Bitcoin has stalled a little bit at the $66,000 level, which is an area that has been important previously.
With that being said, I think that if we can break above that level, then it’s possible that we could go looking to the $73,000 level.
This is an area that has recently seen a lot of resistance, so it does make sense that would end up being a bit of a target.
If we can break above there it would obviously say a lot of things, but right now it is going to be a market that simply looks at that as a potential possibility.
Short-term pullbacks should be buying opportunities
Short-term pullbacks should continue to be buying opportunities with the 50-day EMA below and the $60,000 level both offering support. Ultimately, I don’t have any interest in trying to short this market and I think that pullbacks continue to be buying opportunities. In fact, that’s exactly how I’m going to trade the BTC/USD market because I do believe that we have a range that is very much intact.
The support level at the $60,000 level is crucial, but you should keep in mind that it extends down to the $57,000 level. If we can break out to the outside and clear the $73,000 level, then I think Bitcoin has much further to go. Quite frankly, I think it’s probably only a matter of time before all that happens anyways.
But at this point in time, I like the idea of looking for a little bit of value and taking advantage of it. In general, this is a market that I think continues to see a lot of volatility. But as long as people are worried about the Federal Reserve loosening monetary policy decisions, and of course, cutting back a little bit on quantitative tightening through its balance sheet, it does make a certain amount of sense that Bitcoin will continue to try to go higher. As long as that’s the case, I think that there will be plenty of people out there willing to get involved in bitcoin still.
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Gold has pulled back from the crucial $2,400 level during trading on Thursday, which is an area that has been important multiple times.
With that being said, I think we are just simply entering some type of consolidation area more than anything else.
The $2,400 level above continues to be an area that I’ll be paying close attention to, and therefore, if we can break above there on a daily close, then I’m interested in getting long.
If we pull back from here, then the market could drop all the way down to the $2,300 level, which of course is a major support level based on the previous action. And now that the 50 day EMA is racing towards that level, it makes a lot of sense that traders will continue to look at that as a short term flaw in general, and I think this is a market that remains bullish. But you could make an argument for an attempt at least to form a little bit of a double top. A lot of this will come down to interest rates, especially in the United States. So, we’ll see how that goes. If interest rates start to really spike, that could work against gold.
Plenty of Buyers Overall
But at the same time, we do have central banks around the world buying gold. Hand over fist. Let’s not forget all of those massive geopolitical issues that are still out there waiting to cause headaches. So, with that being said, I don’t have any interest in shorting gold, at least not at the moment.
At this point in time, I look at a pullback as more likely than not going to be a buying opportunity in general. This is a market that I think continues to be very volatile, but that’s not really that new for gold, and as such, traders should be cautious about getting “too big” in this market. This is a positive market overall, but at this point, it is obvious that a certain amount of discretion is necessary when putting money to work, instead of just piling into this market.
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Last week’s key takeaway was the souring of risk-on sentiment due to expectations in the USA of higher inflationary pressure over the short-term as well as US Consumer Sentiment data which came in at a six-month low. This souring did not come until the end of the week, and it is unclear how negative it is, as most assets over the entire week showed a risk-on rally.
It is unclear what sentiment will be like as the new week gets underway. It is likely that markets will be so fixated on the upcoming US CPI data release that nothing much will happen in the market before that.
The two major data releases last week were policy meetings at two central banks: the Bank of England and the Reserve Bank of Australia. Both central banks kept their interest rates unchanged, but the Bank of England vote was a little more dovish than expected. The RBA stated that inflation risk remains to the upside but that on balance they considered another rate holding to be the correct action. However, both banks effectively indicated a rate hike was out of the question.
Other important data releases were:
US 30-Year Bond Auction – this produced a slightly lower yield, which should be slightly bullish for risk.
UK GDP – this came in notably better than expected, with a month-on-month increase of 0.4% instead of the expected 0.1% increase.
US Unemployment Claims – this was slightly worse than expected.
Canadian Unemployment Rate – this was better than expected, with the unemployment rate remaining unchanged at 6.1% due t the creation of more net new jobs than was expected.
The Week Ahead: 13th – 17th May
The most important item over this coming week will be the release of US CPI (inflation) data on Wednesday. Apart from that, there are several other important releases scheduled, listed in order of likely importance:
US PPI
US Retail Sales
US Empire State Manufacturing Index
US Unemployment Claims
Australia Wage Price Index
New Zealand Inflation Expectations
UK Claimant Count Change
Australia Unemployment Rate
Monthly Forecast May 2024
Weekly Forecast 12th May 2024
Last week, I forecasted that the Japanese Yen would decline against the Euro, Pound, New Zealand Dollar, Swiss Franc, Canadian Dollar, and Australian Dollar. All of these were excellent winning trades, giving a large overall gain of 10.45%, as outlined earlier.
Directional volatility in the Forex market decreased last week, with 27% of the most important currency pairs fluctuating by more than 1% last week.
Last week, the Australian Dollar showed relative strength, and the Japanese Yen showed relative weakness.
Key Support/Resistance Levels for Popular Pairs
Technical Analysis
US Dollar Index
The US Dollar Index printed a small inside candlestick last week which closed slightly higher with a relatively large upper wick, signifying indecision. The candlestick is close to being a bearish pin bar. There is no true long-term trend here, as the price is above its level from 3 months ago but remains below its price of 6 months ago, making the US Dollar relatively unreliable to trade on a trend basis.
The weekly price chart below shows that the dollar has been swinging but has been in a consolidation pattern for quite a while, and the consolidation seems to be getting stronger and constricting.
However, it is worth noting that there is a confluence of a bearish descending trend line and a key horizontal resistance level at 105.81 which is not far from the current price. If the Us Dollar can get established above that level, it could be a significant bullish breakout. It could happen this week if the release of US CPI (inflation) data is notably higher than expected.
USD/JPY
The USD/JPY currency pair was active this week, as were all the Yen crosses. This is due to volatility remaining within the Japanese Yen after its recent massive price movements, with the volatility goosed by two suspected interventions from the Bank of Japan.
The Yen is weakening everywhere, and so of course it also weakened against the US Dollar. However, several other currencies gained even more against the Yen last week.
Technically we see the bullish momentum starting to evaporate into a consolidation below ¥156.00.
Yen weakness is quite likely to persist over the coming week. Whether this is the best pair to use to be short of the Yen is debatable. However, if the Yen does stay weak, long trades from bounces at support levels in this currency pair are likely to be good trades.
Gold
The price of Gold rose quite firmly last week, printing a bullish engulfing candlestick of good size, although Friday saw Gold give up some of its gains through a short-term topping out. The weekly price chart below shows some upper wick on the weekly candlestick. However, the price closed notably higher, and is not very far from making a record high weekly close, which was last made 4 weeks ago at $2392.
We do not yet have bullish breakout conditions, but long trades do look more likely to succeed than short ones, and there is certainly a long-term bullish trend here.
I think we could see a good point to enter a new long trade if we get either:
A daily close above $2400, or
A retracement to any of the support levels above $2290.
Silver
The price of Silver rose quite firmly last week, printing a bullish engulfing candlestick of good size, although Friday saw Silver give up some of its gains. The weekly price chart below shows some upper wick on the weekly candlestick. However, the price closed notably higher, and is not very far from making a record multi-year high weekly close, which was last made 4 weeks ago at $28.69.
We do not yet have bullish breakout conditions, but long trades do look more likely to succeed than short ones, and there is certainly a long-term bullish trend here.
I think we could see a good point to enter a new long trade if we get either:
A daily close above $29, or
A retracement to either of the support levels at $27.72 or $27.46, with $27.46 looking especially strong due to its confluence with $27.50.
S&P 500 Index
After major US equity indices dropped quite sharply 4 weeks ago after making new all-time highs, US stock markets have been rising slowly but surely, and last week saw quite good performances, especially here in the broad, benchmark S&P 500 Index. It is worth noting that this Index outperformed the NASDAQ 100 Index, which is unusual in a bear market and suggests that the tech sector currently has some vulnerability.
The weekly price chart below shows a bullish candlestick that closed quite near its high. There was some upper wick, but nothing unduly large for bulls to worry about.
There is clearly a long-term bullish trend coupled with mostly bullish short-term momentum. The issue for bulls here is likely to be that the price is near the recent record highs which could provide resistance and trigger another bearish reversal if reached.
For this reason, I will only consider entering a new long trade here if we see a new record high daily close. I prefer a daily close above 5265 which would be a new record high.
We have seen renewed risk-on sentiment in recent days, which is benefiting stocks and precious metals. Gold and silver are positively correlated with stock market performances historically.
USDMXN :
The US dollar gap lower against the Mexican peso the kickoff the trading week, only to turn around and show signs of strength and fill that gap, only to turn right back around and start selling off. Ultimately, this is a market that I think is doing everything he can to break down below the 16 pesos level, but we have a long way to go. In general, this will be an interesting pair to watch due to the fact that it is an emerging market currency that is extraordinarily important. I think this still remains a market that you are looking to fade rallies in.
CAC
The French index was very positive this week, although it’s worth noting that Friday was little bit of a letdown. The market has struggled at the previous high, but this simply means that we will probably pull back only to find more buyers. Underneath, we have the €7900 level that is likely to offer quite a bit of support. Even if we were to break down below there, I think there’s even more support near the €7600 level as the 50-Week EMA comes into the picture.
Bottom Line
I see the best trading opportunities this week as follows:
Long of the S&P 500 Index following a daily close above 5265.
Long of Gold following a daily close above $2400.
Long of Silver following a daily close above $29.00.
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The US dollar has rallied a bit against the Mexican peso during the early hours on Wednesday, as we continue to see a lot of volatility overall.
Keep in mind that the interest rate differential actually favors Mexico in this equation, and that’s part of why we had seen such a strong downtrend for so long.
That being said, we are in between the 50-day EMA and the 200-day EMA indicators, and that, of course, is an area you normally see a lot of volatility in. This is mainly due to a lot of technical traders placing trades in one direction or the other. More importantly, we’re around the 17 pesos level, which has a certain amount of psychology attached to it, and then you also have to keep in mind that there’s probably options barriers in that neighborhood as well.
Risk Appetite Continues to Matter
Because of this, I think we’ll have to pay close attention to how things play out because there is a risk appetite component in the USD/MXN pair. Keep in mind, people generally run to the US dollar in times of trouble and away from emerging market currencies regardless of the interest rate that you get paid. Beyond that, Mexico is highly levered to the US economy as it is now the number one exporter to the United States.
And obviously there’s a major influence on Mexican corporations and factories, et cetera, depending on what’s coming out of the U.S. With all of that being said, it does look like there is a large amount of clustering above that could cause some issues. And therefore, I think it’s going to be difficult to rally from here significantly. However, if we were to rally above 17.30 pesos then you have to think that perhaps the trend change is in the cards. It could be a difficult move, but it’s worth noting that if we do rally at this point in time, it could lead to not only the Mexican peso struggling, but also quite a few emerging markets as well.
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Silver is outperforming Gold, so traders should be more confident of being long of Silver than of Gold.
The best new trade opportunity which might set up today will be a long trade in Silver from the $27.50 area.
Stock markets are mostly holding up, which is probably good news for further rises in Gold and Silver.
Gold (XAU/USD): Technical Analysis
Gold is still established within a long-term bullish trend despite retreating from its record high made just a few weeks ago. Bulls still need caution as the price is not trading in blue sky and is prone to hitting resistance and swinging lower. In fact, it is fair to say that we are seeing a consolidation within an increasingly narrow range, with both nearest support and resistance levels looking likely to produce rejections when tested, giving potential short-term trading opportunities.
A few hours ago, the price made what seems to be a significant bearish reversal at the resistance level at $2321. The price looks quite likely to fall further to $2305 where a long trade could be possible. If any rejection also rejects that round number at $2300 it will likely be even stronger.
Any long trade could easily run out of momentum near $2321 so be conservative with taking profits from any long trade – monitor it carefully.
Key Support Levels:
$2305
$2290
Key Resistance Levels:
$2321
$2329
Silver (XAG/USD): Technical Analysis
The price chart below shows that Silver is still established within a long-term bullish trend despite retreating from its multi-year high made just a few weeks ago. Recent hours have seen a significant bullish development: a bullish breakout above the resistance level confluent with the major quarter-number at $27.50.
A few hours ago, the price made a bearish reversal at the resistance level at $27.73. However, this does not look technical significant, and I would not be surprised if the price rises again to get established above that level.
A long trade here in Silver could be a great idea if we get a bullish bounce anywhere between $27.50 and $27.46, as this area was formerly well-established resistance so is likely now to act as strong support.
I see Silver as a better potential buy opportunity than Gold right now, but more conservative traders might prefer to wait for a bullish breakout above $27.75 instead of buying on the dip after a bounce near $27.50 or even lower.
Key Support Levels:
$27.50/46
$27.00
$26.84
$26.62
Key Resistance Levels:
$27.73
$28.05
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You can see that the DAX did rally pretty significantly right off the bat here early Monday morning, but we are starting to see trouble in a very familiar area.
This area for lack of a better number, I’m going to call 18,250 euro.
It does look like we are essentially trying to consolidate here
With that being said, it does make a certain amount of sense that perhaps we will see a market that just bangs around between the 50 day EMA and the 18,250 euro level in the short term. But overall, it is a market that’s bullish. This consolidation makes a certain amount of sense after the recent pullback as traders have to test the waters to see whether or not the stock market is where they want to be.
DAX is the Big Market for EU
Furthermore, you must keep in mind that the DAX is the gateway to the rest of the European Union. So as the DAX goes, typically, so goes the AMX, the CAC, the MIB, et cetera. So with all of that being said, even if you’re not trading the DAX directly, this is an index that you need to pay close attention to if you have anything to do with equities on the continent.
If we can break above the 18,250 euro level on a daily close, I think at that point in time, you will have a real shot at this market trying to reach the highs again, near the 18,563 euro level. On a pullback, if we were to break down below the 50 day EMA, we could see the DAX go looking to the 17,500 euro level in area that has recently been massively supported. This area being broken below would obviously be a major turn of events, and therefore would be disastrous for not only the German stock exchanges, but for exchanges around the continent, as it is such a big player.
The EUR/USD pair could also give us an idea of how things go, as the German economy is so laden with export based companies. The euro falling against the dollar could also be a tertiary signal for where we go here as well.
S&P 500 Forecast: Continues to See Inflows
The S&P 500 rallied early during the trading session on Monday, as it looked like money was flowing back into Wall Street and stocks overall.
This does make a certain amount of sense, because people are starting to celebrate the idea that the jobs report in the United States was fairly weak, and therefore we could possibly be seeing the potential scenario setting up that the Federal Reserve could actually cut rates.
After all, this is what Wall Street cheers. They cheer unemployment. This should bring down inflation and therefore stocks should perform a bit better as rates in America drop. Speaking of rates, you will have to pay close attention to the interest rate situation which has been falling, but certainly looks as if it could turn around at any moment. If rates start to spike in America, that could very well put downward pressure on stocks.
Not Equal-Weighted
The S&P 500, of course, is not an equal weighted index. So, you have to keep that in mind. But I think ultimately as long as the top ten stocks or so are doing fairly well, you have a situation where the S&P 500 will rally. Underneath we have the 50 day EMA hanging around the 5090 level. And then underneath there we have the 5000 level which could be massive support as well, both from a structural and psychological standpoint.
It looks to me like the market is going to continue to be a buy on the dip scenario, and that we will eventually try to go looking toward the 5300 level, which is essentially where we topped out at recently. In general, this is an uptrend that had a nice correction of roughly 6 or 7%. And now those who are willing to follow the trend are starting to put money to work. That being said, you need to be very cautious about jumping in with both feet as there have been a lot of issues out there as of late, some of which have nothing to do with the stock market itself such as the geopolitical risks. Ultimately, I am bullish of this market, but I also recognize that there are a lot of exterior pressures out there that could come into the picture. Obviously, comma the fact that we are in the midst of earning season is a major issue as well.
NASDAQ 100 Forecast: Continues to Find Buyers
The Nasdaq 100 rallied a bit during the trading session on Monday, after initially pulling back the 17,850 level continues to be important as it showed itself to be support on that short term pullback.
Nonetheless, this is a market that I think does continue to go higher and eventually goes looking to reach the 18,385 level.
The market has been bullish for some time, and the fact that we have recovered so aggressively over the last couple of trading days certainly bodes well for the index.
Keep in mind that the 50 day EMA sits just below the 17,850 level as well. So that’s another reason to think that there are buyers just waiting to get involved in this environment. I just don’t have any interest whatsoever in trying to short this market because quite frankly, there’s just too much momentum. We will have to pay close attention to interest rates in the United States because quite frankly, if they start to rally, that might cause major issues for the Nasdaq 100 and some of the major technology companies.
We are in the midst of earnings season, so that could bring in a little bit of volatility. But I think at this point in time, it’s obvious that the Nasdaq 100 index wants to do everything it can to go higher. The short term pullbacks, I think, continue to be buying opportunities. The 17,000 level underneath is probably a major floor in the market, as it was the most recent swing low. This is more than likely not to be a concern, but it is a possibility if we get a sudden surge of fear in the markets overall.
The Other Scenario
If we break down below there then the 200 day EMA comes into the picture. But really at this point in time, I just don’t see an argument for shorting the market. And every time we pull back, I would have to assume that there will be buyers getting involved trying to take advantage of the Nasdaq 100 itself.
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The NASDAQ 100 has been all over the place during the month of April, which is not a huge surprise considering that there are a lot of uncertainties around the world.
After all, the NASDAQ 100 is an index that is highly sensitive to risk appetite, as it is some of the higher growth companies.
Furthermore, the month of April has seen earning season kickoff at the end of it, so that obviously has a major influence on what happens in the NASDAQ 100 as well.
The 17,000 level has proven itself to be important in this market, and therefore I think you need to look at it through the prism of a “floor in the market” that we are dealing with. If the market were to break down below the 17,000 level, then it’s possible that we could drop another 1000 points down to the 16,000 level. While I don’t necessarily have that as a target going forward, I do recognize that it is something important to keep in the back of your mind.
At this point in time, I believe that the 18,500 level is an area that traders will continue to look to as a potential target, as it was significant resistance previously. With that being the case, the market is likely to continue to see a lot of volatility, but I think every time we pull back, it’s very likely that buyers will come in and try to pick up a little bit of value.
One thing is for sure, it seems like the Wall Street traders out there continue to find reasons to buy stocks regardless. That being said, I think every dip will more likely than not capture a certain amount of attention, and therefore I think given enough time we could really start to see this market take off. Over the longer term, I think you continue to see a lot of people jumping into this market, but there may be a lot of pain between now and whenever we find momentum. Longer-term, it would not surprise me at all to see the NASDAQ 100 go looking to the 20,000 level, but it may not happen during the month of May as we are probably going to spend most of her time digesting some of the massive gains that we had seen previously.
S&P 500 Monthly Forecast: May 2024
The S&P 500 has been very noisy for the month of April, which should not be a huge surprise considering that we have seen so much in the way of upward momentum.
Sooner or later, we had to consolidate, and therefore work off some of the excess froth that had been built up in the markets.
I think given enough time, this is a market that will eventually take off to the upside again, and as we are going through earnings season, it does make a certain amount of sense the volatility would be part of the market anyway.
At this point, I have to assume that the S&P 500 remains more or less a “buy on the dips” market, as we have seen so much in the way of upward pressure of the longer term, and therefore a lot of traders will be out there wishing that they had gotten involved that in earlier level. However, they did get a little bit of an opportunity to pick up “cheap contracts” in this market, therefore I think that’s part of what we are seeing happen right now. Underneath, we have the 5000 level that will almost certainly offer a significant amount of support, and then after that we have the 4900 level. Anything below the 4900 level could open up a major correction.
All things being equal, this is a market that will continue to see a lot of volatility during this time of year, but I also believe that we have a situation where plenty of value hunters are willing to get involved. If we can break above the 5300 level, then it’s likely that the S&P 500 will go looking to the 5500 level. Underneath, if we were to break down then the 50-We EMA will be right around the 4700 level, and it could be a bit of support as well. That being said, at the end of the month of April, it looks like the buyers are starting the flexor muscles again, so I think it’s probably only a matter of time before we continue to go higher. Ultimately, I think you have a noisy market, but you still have to look at this through the prism of a market that is still bullish from a long-term perspective.
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Rehana William |Financial Consultant _Forex_Gold Xauusd| Fund Manager 