It‘s been an abnormally busy Thursday in the summer as markets remained
fairly busy throughout the session. Of course, FOMC Chair Jerome Powell
speaking at part two of the Fed’s Humphrey Hawkins testimony contributed
to the drive; but that certainly wasnt all as there were a few
different themes of note in the headlines. This article will look at
some of the more prominent.To get more news about
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DID OIL JUST TOP？
A widely-followed financial pundit with a television show made a brash
call today, saying that oil prices have topped. This caught a ton of
attention as oil prices have been in the midst of a one-way move over
the past couple of months, and just last Tuesday touched up to a fresh
six-year-high.
Prices have been snagged at resistance since that test last week,
however, but as we pointed out in the recent Analyst Pick on oil, this
is a big zone of resistance with multiple levels in tight proximity. I
had started looking at bullish breakout potential in late-May as oil
prices were angling up to another key zone, and an explosive movement
showed thereafter. So, it makes some sense for prices to calm after an
exuberant run tested through a massive level on the chart.
But has oil topped？ There‘s not yet enough information to suggest as
such. For traders looking to fade this recent breakout, awaiting a test
below the 70 psychological level and, further, the 64.31-67.19 zone
seems a prudent indication to follow before looking to get bearish on a
trend that’s been extremely bullish for the past two months.
An interesting observation in FX-land of recent has been the general
strength showing in anti-risk currencies like the USD or JPY.
I had looked into the Japanese Yen last week, tying that Yen strength
in with the continued drop in US yields. That pressure has yet to
relent, and Yen-strength continues to show visibly against many major
currencies, the US Dollar included.
Chair Powells comments on Wednesday and Thursday proved unhelpful to
the theme as US yields continued to drop as Yen-strength continued to
build. This sets up for a fairly interesting scenario for the days/weeks
ahead, particularly if we do see some element of risk aversion pop up
in global markets.
With both bonds and stocks heading higher of recent, the question begs
‘which one is right？’ Often, bonds are the signal to follow, and if
that remains the case, and if yields continue to dip, then there may be a
summer surprise not too far off in the distance, and Yen bulls may be
able to benefit from that. Below I look at EUR/JPY as the pair has
pushed down for a re-test of the level that caught the lows last week.
Last weeks test bounced into a lower-high, giving the appearance of
bearish breakout potential as that price comes back into play.
The meme stock manias from earlier this year seem a bit more distant now
as both AMC and Gamestop have been on offer over the past week. But
even the crypto space appears to be getting less attention, and today
there appeared to be some fairly bearish prognostications on the space
from a number of different outlets. Jeff Gundlach had some interesting
comments on the matter, saying that the Bitcoin chart looks ‘scary’ at
the moment.
He also had some interesting comments back in May, saying that
cryptocurrencies were the poster child for the speculative fervor
coursing through markets, and he highlighted how the sell-off in Bitcoin
may be signaling that the fervor was calming.
Since then, Bitcoin hasn‘t yet broken down but it hasn’t exactly been
bullish, either. The same support zone that came into play in mid-May
remains in-play today. And while the initial bounces back in May or
early-June could lead to a run up to the 40k level, more recently, those
bounces have been showing a diminishing impact, and now theres a
descending trendline sitting atop price action.
That makes for a descending triangle formation – often approached with
the aim of bearish breakdowns. That can be a scary thing, particularly
to those who are long.
