An analytical overview of the stock and crypto markets.
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The market data is provided by the HitBTC exchange.
Global Equity Markets: Possible recovery in the works
Most major equity markets moved into recovery mode last week with gains above 1.0%, following selloffs in the previous week. Global trading was quiet as the week came to a close given that many markets were closed for the Easter Holiday on Friday, and some in Europe will be closed on Monday.
Investors are now looking to positive earnings surprises to help propel the markets higher as we finish the first quarter of the year. Threats of a trade war by the Trump administration and a hammering of technology stocks has been a cause for concern recently. Global tech leaders including Facebook and Amazon have faced pressure, and that concern has spread throughout the markets with investors moving to risk-off mode.
At least for the short-term, it looks like we may be shifting given last week’s somewhat consistent positive performance among major equity markets. Nevertheless, a most of the indices will be heading up into overhead resistance if they do go higher and this could mute the advances.
BSE Sensex: Bullish pattern setup
The BSE Sensex 30 Index has formed a potential bullish falling wedge during the most recent correction following a record high in January. If the bottom has been set at the 32,483.84 low from two weeks ago, then an upside breakout will be triggered on the move above the downtrend line. Last week’s high of 33,371.04 and a two-week high can be used as a proxy for the line. The bottom has formed around support of the 200-day moving average line (brown) and prior support and resistance over a number of months in 2017. Multiple support indicators coming together can enhance the significance of the price support zone.
The recent touch of the 200-day MA is the first time the Sensex has hit it in more than a year. Frequently, once the 200-day MA is approached as support after being above it for months, it tends to act as support. A bullish wedge is a trend continuation pattern and if triggered has the potential for price momentum to accelerate upward.
S&P 500 Index: Continues to hold long-term support at 200-day moving average
Unfortunately for investors in the U.S. markets, the S&P 500 Index ended the first quarter of the year with a loss for the first time since the third quarter of 2015. This behavior is supportive of the idea that the times are changing for stocks as volatility picks up. A quarterly loss for the first time in a while improves the chance that further quarterly losses could occur and it adds to the growing worry among investors as they look ahead over the coming 6-12 months or so.
Regardless, last week the S&P 500 advanced by 52.61 or 2.04% to close at 2,640.87 as it tests support of the 200-day MA for the second week in a row. Watch now for further strengthening off this key support zone with a low of 2,585.89.
Next week investors will be watching the U.S. jobs report carefully and the market reaction for signs of shifting investor sentiment. The jobs report is released on Friday.
Cryptocurrencies: Correction deepens
Threats of further regulation and the growing attack on the ICO model by social media channels kept the pressure on crypto prices. Whereas before, the perceived bad news was sometimes ignored, it no longer is. Twitter confirmed that it will join Google and Facebook in banning cryptocurrency advertisements, specifically in regards to ICOs and token sales. Meanwhile, following the announcement from Binance that it is moving to Malta, Bitfinex, one of the world’s largest crypto exchanges revealed it considering a move to Switzerland. Change can be good but it also creates uncertainty, and that can affect investor sentiment.
It got ugly again last week with three out of the eight major cryptocurrencies followed (see enclosed table) ending below their prior swing lows. Those drops triggered bearish trend continuation signals for each. Dash, Ethereum, and Ripple met the criteria. The other five, Bitcoin, Bitcoin Cash, IOTA, Litecoin, and Monero each fell noticeably and are getting close to their prior swing lows.
Since the major cryptos have been moving pretty much together recently, relative weakness, confirmed bear trend continuation signals, in the few may be a sign of what’s to come within the group. Short-term it looks like support may have been found around last week’s lows, and a bounce could be coming. However, in the bigger picture, since trends usually continue bear trend continuation signals usually lead to further declines past the initial support zone trigger, prior swing low.
At the same time, as seen in the accompanying table, the eight major cryptos have already had significant corrections off their record highs. Note that declines from high areas of last week’s close, not the corrective swing low, which is lower for some. By itself, this would seem to indicate that we are closer to the end than the beginning of the corrections, but downside risk remains high still.
Bitcoin: Finds short-term support
So far Bitcoin has found support at the 88.6% Fibonacci retracement zone with a low of $6,550. That could lead to at least a bounce. However, a drop below that price level will signal a continuation of the short-term downtrend and therefore put the corrective low of $5,920.72 at risk of being busted. Note that the BTC/USD pair has recently tested the resistance of the 200-day MA (brown line) and it reversed the advance. Plus, the price is falling further below the uptrend line. Each indication is an overall bearish sign.
Ripple: Bear trend continues to new low
Ripple reached its most oversold level on the 14-day Relative Strength Index (RSI) momentum oscillator last week as it hit a low of $0.47. That’s right around potential support of the 88.6% Fibonacci retracement level of the long-term uptrend. Even though being overbought by itself is not a signal it may mean we are getting closer to a low for at least a bounce.
The XRP/USD pair triggered a bear trend continuation signal last week as it fell below its prior trend low of $0.5335 and ended the week near the low of the period, at $6,850. A further concern for the bulls is the test of the 200-day MA as resistance several weeks ago. Resistance held at this long-term trend indicator and price turned back down to selloff into last week. A drop below last week’s low will likely lead to a deeper correction and possible acceleration in downward momentum.