Market update: Dollar, Gold, 10Y, SPX and BTC

Dollar

After breaking out through the Nov-April resistance of 97.70, the Dollar Currency Index (DXY) ticked to ~98.40 on two occasions and is currently selling down for a possible retest of prevailing support. Often we see resistance turned into support after a technical breakout, watching 97.50-97.70 to confirm the up-trend.

DXY trending.jpg

As for the components of the Dollar Currency Index; The Euro, which makes up 57.6% of the DXY’s weight, is sitting at 2 year lows. The Japanese Yen (13.6%) has been the strongest of the basket of currencies relative to Dollar, regardless of negative rates. Both the Canadian Dollar and Pound Sterling continue to show weakness.

Gold

In the face of Dollar strength we should expect to see Gold weakness, which has been the primary trend for the last 3 months.

Technically it looks like Gold has been rolling over and a break below $1270 would indicate further downside. I maintain a bearish stance on Gold in the medium term as I see the Strong Dollar theme continue. We are currently testing the upper end of the down-trending resistance level ~ $1285-1290. Another failure to break above continues the Bear case.

GOLD H&S.jpg

S&P

The S&P500 is off its highs again in a volatile May, bringing us back to the much loved (apparently) 2800 level. If this is the beginning of a longer duration Bear market then shorting here is still on the table.

2800 has proved to be a level of high volume activity and has acted as both a support and resistance in recent times. The Bull case might maintain that Equities consolidate around this level and then continue their march higher. While the Bear case would likely consist of a break below 2800 as the final top is in place.

SPX level.jpg

10Y Treasury

In combination with SPX selling to test this level, the 10 year treasury has broken out with yields now back to Dec 2017 lows. The insatiable demand for a safe haven asset like Treasuries seems to point toward risk off sentiment, at least among the bond traders.

It should be common knowledge that Bond traders are, on average, smarter than equity traders. Which leads me to believe that when the Bond and Equity markets disagree; listen to bonds.

US10Y breakout.jpg

Bitcoin

If Bitcoins recent price action hasn’t caught your attention you probably live under a rock. Looking at the weekly chart we can see that the possible beginning of another parabolic rise is upon us.

weekly BTC.jpg

On the Daily chart, Bitcoin is consolidating after a +50% start to the month of May. A correction to say $6000 wouldn’t be out of the blue for Bitcoin.

BTC consolidating.jpg

 

Lots to look out for,

Thanks for reading.

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