A look at the day ahead in U.S. and global markets from Mike Dolan
August looks anxious already – as stock markets take fright at Big Tech earnings and start to reconsider ‘hard landing’ scenarios for the world economy just as central banks ease and bond yields plummet.
It’s been a frantic week’s trading in all corners of the financial world. Regardless of the recently vaunted rotation of stock sectors, the biggest rotation that’s emerging is one from stocks to bonds as ‘recession’ creeps back into parlance.
Morning Bid: Rethinking recession risks and AI, markets take fright
US500 DAIY CHART – REVERSAL OF FORTUNE
The retreat from the record high continyes as markets await the next key event, the US jobs report. As noted, the mood has shifted to bad news is bad news so price action suggests traders are wary of a downside surprise..
On this chart 5391 has been broken so back above it, at a minimum, would be needed to slow the risk on the downside.
Using a 10% rule, 5106 = a 10% retracement off the record 5674 high (not a forecast).
EURUSD 4 HOUR CHART – UP ON RISK OFF
EURUSD catching a bid as a safe haven as US STOCKS extend THE slide ahead of the US jobs report where the reaction has shifted to bad news is bad news. Price action suggests traders are wary of a downside JOBS surprise.
KEY CHART LEVELS
TRENDLINE
1.0836
1.0850 *
1.0870 *
1.0850-70 ARE GAME CHANGER LEVELS
ON THE DOWNSIDE, 1.08 IS CLEARLY PIVOTAL AS IT NEEDS TO STAY ABOVE TO MAINTAIN A BID.
USDJPY 4 HOUR CHART –
As I noted, when I can identify a trend, I look at longer time frame charts to see what level would end the latest leg.
In this case it would be 151.25, which seems safe into the weekend.
Chart levels:
148.50 = Thursday low
148.00 = Pivotal lebvel
145.89 = key target if below 148
On the upside, 150 is clearly pivotal in dictating whether USDJPY goes after the above levels.
Note JPY strength is even more promounced on its major crosses.
Aug 2 (Reuters) – A look at the day ahead in Asian markets.
Falling bond yields and the prospect of lower interest rates may have helped fuel investors’ animal spirits and the recent mega rally in world stocks, but it’s a different story when borrowing costs are falling because recession fears are rising.
BTC DAILY CHART -DISAPPOINTING
Bulls have to be disappointed by the brick wall around 70K and the sharp retreat.
As the daily chart shows, below 63K (briefly broken) would open the door for 60K .
As I have noted, I prefer to look at pivotal levelSs such as 60k, 65k and 70k AS A RANGE WITH LITTLE IN THE WAY OF KEY STOPS SO REVERT TO SHORTER TIME FRAMES TO TRADE IT.
GBPUSD 4 HOUR CHART – bearish below 1.28
When in a trend, like the downtrend in GBPUSD, I look for an AT level that would negate the latest leg.
On this chart it comes in at 1.2840.
A couple of levels to watch:
1.2750 (power of 50 level for day trading)
1.2777 (former support)
1.2800 (pivotal big figure, bearish below it)
1,2612 (major level), start of the move that peaked at 1.3044).
In my estimation the market will likely reprice Euro into the 0740’s ultimately where larger participants will add to their already long existing buy side positions. They are already lightly scaling in again, I know where the orders are. They will fill more around 0780, again around 0750-0760, and the lower zones mentioned as well and if seen.
The result should be pricing in of a relief rally as the September rate announcement nears in stocks and risk polite currencies like Euro.
CTA is off to other things for a bit. Good luck!
The S/P 500 Strategic Commodities Index is beginning to trade under its equilibrium slightly and so when it arrives around certain areas which would coincide with Gold pricing 2470 to 2480 that is a zone I expect to see some more robust buy side activity in Gold again. (Got your back JP)
JP – regarding the FED…one has to. In similar fashion to the value of the US Dollar itself. The Dollar is backed by the confidence that the market has in future economic performance. Not Gold (there is not enough store to sustain the US economy for more than 48hrs even in war time). The FED impacts markets with their views on confidence. So the FED is viewed as both cause and effect. The problem is the accounting. When I was majoring in accounting I proved to the instructor that the books could be cooked without affecting the balance sheet during finals. I got an A on the final but was flunked for disproving actuary out of spite by the instructor lol.
That is what the FED has been doing of late.
SF 2:42 – do you count the FED meddling in the fin market and the economy as a “fundamental” element ?
JP – It is simply factual they have been keeping it out of the (published) results to cause the face value appearance of inflation being lower than it really is. The reality is some commodities will remain inflated now with new levels being established in the cost of living index. Basically the books are being cooked so that it appears inflation is cooling but it really is not, only in some parameters. Some could possibly argue it is criminal and be correct. It is like the headline employment number that does not “account” for the labor participation rate. The headline figure looks great. Until the clothes come off.
There is an old saying in sales and politics: Multiply your positives and divide your negatives. They won’t know any different than what they hear if they remain uneducated. Some remain uneducated by choice.
FWIW
bullard says …
Job market needs to normalize, not deteriorate: Fmr. Fed. Pres.
https://ca.finance.yahoo.com/video/job-market-needs-normalize-not-143107268.html
I don’t believe this morning’s US data affected Euro much other than to not shock the buy side entrants who are larger entities. The buy side was already being entertained below 0800 by more significant participants well before the data was released.
Does that mean fundamentals do not matter in trading? To think that would be pretty arrogant and pretty narrow. There is likelihood that the market will see 0880 and if there are no geopolitical or other shocks they may price in 0980. But likely not before another bout of selling toward 0780 or below, especially considering current geo-political conditions. Recent activity is highly import/export and geo-fundamental driven, not just by rate moves.
Why is that? Ask your analysts. After 5,000 words they will say “on the other hand.”
Or you can just ask your YouTube guru. They keep it simple. They know everything.
Well educated traders with common sense and more than out of the box indicators are the best traders.
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