North American News
uS major indices closing the day with mixed results
- NASDAQ rebounds. Dow down. S&P up modestly
The major US indices are ending the day mixed results. The Dow industrial average is down. The S&P index is modestly higher, while the NASDAQ is up nearly 1%. Yesterday the major indices all fell sharply to start the trading week.
A look at the final numbers shows:
- Dow industrial average down -84.986 points or -0.26% at 32160.75
- S&P index up 9.82 points or 0.25% at 4001.05
- NASDAQ index up 114.43 points or 0.98% at 11737.68
- Russell 2000 down -0.29 points or -0.02% at 1761.78
All the major indices had their share of ups and downs today as the market consolidated the sharp declines from yesterday’s trade. The NASDAQ index did trade to a new year low at 11566.28. That took out the low price from yesterday at 11574.94.
The S&P and Dow industrial average also made new 2022 lows. For the S&P, it reached 3958.17 taking out the low price from yesterday at 3975.48. For the Dow industrial average traded to a new low of 31887.89, after trading to a low yesterday of 32121.9.
In after-hours trading Coinbase reporting much worse than expected earnings of -$1.98 vs. expectations of +$0.18. Revenues came in at $1.17 billion vs. expectations of $1.48 billion. Monthly transacting users came in at 9.2 million vs. 9.5 million expected. The stock is currently trading at $65.07 down $7.92 or -10.85%. That comes after trading down $10.52 or -12.6% in the normal trading hours today. Yesterday the stock closed at $83.51.
US sells 3-year notes at 2.809% vs 2.812% WI
- Results of the three-year sale
- High yield rate: 2.809% (prev 2.738%)
Bid-to-cover ratio: 2.59 (prev 2.48)
Direct accepted: 18.0% (prev 17.6%)
Indirect accepted: 62.0% (prev 53.4%
Commodities
Gold Price Forecast: XAU/USD bears taking on critical daily support
- XAU/USD bears are moving in and taking on the daily support structure.
- US CPI will be a key driver for markets that are in wait and see mode.
- The US dollar is consolidating as US yields pull back giving relief to stocks.
The gold price continues to deteriorate despite some relief in the US dollar’s advance. At the time of writing, XAU/USD is down some 0.46% at $1,845 while the DXY is trading at 103.85 and up just 0.1%.
The dollar has been choppy on Tuesday, fluctuating between modest gains as traders get set for Wednesday’s big event in the US Consumer Price Index which could give clues on the likely path of the Federal Reserve’s monetary policy.
Investors have been in a risk-on mood, as the yield on the benchmark US 10-year note eased back below the 3% psychological level and from the highest levels since 2018 at 3.20% scored on Monday. This has given some relief to US equity benchmarks that have been mixed in choppy trade. The Dow Jones Industrial Average has recovered to flat, with the S&P 500 up come 0.55%. The Nasdaq Composite is higher by some 1.9%.
However, the outlook is not so bullish for gold, according to analysts at TD Securities.
”Systematic trend followers are joining into the liquidation vacuum in gold. Finally, trend signals have sufficiently deteriorated to catalyze a substantial selling program in gold. With gold prices challenging the psychologically important $1850/oz range, the additional CTA flow could be sufficient to spark a breakdown in this technical level.”
Eyes on US CPI
Tomorrow’s CPI is expected to rise by 0.5% MoM in April and headline to rise by 0.3%, as food and energy prices eased, according to analysts at ANZ bank. ”Inflation has probably peaked on a YoY basis, but monthly inflation trends remain stubbornly high and above rates consistent with 2%. Fed Chair Powell wants to reduce the excessive demand in the labour market by achieving a reduction in job openings without unemployment rising. Navigating that path will be challenging.”
Crude oil settles at $99.76
- Down -$3.33 or -3.23%
The high price last Thursday peaked at $111.37 on Friday, the high price reached $111.18. Yesterday the price tumbled. That move to the downside continued today with the low price reaching $98.86.
Looking at the hourly chart, the run to the downside today moved below a swing area between $99.80 and $100.28. Buyers returned to push the price back above the swing area, but traders are settling the contract just below the low of that swing area.
Going forward the swing area will remain a short term bias defining area for buyers and sellers. Move above with momentum would have traders looking toward the $101.43 level followed by the $102.80 level. A move lower would have traders targeting the swing lows from April 26 and $97.06 and the swing low from April 25 at $95.28.
EU News
European equity close: Big bounce fades late
- Closing changes for the main European bourses
- Stoxx 600 +0.8%
- German DAX +1.3%
- UK FTSE 100 +0.6%
- French CAC +0.7%
- Italy MIB +1.2%
- Spain IBEX +0.1%
ECB’s Nagel sees ‘disturbing trend’ that inflation is gaining momentum
- Comments from Nagel
- ECB should hike in July if incoming data confirm that inflation is too high
- ECB should end APP at the end of June
- Risk of acting too late is ‘increasing notably’
- There is ‘disturbing evidence’ that increase in prices is gaining momentum
- Higher inflation likely to prevail, price growth expectations could become less anchored
The hawks are getting louder.
Other News
WHO tells China it’s time to shift away from covid-zero policy
- Strong words from the WHO’s Tedros
- We don’t think that China’s covid-zero policy is sustainable considering the behaviour of the virus
- We know a lot about the coronavirus now, we have better tools, it’s time for a shift
The WHO has been criticized for being overly-deferential to China so either this is a direct challenge or it’s the WHO giving cover to China who is planning to shift anyway.
In any case, China moving away from covid-zero would be hugely-consequential for global growth. Dare I say it could be the single-biggest headline of 2022, so watch it very carefully.
“We don’t think that it is sustainable considering the behaviour of the virus and what we now anticipate in the future,” WHO Director-General Tedros Adhanom Ghebreyesus said. “We have discussed this issue with Chinese experts. And we indicated that the approach will not be sustainable… I think a shift would be very important.”
Trades that might work on a shift in policy include resources: particularly oil and copper. Others would be Chinese equities or anything else that benefits from global growth. The CNY could also begin to reverse its decline.
Cryptocurrency
Bitcoin moves towards key swing area support
- Down 37% from the end of March high and near 35% YTD
The price of Bitcoin has not been immune from asset selling (assuming bitcoin is an asset much like a stock or bond). In fact the selling is more intense from end of year levels and highs for the year.
The price of Bitcoin is down some 37% from the March high (which was testing the 200 day MA at the time) and around 35% from the end of year level as well.
Technically in addition to selling off from the 200 day moving at the March high, the price has moved back below its 100 day moving average at $40,811.41 currently, and its 50% retracement of the move up from the March 2020 low at $36,425 (the low for that year).
Yesterday and continuing today, the price decline moved down to test a key swing area between $28,600 and $30,066. The 61.8% retracement of the same move higher from the March 2020 low is also within that area at $28,737.30. The low price yesterday reached $30,082. The low price today extended to $29,731.
The current price is trading at $31,252 as support buyers lean against the upper area of that swing range.
Going forward holding that swing area gives the HODL (Hold On for Dear Life) investors “some” comfort in what is a painful move. Move below, however, and additional comfort from that support starts to fade.
Of course bitcoin has loyal followers/investors. Most speak in terms of the long-term levels much higher than the highest high near $69,000 ($100,000, $200,000, name your price, etc).
With that investor mindset – that does not include any concern of the him risk – it’s hard to shake the tree out of all the buyers, or stop the dip buyers who have FOMO (Fear Of Missing Out). There may also be some investors who are still in from much lower levels. The March 2020 low was down at $3850. So although the price is working toward the 61.8% of the move up from that level, with that retracement at at $28717, it is still around $25000 above that 2020 low level. Nevertheless, versus a $69000 high in November 2021, it is a meaningful haircut. The question for HODL traders is when does the haircut start to hurt….
The move lower in Bitcoin is being influenced by UST, a controversial stablecoin, as the organization that supports it is sitting on billions of dollars in bitcoin and may be forced to unload of those Bitcoin.
The story is a complicated one which unfortunately is what the digital world of storytelling bases their hopes on.
When things get complicated, the traders that DO focus on risk will tend to use the technicals to help fill in the missing pieces. The holding below the 200 day MA was a bearish development at the March high. The 100 day MA is another technical bearish signal.
The lower swing area is another technical level that will either hold support or be broken. Dip buyers can lean against the area and hope the “story” from UST gets better and pushes BTC higher in the process. Those same dip buyers can turn to sellers on the break (with limited risk). All is regardless of how the “story is written”.