Welcome back to our weekly update on the tumultuous world of trading. In this journey, we set sail with the US10Y Yield, an asset class often regarded as the captain of all markets, as it steers the course of global financial tides and offers crucial clues about what’s unfolding elsewhere.
US10Y Yield Surge
Our voyage commences with the US10Y Yield, the undisputed behemoth of the financial world. With relentless upward momentum, it continues to chart its own course, casting a shadow of uncertainty over other markets. The ever-increasing sell-off of US debt is a red flag, and rumours abound of China divesting its holdings. The implications are far-reaching, demanding immediate containment measures to prevent a broader financial tempest.
Dollar Dominance
Our journey next takes us to the world’s primary reserve currency, the dollar, which remains a powerhouse, relentlessly ascending week after week. The world clamours for dollars, driven by the urgent need for liquidity amid the looming global recession. The Dollar Milkshake Theory ( world wide dollar liquidity) remains in play, but we stand on the precipice of a potential pivot. Before embarking on a higher ascent, the dollar may pause for a pullback or consolidation this week.
SPX500’s Rollercoaster
The SPX500 comes into view as we navigate the financial seas. A persistent sell-off continues, marking the second consecutive week of substantial declines. Lower lows are now a stark reality, potentially signalling the onset of a broader downtrend. Whether this decline persists into the coming week remains a question mark.
Gold’s Rocky Road
Our course then shifts to the enigmatic realm of gold. The week began with a sell-off, but a partial recovery ensued, leaving us in a state of equilibrium. A further decline in gold prices could trigger a ‘risk-off’ sentiment, possibly igniting a broader market panic. However, gold has yet to embrace its role as a safe haven asset, failing to incite a flight to safety in assets like gold or cryptocurrencies.
Oil’s Calm Waters
Amid the market’s turbulence, oil presents itself as a haven of tranquillity, remaining relatively flat for the week. Though it teased a continuation, it gracefully executed a pullback before inching back toward recent highs. This price action is indeed the woes for consumers and continues to fuel inflation talk.
Bitcoin’s Uncertain Course
As we approach the end of our voyage, we encounter Bitcoin. It rebounded after flirting with a downward trendline but appears fragile. A descent to as low as 23K looms on the horizon, possibly in the coming week. It may stall momentarily around 25K, but it would require a critical event such as bank closures or profound market fear and policy shifts to stir significant action. Even then, Bitcoin is likely to initially succumb to the broader market turmoil. A bounce towards strength could signify a crucial level at 23K, and should that line break, the road to 10K may open.
Charting Our Course as Traders
So, what does this all mean for us, the traders? It’s a matter of vigilance in tracking the ebbs and flows of capital. As traders, we are both buyers and sellers, but a nuanced understanding of the prevailing direction can enhance our ability to identify continuation opportunities, especially in intraday trading. If this aligns with your trading persona, we currently witness a flow of funds into the dollar, where it holds court as the ‘prettiest pig in the pen’ amidst the financial menagerie.
Therefore, our journey this week is marked by the relentless ascent of the US10Y Yield, the commanding presence of the dollar, the tumultuous seas of the SPX500, the enigmatic course of gold, the placid tides of oil, and the uncertain path of Bitcoin. As traders, we stand as captains of our own ships, navigating these waters with knowledge and insight, ever-ready to adjust our course in pursuit of profitable trades. Until our next voyage, fair winds and following seas.
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