited to Germany’s IFO Business Climate figures for July. Continued improvement in business sentiment delivered the only positive day for the DAX30 on Monday.

The markets then had to wait until Thursday for 2nd quarter GDP and July unemployment figures from Germany.

Germany’s economy contracted by 10.1% in the 2nd quarter, following a 2% contraction in the 1st quarter. Economists had forecast a 9% contraction. This was the largest decline since calculations began 50 years ago.

Year-on-year, the economy contracted by 11.7%, following a 1.8% contraction in the 1st quarter.

German Unemployment figures for July failed to provide support on the day, in spite of better than expected numbers. The unemployment rate held steady at 6.4%, with the number of unemployed falling by 18k.

On Friday, the French economy contracted by 13.8% in the 2nd quarter, with the Eurozone’s economy contracting by 12.1%.

June retail sales figures failed to provide support amidst the dire numbers, in spite of a further jump in sales. In France, consumer spending increased by 9%, following a 37.4% surge in May. German retail sales rose by 5.9%, following a 12.7% bounce in May.

Prelim inflation figures for July had a muted impact as the markets considered the economic woes. With a 2nd wave hitting the U.S and parts of the EU and Asia, the v-shaped recovery looks even less likely.

From the U.S

Stats were also skewed to the negative. Consumer confidence waned in July, with the CB Consumer Confidence Index hitting reverse.

Later in the week, initial jobless claims saw a 2nd consecutive weekly increase, with the U.S economy contracting by a whopping 32.9% in the 2nd quarter.

Things were not much better at the end of the week, with consumer sentiment revised down for July and inflationary pressures easing.

There were some pockets of positive, however. Durable goods and core durable goods orders continued to rise in June. Personal spending was also in recovery mode in June, though the 2nd wave pandemic could weigh on spending in July.

The Market Movers

From the DAX, it was a particularly bearish week for the auto sector. Volkswagen and Continental slid by 12.02% and 9.77% respectively to lead the way down. Things were not much better for BMW and Daimler, which saw losses of 8.88% and 6.33% respectively.

It was another bearish week for the banking sector. Commerzbank slid by 5.15%, with Deutsche Bank tumbling by 8.12%.

From the CAC, it was also a bearish week for the banks. Soc Gen tumbled by 11.64% to lead the way down. BNP Paribas and Credit Agricole weren’t far behind with losses of 8.13% and 8.75% respectively.

It was a particularly bearish week for the French auto sector, which reversed gains from the previous week. While Peugeot slid by 8.09%, the markets punished Renault, which slumped by 20.52% in the week.

Air France-KLM slid by 12.40%, while Airbus saw a more modest 3% loss in the week.

Earnings contributed to the moves in the week.

Renault reported a record net loss for the 1st half of the year. Volkswagen slashed its dividend off the back of an operating profit loss.

BNP Paribas fared better, with higher trading volumes providing support. The bank reported a net income loss for the 2nd quarter, however.

On the VIX Index

It was back into the red for the VIX, which saw its 6th week in the red out of 7. Reversing a 0.62% gain from the previous week, the VIX fell by 5.34% to 24.46 in the week ending 31st July.

The S&P500 and the NASDAQ ended the week up by 1.73% and by 3.69% respectively, while the Dow fell by 0.16%.

While economic data from the U.S was particularly dire, tech stocks delivered impressive quarterly earnings in the week. Mid-week, the FED had also delivered much-needed support, assuring the markets of continued support.

The Week Ahead

It’s another busy week on the Eurozone economic calendar.

The lion’s share of the stats is due out in the 1st half of the week. July private sector PMIs for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone are in focus.

With Spain getting hit by a 2nd wave of the pandemic, there will be plenty of interest in the numbers. Ultimately, however, expect the Eurozone’s Service and Composite to garner the greatest attention.

In the 2nd half of the week, Germany is back in focus. June factory orders, industrial production, and trade data are due out.

Following last week’s GDP numbers, the stats will need to be impressive to ease the pain…

From the U.S

It is also a particularly busy week ahead.

Key stats include ISM private sector PMIs for July, the weekly jobless claims, and nonfarm payrolls.

From Elsewhere

Private sector PMIs and trade data from China will also influence in the week.

Away from the economic calendar, however, COVID-19 news and progress towards the U.S stimulus package will also influence. As always, there is also the simmering tension between the U.S and China to monitor.

S&P 500 Weekly Price Forecast – Continue to Grind Through Earnings Season

The S&P 500 has rallied a bit during the week but gave back some of the gains as we continue to see noise right around the 3280 level. That being said, we are in the midst of earnings season so it could be a major problem. Nonetheless, this major problem is probably short-term at best and I think that we will more than likely see plenty of buyers on any type of pullback. Earnings season causes a lot of noise, but at the end of the day the only thing that truly matters is that the Federal Reserve is still pumping the markets full of liquidity.

S&P 500 Video 03.08.20

The markets continue to see a lot of noise going forward, but I think given enough time it is likely that we will see buyers at lower levels, closer to the 3100 level. On the other hand, if we break above the 3300 level, it is likely that we will continue to go towards the gap above, perhaps even the 3400 level above which is a large, round, psychologically significant figure. That was the all-time high, so if we blow through there then we will of course continue to go much higher but I think we may be taking a little bit of a breather as we listen to the earnings season reports, perhaps giving people a bit of a pause at this point as to putting more money to work. With this, I have no interest whatsoever in trying to short this market, regardless of what is going on in the “real world.”

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

Crude Oil Weekly Price Forecast – Crude Oil Markets Pullback for the Week

West Texas Intermediate

The WTI Crude Oil market fell a bit during the course of the week, as we continue to see a lot of noise in general. The negative candle for the week does not suggest much though, because quite frankly it is still well within the range of the last several weeks, so I think we will simply grind sideways more than anything else. Having said that, if we were to break down below the 20 week EMA underneath, then we probably could drop down to $35, possibly even $30. On the other hand, we break above the 50 week EMA, then we are probably going to the $49 level. Short-term trading is preferred at the moment though.

WTI Oil Video 03.08.20

Brent

Brent markets went back and forth during the course of the week to form a bit of a bullish candlestick, counteracting the shooting star from the previous week. With that being the case, it is likely that we are going to be stuck in a range between $45 and the 20 week EMA underneath. Short-term trading back-and-forth continues to work, and it probably will be the case for some time. Ultimately, the volatility is going to pick up and is going to continue to be very noisy. That being the case, we do not quite have the argument for a longer-term trade yet, but if we break significantly above the $45 level then it is time to start buying. If we break down below the 20 week EMA, then it is time to start selling.

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

Silver Weekly Price Forecast – Silver Markets Showing Signs of Gravity

Silver markets have gone straight up in the air over the course of the week, showing signs of strength and breaking above the $26 level. By doing so, it was an extraordinarily bullish move but at the end of the day we see that the market has given back quite a bit. I think at this point it is likely that we will continue to see bullish pressure eventually, but some profit-taking is probably going to be what we see initially.

SILVER Video 03.08.20

While we have not formed a complete shooting star, the candlestick is close enough to that to suggest that we are going lower. The $20 level underneath should be the “floor” in the market, so I would be a bit surprised to see this market break through there. If it does, that would of course be a very negative sign, but if we get down there, I am more than willing to take the chance on that position. To be honest though, I do not think we get that low and I think $22 is probably a little bit more likely.

On the other hand, if we break above the top of the candlestick it is likely that we then continue to go higher but only for the short term as it would be a bit of a “blow off top.” Silver has been extraordinarily volatile and bullish as of late, but sooner or later gravity had to come back into play. I will not short this market, but I am more than willing to be patient enough to take advantage of value when it appears.

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

Gold Weekly Price Forecast – Gold Markets Touch Major Level

Gold markets have rallied significantly during the course of the week, touching the $2000 level. That level has caused a significant amount of resistance on short-term charts, as Friday started to see sellers get involved to take profits. I think at this point we are likely to see a pullback from here and eventually value hunting again. However, the market cannot go straight up in the air forever, so we need to be cautious, but I also recognize that looking for some type of pullback is the only way to trade this market. The Federal Reserve of course continues to show signs of flooding the market with greenbacks, and that could continue to push the gold market higher.

Gold Price Predictions Video 03.08.20

Longer-term, I think that gold goes much higher, perhaps as high as $3000 but obviously we need to take a bit of a break here in order to build up the necessary momentum. There will be a lot of “FOMO” out there as quite a few traders have missed this move. Regardless, only the foolhardy would jump in and start selling, because quite frankly this is a market that is extraordinarily bullish, and therefore a simple bit of patience could go long way in order to find value that will be extraordinarily profitable. I believe that volatility is coming, but that should offer plenty of opportunity if you can recognize it. You will probably need to look on the daily chart in order to take advantage of it though. Again, selling is not an option.

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

Natural Gas Weekly Price Forecast – NG Markets Form Neutral Candle for the Week

Natural gas markets have gone back and forth during the course of the week, showing signs of confusion as the market has been bouncing around in this range for some time. Ultimately, the natural gas market is testing a major support level underneath in the form of the $1.50 level, which is a major support level going back multiple years. At this point, I think we are getting closer to the turnaround that this market has needed for some time. If we can break above the $2.00 level, this market can go much higher.

NATGAS Video 03.08.20

While I know that the oversupply of natural gas continues to be a major problem, the reality is that the commodity has gotten so cheap that we are seeing in multiple companies go bankrupt. With that being the case, we should eventually see supply dwindle and that should drive this market higher. I would be a bit surprised if we break down below the $1.50 level, because sooner or later you have the problem of where natural gas simply is not worth enough to bother drilling for. However, that does not mean that we take off to the upside right away either. Ultimately, I think it is a scenario where we will see a lot of noisy trading, and then an eventual breakout, perhaps later this year as temperatures plunges in America. Right now, things remain very back, and forth so short-term traders probably are going to be much more interested than longer-term traders.

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

USD/JPY Weekly Price Forecast – US Dollar Finds Support

The US dollar has initially fallen during the week against the Japanese yen, reaching down well below the ¥105 level. Having said that, the market has turned around to form a nice-looking hammer -type candlestick. This suggests that we could continue to see a bit of a pushback, so it is possible that we can take advantage of the overall range and look at the 107.50 level as an area to start selling. I would not necessarily be a buyer here, even though the candlestick does suggest that there are plenty of people willing to do so. I think at this point we are still kind of stuck here, which makes sense considering that the pair features a couple of safety currencies.

USD/JPY Video 03.08.20

All things being equal, I do think that eventually we get a nice selling opportunity, but things can always change as you know. The 50 week EMA is starting to curl towards the ¥107.50 level so I think at that point there will be enough technical pressure to keep this market struggling. All things being equal I think that it is only a matter of time before we do get a breakdown, mainly because of the Federal Reserve and its desire to flood the market with greenbacks. It is also worth noting that almost all of the pushback came on Friday, so we could have seen a significant amount of profit-taking skew the candle to say the least. With this being the case, little bit of patient should offer a nice selling opportunity. However, if we were to break down below the bottom of the candlestick for this past week, that would be a very negative sign.

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

GBP/USD Weekly Price Forecast – British Pound Touches 200 Week EMA

The British pound has shot straight up in the air during the week, testing the 200 week EMA, and perhaps even more importantly the 1.3150 level which with my longer-term target. In fact, it hit that level much quicker than I anticipated, as I thought this was a story for a couple of weeks from now. That being said, the market is likely to continue to see upward momentum overall, but I would like to see some type of pullback in order to find a bit of value.

GBP/USD Video 03.08.20

That is probably something you will have to buy off of the daily candlestick, so at that point we could then push higher. Overall, this is a market that I think eventually will find a reason to go higher, but at this point in time we are a bit overdone. I simply cannot feel good about buying up here as its “chasing the trade”, something that I refuse to do. In fact, as soon as I stopped doing that, I started to become a profitable trader.

I think that the 1.30 level at the very least needs to be retested, but a move down to the 1.2750 level would also be very possible. Longer-term, this is a market that I think eventually gets its way towards the 1.35 handle and then could make an even bigger longer-term “buy-and-hold” type of move. However, we still have to deal with Brexit down the road, so I believe that the British pound still has very rocky moves ahead of it.

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

GBP/JPY Weekly Price Forecast – British Pound Has Strong Week

By the time Friday rolled around, the British pound was in familiar territory, as we were threatening the ¥139 handle. This is an area where we have seen quite a bit of resistance recently, so do not be surprised at all to see a little bit of a pullback. That being said, the market is certainly one that you do not want to short, and the fact that we have attacked this area again tells me that there is significant demand. With that in mind, I like the idea of buying dips and will not be selling this pair anytime soon, at least not until it breaks down below the ¥135 level. Ultimately, this is a market that I think will eventually see a lot of noise, as it is pushed around by multiple things at the same time.

GBP/JPY Video 03.08.20

The British pound itself is strong but eventually people are going to think about the Brexit situation again, and that of course is something that is worth paying attention to. With that being said, I think that it is only a matter of time before we start talking about that, but in the meantime, it certainly looks as if the British pound is trying to make a bigger move. If we can break above the ¥140 level, the next target would be closer to the ¥145 level. We have been basing for some time going back a couple of years, so who knows, this might be where we change everything. Be cautious with your position size and look for value.

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

EUR/USD Weekly Price Forecast – Euro Smashes Through Barriers

The Euro shot through couple of barriers during the week, breaking through the 1.17 level, the 1.18 level, and even threatening the 1.19 level. The way we have done this, it has been quite impressive, but I think eventually we will regain all of this territory after a pullback. The pullback is something that is desperately needed, and therefore it is likely that we will see buyers come in to pick up value when it occurs. The 1.15 level is now your absolute floor in the market, as I think the trend has most certainly changed.

EUR/USD Video 03.08.20

The candlestick is somewhat impressive, but it is likely that we are going to continue to see plenty of people acknowledge the fact that the Federal Reserve is flooding the markets with greenback and therefore it is likely that we will continue to see the Euro continue to go higher longer term. We are seen a major trend change and therefore there are plenty of people waiting to see a bit of value appear so that they can take advantage of this massive change.

The trend in FX tends to last quite some time, so even if we do get a bit of a pullback, I think that there will be plenty of people willing to take advantage of that value. I have no interest in shorting the Euro, it has shown us just how explosive it is at the moment, and with the US dollar losing so much strength, it makes quite a bit of sense that we would see a bit of a cool off before we move in the same direction again.

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

AUD/USD Weekly Price Forecast – Australian Dollar Reaches 200 Week EMA

The Australian dollar has rallied again during the week, breaking through the 200 week EMA before pulling back a bit. It is worth noting that the Aussie dollar has been very bullish for some time, and the fact that we pulled back from the 200 week EMA is not much of a surprise. Ultimately, I think that the market will find plenty of opportunities, but we will probably need to pullback in order to find them. I am especially interested in the 0.70 level, an area where we should see quite a bit of support.

AUD/USD Video 03.08.20

If we were to break down below there, the next major support level should be the 0.68 handle, an area that continues to see a lot of support based upon structure and of course the 50 week EMA. That being said, there should be plenty of buyers after a move like this, and people are itching to get involved that have not managed to. The greenback continues to get hammered against almost everything due to the Federal Reserve flooding the markets with currency.

A break above the candlestick for this past week of course is bullish but the Australian dollar has gone straight up in the air for so long that it is difficult to imagine that we simply do that. At the very least I think we need to consolidate, if not get that pullback I mentioned previously. The Aussie dollar has to worry about the Reserve Bank of Australia working against it, but quite frankly they are lightweights in comparison to the Federal Reserve, so we are going higher over the longer term.

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

Precious Metals Warn Of Increased Volatility Ahead

Our trading team witnessed a big drop in Platinum and Palladium prices early this morning while Gold and Silver continued to push moderately higher.  We began to question this move and investigate any historical relevance to previous patterns.  Our research team pointed out that both Platinum and Palladium rolled lower just 3 to 4 days before the breakdown in the US stock markets on February 24, 2020, while Gold and Silver were reaching recent price peaks.  Could the patterns in precious metals be a warning of another potential volatility spike and price decline in the near future?

ARE METALS PATTERNS PREDICTING A BIG DOWNSIDE PRICE EVENT?

Our research team created the charts below to help highlight the pattern that we are seeing in Precious Metals right now.  First, we highlighted February 24, 2020, with a light blue vertical line to more clearly illustrate where the markets initiated the COVID-19 breakdown event.  Next, we drew shaded rectangles around new downside price rotation levels that took place near this peak in the US stock markets.  Lastly, we drew a red line that highlights the subsequent price decline that took place in Precious Metals as the markets tanked in late February and early March 2020.

The current downside price move in Platinum and Palladium are very interesting because it appears Platinum and Palladium both initiated a downside/contraction price event just 3 to 4 days before Gold and Silver, as well as the rest of the US stock market, began to collapse on February 25, 2020.  You can clearly see in the bottom two charts that Platinum and Palladium initiated a downside price correction a few days before both Gold and Silver reached their peak levels and began to move lower.  Once this peak rotation took place, all four of the major metals groups moved moderately lower for about 7 days before pausing, then collapsed even further.

Our researchers believe the current setup in Platinum and Palladium may be mirroring the February 2020 peak rotation and warning that a massive volatility event and downside price contraction event may be setting up and just days away from initiating.

The breakdown in Precious Metals at a time when the US stock market is crashing is usually a result of margin calls – where traders experience losses in their trading accounts and much liquidate Precious Metals positions to cover these losses.  This time, the downside event in Precious Metals may not be as deep or exaggerated as the February/March collapse.  Skilled traders have already positioned their accounts to avoid margin calls.  Only the novice traders may be in a position to experience this type of event in the near future.

HOW DEEP WILL IT GO?

Our researchers believe any future downside event in precious metals will likely stall near the recent support levels on these charts and immediately rotate back into a bullish trend because fear and greed won’t allow metals to fall too far before greedy traders try to scoop up these positions at discounted price levels. Our Support levels for the four Precious Metals shown are:

Silver: $19 to $21
Gold: $1780 to $1820
Platinum: $750 to $850
Palladium: $1915 to $2090

We believe any attempt to reach these levels in any of these four various Precious Metals would present a very strong buying opportunity for skilled technical traders.  If it were to happen while a US stock market volatility event was taking place and/or the US stock market began a new downside price decline, then skilled traders should understand we may be seeing a similar type of price rotation event to the one that took place in February/March 2020 – representing a fantastic trading opportunity for those lucky enough to take advantage of the discounted price levels.

This next chart highlights what we believe may be the downside price event as it potentially takes place over the next 10 to 20+ days. Pay special attention to the differences in how Silver, Gold, Platinum, and Palladium react to the fear event and where real opportunity exists near the end of this potential event.  Platinum and Palladium will likely fall 15% to 25% where Gold may fall only 8% and Silver may fall 15% to 20% before bottoming.

As technical traders, we can’t pass up an opportunity like this when Precious Metals gift us with a potential 15% to 45%+ rotation in price that should be moderately easy to trade given our expectations.  If this event takes place as we have described, skilled technical traders could begin to acquire smaller positions near our target levels, then wait to acquire bigger positions as the bottom sets up.  Take a look at how Gold and Silver rallied after the February/March collapse – Gold rallied back to new highs within 45 days whereas Silver rallied higher over 4+ months, then broke higher just recently on a huge upside breakout move.  Platinum and Palladium rotated more diligently throughout a 90-day span – never really reaching new highs after the peak in February 2020.

The reality of patterns like this is they are fun and exciting to find at this early stage of the setup.  We’re not 100% confident this pattern will play out as we expect yet – but we believe the probability is high that a volatility event is about to take place and that Precious Metals could react very similarly to the February/March 2020 price reactions again.

Quick Video Clip On Silver & Gold Predictions

As technical traders, we love this type of “telegraphed event” – even if it does not take place exactly as the previous event took place.  It means we have an opportunity to take advantage of increased volatility and price rotation in one of our favorite sectors – METALS.  Get ready for this move if we are correct – it may be your last chance to buy Gold and Silver at deep discounts for quite a while.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our subscribers in an effort to try to keep you informed of trends and our research.  Visit our web site at www.thetechnicaltraders.com to learn how to take advantage of our members-only research and trading signals.

 

Trump, the Polls, and that Glimmer of Hope

The Mood

COVID-19 has left the Presidential Election up in the air, with many having now written off Trump’s chances of a 2nd term.

Trump may have hoped for a 2nd term and, as some put it, a political dynasty to extend beyond his watch.

We can expect the debate to last longer than Trump’s political career. The big question mark will be whether Trump would have won a 2nd term had the U.S not succumbed to COVID-19.

It wasn’t just COVID-19 that has left Trump trailing in the polls, however.

Civil unrest and the administration’s foreign policy are just two examples of how Trump isolated and disjointed the U.S.

With Canada, China, Mexico, the EU, and even the UK falling foul of U.S foreign policy, many will be hoping of a Trump defeat.

We’re 3-months away from the 3rd November and there’s a lot that has to change for Trump to claw back his way into contention.

The Latest Polls

So, according to the latest FT’s interactive Calculator and polling data, which are as at 29th July 2020, there has been a shift in the numbers.

The FT has Democratic challenger Biden with 308 Electoral College votes, which remains unchanged from 22nd July.

In fact, Biden has held onto the 308 since falling back from 318 as at the end of June.

It’s been a different story for the U.S President, however.

The latest numbers show Trump with 128 Electoral College votes, which is down from 132 as at 22nd July.

Looking more closely at the numbers, there is some cause for optimism for the blues.

Joe Biden has seen the number of solid votes rise from 188 to 190, with leaning votes falling by 2 to 118.

For U.S President Trump, his projected Electoral College vote count has fallen from 132 to 128.

Leaning votes stand at 51, with solid votes at 77. That’s quite a shift from 22nd July. Leaning votes and solid votes had stood at 17 and 115 respectively just over a week ago.

Also positive for Biden is the rise in the number of toss-up votes, which have increased from 98 to 102.

If we look at the key U.S states that tend to be election barometers:

Missouri continues to lean in favor of Trump and the Republicans, with Kansas City now also leaning in Trump’s favor. A week ago, Kansas City had been a solid Republican state. Sending in Federal agents looks to have caused the shift.

For Biden, Illinois, New Mexico, and Oregon are solid blues, with Michigan, New Hampshire, and Pennsylvania also blue.

The Road Ahead

With the first of 3 Presidential Election debates not due until 29th September, that may favor the U.S President.

Trump and the administration have just under 2-months to prepare to defend the Administration.

U.S equities have held their ground, largely thanks to the FED. By contrast, however, the economy is in a shambles, with unemployment sky-high.

The latest U.S COVID stimulus package also doesn’t like it’s going to do the trick and support the unemployed. A sizeable cut in unemployment benefit is not only going to rile voters but also weigh on consumer spending.

That’s a double negative for a U.S President that had promised to reunite the Republican Party and make America great again.

As the effects of the COVID-19 pandemic continue to hit the U.S economy further, Republicans have also begun to distance themselves from the President.

The failure to deliver a swift stimulus package to the House was a reflection of the party’s recent fragmentation.

Trump needs a united party front and a widely available vaccine to shift the polls in his favor.

If the latest news on the vaccine is anything to go by, a vaccine may not be available until mid-2021.

That means one full winter season, where the U.S could even succumb to a 3rd wave of the pandemic. Such an outcome would almost certainly be curtains for the U.S President.

Not even a postponement of the U.S Election would save Trump.

The Glimmer of Hope

For the die-hard Republicans, there may be a glimmer of hope, however…

Republicans have a tendency to be more loyal than Democrats. You don’t have to go too far back in history to see examples of Democrats flipping at the last minute.

Hillary Clinton was set for a comfortable win back in 2016.

Then consider Trump’s in-party support that remains exceptionally high compared to other Presidential candidates going for a 2nd term. This is the case even with the latest news of some turning their back on their leader.

When you then factor in Trump’s sheer desire to win at all costs, some may still give him a reasonable chance to swing the polls in his favor.

One last thing to consider is the COVID-19 pandemic and what actual impact it will have on Election Day.

Trump may quietly be hoping for the pandemic to remain a concern on Election Day. With Republicans considered to be more loyal, they are more likely to vote at any cost.

A low turnout on Election Day must therefore also favor Trump and a 2nd term.

All in all, it makes for an interesting few months ahead.

Assuming that China, Russia, and other anti-Trump nations don’t rig the elections, it’s still anyone’s race.

Technical Patterns, Future Expectations and More – Part II

Continuing this multi-part research article, today we are going to explore some more immediate (shorter-term) technical setups.  If you missed the first part of this research article, please take a minute to review it before continuing because there is quite a bit of information and related article links that are very important for you to understand this next article. You can view it here.

In the first part of this article, we discussed how our team evaluates a proper market perspective and how we build a consolidated narrative for our subscribers.  Some times, it is not easy for us to build a suitable narrative or decide on risk factors as our team may not completely agree with one another.  At times like this, we’ll often decide that no action is better than taking any action at all.  Generally, though, our team is able to adopt a consensus narrative related to portfolio allocation levels, general market trends and specific target trade setups for the next 5 to 10+ trading days.

The Technical Traders services’ primary objective is to protect assets while attempting to deliver success with trading signals that generate consistent profits.  We care, very deeply, about our members and their success.  Our team has a combined experience in the markets of over 55+ years, and have lived through various market and economic scenarios going back over 35+ years. We have also had the opportunity to learn from some of the best technicians and analysts on the planet.  We publish our public research for two primary reasons: a) to assist our friends and followers, and b) to publically document our future calls and predictions – putting our necks on the line every time we publish anything to the general public.

When we develop a narrative for our members, we internally discuss longer-term and shorter-term expectations as well as to identify concerns or risks that we see as evident in the markets or setups that are present today.  As we suggested in Part I of this article, we don’t try to over trade and are very selective in our trades. We also have processes in place to ensure we have found the right risk /reward ratio prior to initiating new trades.  If we miss a move – we won’t chase it – there will always be other trades setting up for us to capture new profits for our members. We see some interesting events unfolding that will undoubtedly lead to some fantastic trades.

PUT/CALL RATIO SHOWS SELLERS LINING UP

A screen shot of a computer Description automatically generated

The chart above highlighting the PUT/CALL ratio suggests sellers are lining up near recent highs, expecting the markets to roll over as the Q2 earnings and data are released.  It makes sense that the data could be somewhat bearish in nature given the potential destruction of earnings and revenues in Q2.  It also makes sense that near recent highs, as the S&P 500 and Dow Jones have recently rolled into a sideways consolidation, that skilled traders would pull profits near these levels and initiate new Put Options trades to hedge any downside risks in the future.

Gold and Silver recently fired a very large warning shot for anyone paying attention.  The US Dollar has continued to weaken and Crude Oil may begin a new downside price trend if the economic data suggests a broader contraction in the US economy.  What all this means is that skilled traders and others are losing their bullish bias in the markets and are starting to become protective – expecting some type of new trend to setup.

Our researchers believe a downside price move targeting the $252 level on the SPY is not out of the question. Recall the $252 level is a price level that corresponds with economic expectations as of late 2017.  These levels represent a fairly nominal price correction that would still be considered moderate bullish overall.  Any deeper price move would indicate the markets are completely disconnected with future expectations for the rest of the year and possibly further out into the future.

VIX BACK AT FEBRUARY FEAR LEVELS

The VIX is trading at levels that indicate the level of fear in the markets has recovered to historically moderately high levels (near 25.00) – see the chart below.  Volatility is still a major factor in the markets and any change in trend could be aggressive and violent – sending VIX above 40.00 again.  We believe this new low level in the VIX is indicative of complacency in the markets and with the current bullish price trend.  Complacency in the markets tends to lead to very aggressive price corrections.  We believe skilled technical traders should adopt a very cautious stance going forward and protect open long positions exposed to risk.

A screen shot of a computer Description automatically generated

If the markets begin to breakdown on the Q2 GDP and Consumer data that will be released on Thursday, July 30, 2020, then the VIX will begin to move dramatically higher. In this situation, stop levels just below the current market price levels will begin to become targets.  We can also expect to experience a similar event as that of February 2020, a type of flash-crash where a -12 to -18% downside price move could happen over a matter of days – not weeks.

Pay attention to what happens in the Transportation Index and with Crude Oil and Gold and Silver.  Our researchers follow these as early warning triggers for what may come.  Additionally, our cycle research suggests a bottom in the markets will likely form in 2022 to 2023 – thus we may have quite a bit of sideways or downside price action ahead of us before a true market bottom completes.  At this point, in order for our cycle research to become valid, we would need to see a downside price move that substantiates the cycle predictions.

Right now, the advice we continue to provide to our members is to be patient, protect your profits and assets, and prepare for more volatility and risks.  This is not the time to play games with your capital and we strongly believe this is not the time to “buy the dips”.  A bigger price pattern is setting up in the markets and many traders simply ignore these broader technical patterns.  You can read more about these types of patterns in one of our recent research posts that explains the selloff structure. You can also see why we think gold will break out and silver will go ballistic once the stock market bottoms.

We hope you’ve found this multi-part research article helpful and informative.  Remember, read our research and determine if you like and agree with our conclusions.  Even if you don’t agree, pay attention to what we are suggesting.  You never know, it might lead you to make a decision that could help you protect your assets, find a new opportunity or, at the very least, help to keep you better informed – and that is our ultimate goal.  We put this effort into publishing these public research articles every day to help you stay ahead of the biggest moves in the markets.

See the articles listed above and read them to learn more about how we see the future unfolding. We believe you won’t find any better research or analysis anywhere on the web than what we offer and we urge you to take advantage of our member/subscriber services when you are ready.  The next 24 months are going to be really crazy – get ready for some really great opportunities.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.

Stock Pick Update: July 29 – August 4, 2020

The broad stock market remained within a short-term consolidation in the last five trading days (July 22 – July 28). The S&P 500 index has retraced some of its recent advance after getting closer to 3,300 mark. More than four months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears erased more than a third of the broad stock market value. But the index has rallied back closer to record high again.

The S&P 500 index has lost 1.12% between July 22 and July 28. In the same period of time our five long and five short stock picks have lost 2.83%. Stock picks were relatively weaker than the broad stock market. Our long stock picks have lost 4.59% following a large INTC stock sell-off and short stock picks have resulted in a loss of 1.07%.

Could we have avoided such loss? Our 10-stock (5 long and 5 short) portfolio’s weekly decline has been relatively large in the last five trading days. However, a 20% loss in one stock accounts for “only” 2% loss of 10-stock portfolio. There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • July 28, 2020
    Long Picks (July 22 open – July 28 close % change): MLM (-5.87%), MCD (+1.57%), INTC (-19.84%), XOM (-1.36%), IRM (+2.58%)
    Short Picks (July 22 open – July 28 close % change): COG (-0.38%), WY (+6.86%), SPGI (-1.77%), APD (-0.40%), HD (+1.02%)Average long result: -4.59%, average short result: -1.07%
    Total profit (average): -2.83%
  • July 21, 2020
    Long Picks (July 15 open – July 21 close % change): DOW (-1.40%), INTC (+2.83%), MCD (-0.47%), XOM (-0.84%), HST (-1.54%)
    Short Picks (July 15 open – July 21 close % change): COG (+4.57%), VNO (-5.52%), AON (+2.30%), LIN (+1.36%), AAPL (-2.01%)Average long result: -0.28%, average short result: -0.14%
    Total profit (average): -0.21%
  • July 7, 2020
    Long Picks (July 1 open – July 7 close % change): INTC (-2.67%), F (+0.33%), PPG (+2.17%), DTE (-0.35%), AIG (-5.93%)
    Short Picks (July 1 open – July 7 close % change): XEL (+2.00%), BLK (+0.91%), EOG (-5.72%), MSFT (+2.52%), EBAY (+8.14%)Average long result: -1.29%, average short result: -1.57%
    Total profit (average): -1.43%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, July 29 – Tuesday, August 4 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (July 28) and sold or bought back on the closing of the next Tuesday’s trading session (August 4).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Materials, 1 x Consumer Staples, 1 x Utilities
  • sells: 1 x Energy, 1 x Technology, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Technology
  • sells: 1 x Materials, 1 x Consumer Staples

Trend-following approach

Top 3 Buy Candidates

IFF Intl Flavors & Fragrances – Materials

  • Stock remains above the upward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $132.5-137.5

WBA Walgreens Boots Alliance, Inc. – Consumer Staples

  • Potential short-term uptrend continuation pattern – bull flag
  • The resistance level of $44 (short-term upside profit target)
  • The support level remains at $38-39

ED Consolidated Edison, Inc. – Utilities

  • Stock broke above medium-term downward trend line
  • The resistance level and upside profit target level at $82-84
  • The support level is at $70

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Materials, Consumer Staples and Utilities sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

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

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

NASDAQ Double Top & Price Channels Suggest Pending Price Correction

Our research team continues to attempt to navigate the difficult market dynamics ahead as traders’ concerns related to continued global economic functions persist.  We believe the US stock market has rallied well beyond sustainable levels and the recent move in the US Dollar and Precious Metals has issued a clear warning that global traders are not buying into the current valuation levels of the major indexes.  The NASDAQ (NQ) has rallied to new all-time highs at a time when a majority of the US Stock Market is contracting and concerns about future earnings/revenues continue to shock investors.  It is almost as if a large group of traders piled into the “Fed Recovery” message and ignored the fact that the COVID-19 virus event is vastly different than any other price correction we’ve experienced over the past 40+ years.

NQ DOUBLE TOP SETUP

Recently, the NQ setup a very clear Double Top pattern near a somewhat obscure Fibonacci level (85.4%).  The Double Top pattern is a common technical pattern that suggests a resistance has formed near the Double Top price level, near 11058.50. Next week, critical GDP data and economic data will be announced on Thursday, July 30.  We believe the move in Gold and Silver is foreshadowing an ominous series of data that will reflect a very clear 20% to 30%+ contraction in the US and global economy.  The Double Top pattern in the NQ could be a very strong warning that the FOMO (Fear Of Missing Out) rally may be over.

NASDAQ DAILY CHART

NQ 100% MEASURED MOVE SETUP

This NQ Weekly chart highlights the nearly 3,950 point rally from the low in December 2018 to the high formed on February 17, 2020.  The current low formed in March 2020, near 6628, to the recent peak level, near 11,085, represents a “100% measured price advance” of 4,430 points.  Yes, the current rally extended the 100% measured move by 12.15% – which often happens as price tests resistance or support. Measuring from Weekly closing bar to Weekly closing bar on this chart, the 100% measured move is only about 50 points away from a true 100% advance.

NASDAQ WEEKLY CHART

We believe this combination of technical price patterns suggests the US stock market, particularly the high-flying NASDAQ (NQ), may be setting up for a dramatic price decline.  Both the Double Top and 100% Measured Move patterns suggest price has reached a limit.  If our interpretation of these technical patterns is correct, after such an incredible price rally in the face of unsure future economic data, we believe a move back to 8,750 is not out of the question (or lower).

NQ FIBONACCI CHANNELS

Very few people understand the relationship of Fibonacci price theory and how it relates to price action.  Fibonacci Price Theory suggests that price must move higher or lower to establish new price highs or lows within a trend.  Obviously, the NQ has rallied to “new price highs” – thus the current trend is “bullish”.  Yet, a Double Top pattern is also a critical warning of resistance near the dual top level.  Additionally, a 100% measured price advance is another warning sign that price may have reached an upside limit.  Now, we add our proprietary Fibonacci Price Amplitude Arcs using a 0.854% Fibonacci extension level.

This extension level is not commonly used by many traders but is completely valid if you spend a bit of time exploring the Fibonacci Number Sequence and the relationship between the numbers.  In fact, there are a number of levels between the 0.75% and 1.0% common Fibonacci levels that are valid for traders.

We have drawn the 1.854% Fibonacci Price Amplitude Arc in a MEGENTA color to highlight just how critical this level appears on the Weekly price chart.  If our research is correct, we now have three technical/Fibonacci patterns that are setting up warning us that the NQ price may turn downward and begin a new downside price rotation.  When we combine this with the data that we are expecting this week (GDP, Consumer and other data), this could turn into a “knockout blow” for the high-flying NASDAQ.

NASDAQ DAILY – FIBONACCI CHANNELS

If you were paying attention, you already know that the US Dollar is under pressure and the Precious Metals are showing signs that fear is rising in the global markets.  This next week, and the weeks that follow, will likely result in global traders attempting to re-valuate expectations based on the level of destruction the COVID-19 virus has done to the US and global economy.

Our researchers expect a minimum of a 20% to 25% contraction in consumer and business engagement in the US – possibly much more.  In March 2020, our research team suggested the Q1 and Q2 GDP data could contract by as much as -10% to -15%, potentially pushing the 2020 yearly GDP level into a -5% or deeper level.  On Thursday, July 30, 2020, we’ll find out just how rough Q2 of 2020 really was for the US.

This is when the crap is likely to stick to the walls, so our advice would be to protect your open longs, prepare for increased volatility and don’t get married to any position you have right now.  If you have not already prepared for this move, do it quickly early this week.

If the news is bad enough, there is no reason why the US and global markets could not attempt to retest recent low-price levels again.  Remember, Fibonacci Price Theory suggests price is ALWAYS seeking new price highs or new price lows.  Just because the NQ has reached new price high levels does not mean the S&P500, Dow Jones or other indexes, which have not reached new all-time highs, could not collapse and attempt to find new price low levels.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for research and educational purposes only.  The Technical Traders Ltd. does not provide financial or investment advice, so please contact your financial advisor before making decisions about your personal finances.