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Stock Market Today
U.S. and European markets are trading lower as investors had some reality checks with respect to their anticipations of the Fed’s monetary policy. Traders are still optimistic about the U.S. economy and the confirmation of this came in the Retail Sales number, which came better than expected (actual 1.3%, forecast 1.0%). The data has assured traders and investors that consumers are still spending in the U.S., which has boosted their confidence in riskier assets.
Going forward, the focus will be on the FOMC Minutes which will be released on Wednesday next week. As long as the Fed indicates that they are satisfied with the pace of the slowdown in inflation, traders will take that as a positive.
Forex
In terms of the forex market, both the Euro and the Sterling failed to score significant gains, and the element caused was the number of commentaries by the Fed officials. For instance, Fed member James Bullard, president of the Federal Reserve Bank of St. Louis, made said on Thursday, “the policy rate is not yet in a zone that may be regarded appropriately restrictive.” In his opinion, the acceptable range for the federal funds rate may be 5% to 7%, higher than what the market is currently pricing. This has brought the bulls back into the space for the dollar index, which has recouped its lost ground.
Gold
The precious metal is trading where it began the week, and this week’s gains have been small, if any. The major cause has been profit-taking among traders who opted to cash in after the gold price posted a good gain last week. In addition to this, market participants undoubtedly did get ahead of themselves last week, thinking improperly about the Fed’s monetary policy. The reality is that the Fed is still on its aggressive monetary policy, and while they may not be hiking the interest rate by the same amount, interest rate rises will continue to take place. This suggests that the dollar index will recuperate its lost territory, and the odds are that we will see the dollar index rising higher. This week, we have seen hints of the dollar index rebounding back and regaining some of its losses, sending the gold price down.
Oil
Brent and Crude oil prices didn’t have the best week, chiefly due to the improving geopolitical picture in the wake of the missile in Poland, which turned out not to be from Russia, and de-escalating tensions between China and the U.S.
On the demand side, there are concerns about an economic slowdown: the UK confirmed its economy is in a recession, and Chinese economic data has yet to provide any measure of optimism. These factors have kept the oil prices in check, and the path of the least resistance seems skewed to the downside.
Crypto
Crypto is still reeling from the aftereffects of FTX, and all of the bad news surrounding the exchange continues to have an affect on the price of Bitcoin. There is an exciting element to note here, and even though there has been so much bad news about the industry and some serious concerns about the domino effect, BTC prices are still trading above its $15,000 price support. This is a highly encouraging sign for those who pay attention to price action.
Another positive element that traders need to keep in mind is that individuals like Elon Musk are still believers in Bitcoin, as he publicly said on a Twitter conversation that he believes that cryptocurrencies like BTC, Ethereum and Dogecoin will make it out of this storm.
But for the time being, attention is still being paid to the fallout from the FTX scandal, and investors are understandably apprehensive about the possibility of the next large firm or project failing. The fact is that FTX has its fingers in a lot of pies, and its exposure has been considerable.
On the other hand, there is a silver lining in the fact that the majority of the negative news is either in the process of being flushed out or has already been washed out, which means that there is less negative news remaining for the sector. In addition, one of the most promising indications that a bear market is nearing its conclusion is when negative news fails to have the same impact on the price as many people had predicted it would. Taking into account the current price of bitcoin, we are getting closer and closer to hitting that point.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost further momentum. 68% of the Dow Jones stocks are trading above their 200-day moving average. The S&P 500 stock breadth also confirmed some more weakness in its momentum: 53% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures have experienced a minor sell-off this week and have given up some of the gains they scored in the past weeks. The price is still trading above the 50, 100, and 200-day SMA on the daily time frame, which confirms that the bulls are still in the driver’s seat, and this sell-off is only a retracement. Given the optimism about de-escalating geopolitical tensions, we may see further gains for the Dow Jones’s price action in the coming days. However, the RSI is showing signs of being overbought, and that may exert more selling pressure.
The near-term support is 32,285, while the resistance is 35,871.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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