Daily Analysis: Stocks Dump & Pump-ed after US Inflation Beat

22:45 14/02/2018

Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2696 1.31%
DAX 12,339 1.17%
WTI Crude Oil 60.74 2.62%
GOLD 1353.00 1.74%
Bitcoin 9350 8.32%
EUR/USD 1.2356 0.81%

Another epic day in equities for day traders, another head-scratcher for the average investor, and another amusing one for the long-term players (are there any left??). Day traders could have profited from the classic “dump-on-the-data-and-then-buy-until-the-bell” script, which once again could be eerily familiar for those who already participated in the market in the late 2000’s. Stocks fell sharply after the much-awaited CPI report, but the rest of the day was dominated by a short-squeeze that carried the major indices above yesterday’s highs.

This change in market behavior from the steady, low-volatility climb, could be a warning sign for buy-the-dippers, but, for now, the post-crash bounce remains intact, even as the technical setup is unchanged after the hectic session.

S&P 500 Futures, 5-Minute Chart

While the fundamental news was very far from being bullish, high inflation and dismal retail sales, choppy, hard to trade conditions are perfectly normal, as the market is trying to gain footing in a volatile fashion after last week’s crash.

On another cautionary note for bulls, the yield-surge that has been a major component in the stock decline continued in earnest today, with the 2-year, 5-year, and 10-year Treasury rates all hitting new rally highs.

10-Year Treasury Yield, 4-Hour Chart Analysis

As stocks rallied, forex markets resumed their pre-crash trends so the Dollar got dumped, the Euro and the Yen reigned supreme, and even the much more battered risk-on complex recovered some of the recent losses.

That said, the next few days will be critical for the risk-trade, as the equity bounce could still fail, and that be ugly again for risk-on currencies (CAD, AUD, GBP) even if the Dollar loses ground to the Euro and especially the Yen.

USD/JPY, 4-Hour Chart Analysis

It might be boring that we keep on touting gold as a key asset for long-term investors, but nothing has changed in our view that the investment landscape is very favorable for the Shiny Metal. With gold being close to hitting a 4-year high, this view is now being reinforced by price action as well, and the bull market might just be starting, as for the momentum crowd, precious metals are still just bottoming.

Despite the long-term picture, there is no short-term guarantee that gold will rise, but adding on the dips is still advised. The case is different in the case of crude oil, as despite today’s bounce, the long-term picture is way less positive, and other than short to mid-term trading positions, investors should avoid it.

Gold, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment shrugged off the still bearish sentiment, the stock market turmoil, and the mixed news flow, and produced another strong rally today. The major coins all registered gains, with LTC, XMR, Dash, and IOTA adding more than average percentage-wise. Bitcoin and Ethereum also gave their fair share to the advance, and the total market value of the segment topped $450 billion, the highest since the first days of the month, from a low below $300 billion, mind you.

BTC, 4-Hour Chart Analysis

While some of the coins are lagging from a short-term technical standpoint, which a sign of bullish rotation, the overall picture still supports a new advancing cycle in cryptocurrencies. Although new all-time highs might not happen for a long time, a stable, less volatile period could even be better than another boom-bust cycle from a serious investor’s perspective.

Featured image from Shutterstock


Other News