Bitcoin RSI negative divergenceHello All,
Bitcoin having hard time to follow commodities and energies because it is not consumable.
Bitcoin is not an inflation hedge instrument. In an inflationary environment, people would like to hedge their wealth by investing gold.
Gold became a safe haven for money and seems like a smart move to allocate a portion of gold in a portfolio in inflationary environments.
Bitcoin is an interesting, tempting instrument. In my opinion fighting against its value is non sense. Because the technology it offers will be the technology of future; blockchain.
BUT
Bitcoin can be an investment instrument but not a good instrument of payment. Think about getting paid by Bitcoin..
Bitcoin's value is so fluctuant that even one day your salary would decrease or increase by 20%.
That's why Bitcoin will always have haters and lovers.
Nowadays, I don't see Bitcoin revaluate to new highs because with Fed's approach to money.
If Fed decides to awards dollar holders by increasing rates, we'll probably see new areas to reinvest this instrument.
I decided to follow Bitcoin's price actions while approaching to Fed's meetings.
Thanks and stay safe.
Interestrates
Why You Should Learn To Trade Interest RatesIf you're trading this market right now you have to keep your eye on Interest Rates. Why? Interest Rates have the largest web in the market. They impact every market we trade (even crypto :) What rates are doing not only impact the markets we trade, they impact us in everyday life. In this video I go over the best way to trade interest rates and even if you're not interested in trading interest rates, I go over the best markets to keep up on your quotes to see what rates are doing.
Past performance is no guarantee of future results. Derivatives trading is not suitable for all investors.
Inflation, bond yields, the dollar and the Fed! Macro series pt1Part 1 Hello everyone! It's been a few weeks since my last update on the markets, and this one is going to be a very special one. Will go through many different aspects of most major markets, by using both technical and fundamental analysis. It will be an in-depth analysis with lots of charts of several instruments, that have the potential to give us a clear picture of where we are and what is going right now in the global landscape. Because there are so many things I'd like to mention, I've broken the analysis down in different parts, all of which you will be able to find on the links down below.
The first and most important pieces of the puzzle are the US Dollar and interest rates, as together they are one of the largest components in essentially every market as they partially determine the liquidity and demand, by ‘setting a price for money’. In 2020 many forecasters predicted that the value of the dollar would collapse and said it was dead as it had lost 10-15% of its value relative to other fiat currencies. Yet they were very wrong in 2021 as the dollar bottomed and started rising along with interest rates, despite inflation skyrocketing in the latter part of the year. At the same time many claimed that the bond market would collapse, yet even though long term US bond yields had been rising from Aug 2020 up until Mar 2021, just to barely get to pre-pandemic levels where bond yields were already really low. Then went sideways until the end of 2021, where they started rising again. During that time short term US bond yields were close to 0 and only started rising at the end of Sep 2021 as inflation started climbing fast and the market started anticipating the Fed raising rates. Therefore, as those yields were rising due to inflation going up, so did the USD which might seem counterintuitive. Why would it go up if it’s losing purchasing power?
Well fiat currencies are trading against other fiat currencies and the world is heavily interconnected, so it’s a relative game and inflation wasn’t just US phenomenon. However most importantly it was clear that inflation didn’t come due to the Fed doing QE or lowering rates, but due to several other factors. To name a few 1. Government spending, 2. Credit creation during Covid, 3. Deferred loan/rent payments, 4. Wealth effect due to stocks/housing going up, 5. Supply chain issues, 6. Supply shortages due to labor shortages or businesses closing, 7. Pend up demand, 8. Higher demand for goods than services, as well as demand of new types of goods, and finally and most importantly 9. Issues in the energy sector and particularly due to the fact that many oil and natural gas wells got shut and weren’t reopened. Now you might be thinking ‘wait a second, where does QE fit into all of this?’. Unlike what most people believe about QE or low interest rates, the Fed doesn’t print money. It simply creates reserves which the banks can’t use to buy anything and low interest rates are a sign that the economy is in trouble as banks aren’t willing to lend to anyone other than big institutions. QE isn’t inflationary as it is just an asset swap and the Fed doesn’t determine anything aside from short-term rates. So, what does the Fed actually do? Essentially, they are trying to push banks to lend, yet banks refuse to do so, and in turn the Fed tries to manage expectations. It all boils down to the Fed making people believe they know what they are doing and that they are a powerful institution that can either create or fight inflation. Therefore, in the list of factors there is another one (no. 10) which is that the Fed convinced everyone that they flooded the world with cash and that affected the spending/investing habits of the people that believed them. Yet there was a market that hasn’t really believed them, and that is the bond market.
The bond market keeps indicating that we are stuck in a low growth environment where inflation isn’t a long-term issue, just a short term one. It is also telling us that there is too much debt and too many problems, many of which policy makers haven’t been able to solve. Not only that, but many of the policies have been making things worse and worse, and that in 2022 it looks like inflation is probably going to slow down. Hence if markets and the data are telling us inflation isn’t going to be a major issue in 2022 and the sources of inflation are elsewhere, why will the Fed raise rates? Can it raise rates? By how much? What impact will that have on the economy?
For the first question there are some pretty clear explanations. One of them is that Fed wants to raise rates is so that people keep believing in that they can control inflation and that they aren’t just there to pump the stock market. Many believe in the Fed put, which is the belief that the Fed doesn’t want to do anything to upset the markets and that if things go bad the Fed will support the stock market because it can. However, another one is that there are also many people who are upset about inflation and want someone to do something. These people demand the Fed to act, as the Fed itself claims to have the tools to fight inflation and that it created the inflation in the first place. Hence at the moment the Fed is stuck between a rock and a hard place, as markets are at ATHs, housing at ATHs, the economy is slowing down and overall is in a pretty bad place, while for most people the costs of living are up by 10-20% compared to 2 years ago. By the Fed’s own mandates and admissions, inflation above 2% is high (CPI was at 7% YoY) and their reasoning for QE + low rates has been their goal of full employment… and as we’ve reached a point where unemployment is very low and there are even labor shortages as many people haven’t gotten back to the labor force since the pandemic begun. This in turn puts pressure on wages and inflation, hence the Fed has to act based on its own ‘goals’. Yet if they act, and especially if they act quickly, the markets could crash and this could have even more implications on the economy. It is pretty clear that they have to walk a fine line, except it’s also pretty much impossible for their actions not to affect the markets which are overleveraged and are showing signs of weakness. On the one hand they need the markets to come down a bit, in order to slow down the wealth effect which affects inflation, as well as prevent excess speculation from going even further… and on the other hand they must not overdo it because the whole system could grind to a halt.
Keeping all of the above in mind, it seems pretty hard for the Fed to significantly raise rates. Yesterday when Powell started answering questions, he was pretty hawkish because people aren’t taking the Fed seriously, but there is a long way between them talking about being serious and them actually doing it. Doing both QT and raising rates more than 3 times this year, something that the market seems to be expecting at the moment seems a bit farfetched. Like Alex Gurevich said on his recent appearance on ‘The Market Huddle’ podcast (and I am paraphrasing a bit), the most likely scenario for the Fed is to raise rates once. In his view they could do one and not hike again for a decade. Maybe they get two or more, but 1 is more likely than 2, and 2 are more likely than 3… and so on. He also mentioned that he thinks we in the late stages of this cycle, and I happen to agree with both views. My reasoning is that the inflationary factors mentioned earlier seem to be weakening substantially and slowly giving their place to the disinflationary/deflationary factors like supply chains issues being slowly resolved, less government spending, debt accumulated during the pandemic having to be repaid and so on. Inflation in 2021 was really high, though towards the end of the year several data points started showing that it was slowing down and in 2022 we could have 2-3% inflation or even outright deflation. To sum it all up, the Fed will start raising rates too late, as real rates have already started coming up and could go up even higher inflation starts going lower. The impact this could have on an overleveraged market is substantial, something that could force the Fed to stop raising rates and even stop its talks about reducing its balance sheet… or maybe even force them to go back into cutting rates and doing QE.
Up to this point we’ve only talked about rates, but haven’t mentioned anything about the USD and how it could affect entire financial system. This is another very important factor that the Fed needs to be aware off, even if they haven’t been explicit about it recently. The USD is the global reserve currency and most of the world’s debt is denominated in USD, which means that when it goes up relative to other currencies, then debt repayments become harder especially for those who don’t earn USD. At the same time when US interest rates go up AND the USD goes up relative to other currencies, that creates immense pressure on the financial system. That’s because people/institutions have to pay more interest on their loans, while the currency they are earning and need to convert into dollars to repay their debt, is worth less and less. These two factors create some serious deflationary pressures as someone might be forced to cut their spending or even outright sell assets in order to keep up with his obligations. Of course, in a situation where the entire globe is doing well and rates go up because the economies are booming, debt is low, and it just happens that the USD is going up as it happens that the US is doing better than other countries, then the dollar going up isn’t really an issue and neither are rates. However, the dollar going up, especially along with interest rates really is an issue when the world is drowning in debt, economies aren’t doing well, markets are overleveraged and optimized to work well in a low-rate environment. Another thing to keep in mind is that the dollar going up might create a vicious loop by accelerating the sell-off in traditional markets as more and more people sell in order to meet their obligations, or take a risk off stance or to take advantage of higher interest rates or to take advantage of its rise relative to other currencies. At the end of the day the US isn’t an economy that functions in isolation and it isn’t the only one that uses or CREATES dollars. That’s something crucial that many people forget, as even if the US economy is doing great and higher rates might be appropriate for the US, the actions by the Fed could create issues in other parts of the world, which in turn could damage the US economy.
US10YEARS-W1/D1- ONGOING UPSIDE MOVE !WEEKLY (W1)
Following the breakout which occured a couple of weeks ago, we can identify a sideways/up consolidation price action.
Indeed, a natural pullback took place which has been rejected by the former downtrend line resistance which became now the
new support area (currently around 1.67 %) and slightly below the Tenkan-Sen (@ 1.7080 %) which should be seen as the first significant support level
in this weekly time frame.
A SHOOTING STAR took place last week, but the ongoing price action (above it, for the time being and of course should be confirmed on the next weekly closing)
could invalidate such kind of pattern which, usually is a warning of a trend reversal !
The TRIANGLE PATTERN gives a technical target @ 2.3230 %.
ONLY A CLEAR BREAKOUT OF THE CLUSTER SUPPORT OF TS, KS, MBB (1.7080 %-1.6280 % WOULD FORCE TO A VIEW REASSESSMENT OF THIS EXPECTED BULLISH (YIELD) SCENARIO !
DAILY (D1)
Last Friday's price action triggered a BEARISH ENGULFING PATTERN which confirm A BEARISH DIVERGENCE and which should not be underestimated; nevertheless, the last daily closing level was still above the Tenkan-Sen, which for the
time being is still supportive for further upside.
Therefore, in this daily time frame, watch carefully at the following supports levels :
S1 : 1.9020 %
S2 : 1,8780%
S3 : 1.8560% (The Barometer !)
A failure to hold above S3 would open the door for the daily clouds support area (1.70%-1.60%) which corroborate the weekly view as 1.60% should be seen as a KEY PIVOT LEVEL, strategically speaking.
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Have a nice trading week.
Ironman8848 & Jean-Pierre Burki
10 Year Rate: Price keeps moving up!Quick Analysis on 10 Year Treasury Yield on a 1D Linear Chart.
1) The US 10 Year Treasury Yield has been respecting a falling channel for multiple decades going back to the 1980s.
2) It has broken out of the top trendline of the falling channel with a recent re-test of the S/R line.
3) The measured move of the falling channel would bring it back to Pre-2008 ranges (LONG-TERM). The measured move is noted.
4) There was a Bull Flag Pattern forming on the charts within the falling channel pattern, which helped the price move higher. The measured move for the SHORT-TERM is noted.
5) I discussed this breakout in the first week of December 2021 when the price was still at around 1.40ish. PAY ATTENTION!
What are your opinions on this?
If you enjoy my ideas, feel free to like it and drop in a comment. I love reading your comments below.
Disclosure: This is just my opinion and not any type of financial advice. I enjoy charting and discussing technical analysis. Don't trade based on my advice. Do your own research! #cryptopickk
US 10 Yr Treasury: Weekly Chart UpdateQuick Analysis on 10 Year Treasury Yield on a 1W Linear Chart.
1) The US 10 Year Treasury Yield has been respecting a falling channel for multiple decades going back to the 1980s.
2) It is currently headed to the top trendline of the channel with a possibility to break in the coming months.
3) The measured move of the falling channel would bring it back to Pre-2008 ranges.
4) This may fall in line with the US Dollar strengthening (in the idea section below).
5) If US 10 Year Treasury Yield goes lower, there is not much more room for it to get to 0.
What are your opinions on this?
If you enjoy my ideas, feel free to like it and drop in a comment. I love reading your comments below.
Disclosure: This is just my opinion and not any type of financial advice. I enjoy charting and discussing technical analysis . Don't trade based on my advice. Do your own research! #cryptopickk
Gold Falls Short of $1836Gold has found resistance at 1836, exactly as we anticipated in these reports. We have since retraced back to support at 1826, the next level down, after testing 1815 and finding support just above this level. Two green triangles on the KRI suggest strong support at 1821 or so. The Kovach OBV was pretty strong, but has leveled off in tandem with gold's top. From here, we are likely to establish value between 1815 and 1836. Note the vacuum zone below 1815 to 1795, which was a previous value area. If support does not hold at current levels we will surely test this value area once again.
Bonds Smash Lows After Inflation DataBonds took a sharp nose dive off increased Fed rate hike expectations and inflation. We smashed through our lowest levels of support and drove deeper into the 126 handle, before finally bottoming out at 125'17, a support level extrapolated from inverse Fibonacci levels, a tool we are relying on more and more, now that we have exhausted all of our lower technical levels. We are seeing a brief pivot off this level, and appear to be making a run for the 126's again. Currently we are meeting resistance at the psychological level of 126'00, with 126'02 providing resistance as confirmed by a red triangle on the KRI. The Kovach OBV has turned even more bearish with the massive selloff yesterday, but does appear to be leveling off with the support. If we are able to break into the 126's again, then 126'11 is sure to provide resistance. Our next target below is 125'07 if we selloff further.
Gold Breaks Out!!Gold has continued to rally, breaking out from our range between 1795 and 1815. It has hit our profit target of 1826, which we predicted yesterday. We are reaching resistance here, confirmed by a red triangle on the KRI. However, 1815 is providing support as confirmed by a green triangle on the KRI below. If momentum continues, then our next target is 1836 then there is a vacuum zone to 1851. If support does not hold, then we will likely encroach back into the value area between 1795 and 1815. The Kovach OBV has picked up notably, but is currently stalling out, suggesting we will range or retrace from here as gold continues to establish value.
DXY finally show weakness, a Temporary Down trend!After several days that DXY have been surging to pass the middle of the uptrend parallel channel, today it show a little bit weakness.
weakness or strength of fiat (specially DXY) is playing a significant role for risky market. however since FOMC plan to increase the interest rate and bond yield profit, DXY start to surge and
influenced stock market and other integrated markets such as Crypto.
based on Price action if today's candle close on 96.7 , it would be good sign for risky markets, although FOMC might take actions by increasing interest rate, shrinking balance sheet in order to control the demand cycle.
I'm still believing that markets need time to adopt with these new situations .
5 times of increasing interest rate and tension between Russia and Ukraine are prefigured by markets but the Q1 and Q2 of 2022 wouldn't be good for stock markets and Crypto.
A Chart Demonstrating How FED Policy Causes VolatilityDuring a discussion with a contact, I pointed out that watching the FED is one of the easy ways to forecast volatility.
Being specific here, FED policy on interest rates is a key predictor of market volatility.
To summarise, Federal Reserve interest rates induce tightening at institutions. This in turn causes credit crunches out in the real markets as institutions begin to tighten standards.
When this feeds through into the consumer level, this causes volatility n the real markets and hence we see peaks of the market-based components of credit conditions (I.e. the institutional banks and companies) coinciding very neatly with the VIX.
There are many reasons for this.
Firstly, tight credit conditions mean less margin is available.
This should be self-explanatory.
Secondly, it means that ultimately consumers are not able to consume on the level that they previously did and this of course hits institutions in their balance sheets.
As a third-order consequence, it can often mean that it becomes difficult to roll debt and service debt and this can sometimes force the selling of assets to meet short-term cashflow requirements.
A lot of the time, this means selling bonds and equities.
We can see that when the FED begins tightening, the market-based institutions begin tightening a few months to a couple of years later.
The FED's interest rates therefore clearly front-run interest rates and credit conditions out in the real world.
And thus, because these credit conditions are correlated to the VIX, the FED's activity is a clear predictor of big spikes in the VIX (As well as potential downside in the vix).
EURUSD 342 Pip Move Week / Interest rates / Change in Sentiment?Well, Quite the analysis here today. My bias is Bullish on this pair as we move into next week
2/6-2/11. We may consolidate for a few days around 1.146, but I think eventually bulls will take us
to 1.15750. Please follow for more content like this. Cheers.
Dorianfx
NFP Day, Discount on GBPUSD Longs? Our Bias is Bullish on this Pair due to Interest Rate News this week.
- Was anticpating a discount in prices during NFP release today
- Got an entry on 1m/3m Timeframes when Price began to consolidate
after we got a significant reaction to news
- It;s friday, Taking profit before weekly candle closes
-Looking for 1.34450 to take partial profits
Bonds Test Lower LevelsBonds appeared to be making an effort to attempt higher levels, with a bull wedge pattern forming with an upper bound at 128'10. However, we broke down from this pattern, smashing through the 128 handle into the 127's and then some. The next level of support at 127'22 did little to provide support, though we finally bottomed out for now just above 127'08. Currently, we are seeing a brief pivot with an attempt to break 127'22 from below which is meeting resistance confirmed by two red triangles on the KRI. If we are able to break this level, the next target is 128'01. The Kovach OBV has flattened out suggesting we won't expect much in the way of momentum for now. If we fall further, 127'08 should provide support, then 127'01.
EURUSD before NFPEURUSD climbed 200 pips since the Interest Rates yesterday. Today NFP comes out as well.
This is also a very important event which does affect the market.
All week, we've been looking for a possible end of the pullback, but that impulse yesterday took price back to the previous high.
However, we're still in a downtrend on the Daily timeframe and that's something we should not forget.
We don't recommend looking for trades right now, but if we see price possibly reaching the zone,
leaving a wick and rejecting it, then we can expect a downside continuation.
The best opportunities in case of positive news and strong USD will be on the stock currencies.
EURUSD ; Less than 24 Hours to NFP / 1.14550 > Range > BreakoutEURUSD is looking quite bullish
as EURO buyers showed up quite strong early in the week
and have maintained a stronghold on the order flow. This shift in Sentiment
from the prior week can feel quite drastic, on an intraday basis. But thats the nature of the
Lower Time Frames. The lower time frame gives more detail and more noise so you cant get one without the other.
However , create a bias for direction on the Higher time frame, and look for confirmation of your bias on the smaller timeframes.
This takes time, experience, resilience, reviewing your losses, dealing with life outside trading etc.
It is possible, not syaing it will happen, but we could come up to 1.153 tomorrow as NFP closes the week off, just based on momentum and fundamentals
sentiment, etc. cheers everyone
EURUSD before ECBToday is the ECB Interest Rate decision.
We don't expect to see any changes but there's always a market reaction.
Usually, the big moves are during the press conference 45 minutes after the Interest rates comes out.
Technically, we're looking at this upside move as a pullback and we will be looking for selling opportunities.
There's still a chance to see price rising up to around 1,1350 and then finding resistance around those values.
That could also happen during NFP tomorrow.
Don't rush with your entries before the news or at least use bigger stops in order to protect yourself from those long wicks.
Why are Netflix shares down 30% in 2022?Netflix (NASDAQ: NFLX) shares have tumbled 30% YTD, similar to its tech brethren, who have by-in-large, been facing huge downward pressure. For interest sake, NFLX was down 37% from its all-time high in November 2021.
Two major events have eaten into the gains that NFLX made in 2021. The first is investor confidence waning in growth stocks in the face of looming interest rate rises. And the second has perhaps had a greater impact; a tepid earnings report.
Netflix shares experienced a significant sell-off two weeks ago, after releasing its Q4 2021 earnings report. The report noted that the pace at which Netflix is adding subscribers is slowing. Such a declaration typically spooks Netflix investors, who steadfastly hold the streaming platform still has plenty of room to grow and shrink its price-to-earnings ratio.
Before Netflix’s share price dipped by 30%, its PE ratio was ~60.0. As it stands, with Netflix trading at US $429.48 per share, its PE ratio is now ~38.0.
Netflix finally admits it is facing tougher competition
Typically shying away from doing so, Netflix has finally revealed that competition is hurting its subscriber growth. It is this admission that caught a lot of investors off guard.
In the past three years, Netflix has had to contend with a wave of competitors entering the streaming market, such as (in order of appearance) Apple TV+, Disney+, Peacock, HBO Max, and Paramount+.
The penultimate newcomer on the above list, the premium-placed HBO Max, has been the fastest-growing service of late, vastly outpacing Netflix and adding 73.8 million subscribers last year.
Similarly, Netflix is hurting from older streaming services increasing the appeal of their content libraries and raising investment in content creation. One such competitor, Amazon Prime, increased its spending on content by 41% to US $11 billion in 2020 from the previous year and have recently bid US $8.5 billion to acquire MGM studios and its content catalogue.
2022 looks to be a pivotal year for streaming
Will 2022 be the year that consumers start weaning off the numerous streaming services to which they are subscribed? As prices climb, this may be the likely outcome.
In this respect, Netflix may be on the back foot, having recently pushed its prices up to US $15.50 per month for its standard package. Netflix is now more expensive than the more ‘premium’ HBO Max at this price point.
One factor that could influence the price of Netflix shares over the year is whether their competition hikes their respective prices. For one, Disney+ might be expected to raise its prices before June, as its bargain pricing (introduced one year ago) becomes increasingly unsustainable. However, its attempt to hit ambitious growth targets may delay price hikes from the company.
If pricing over the different streaming services become more equitable, content becomes the deciding factor for consumers. Netflix, and Netflix’s share price, will be in a better position in this scenario as consumers by far prefer Netflix content over its competitors. As such, In 2021, even as competitors pumped funds into content creation, Netflix’s hosted 14 of the top 15 most popular TV shows and Movies.
GBP Strength?News came out on Forex Factory, a News article regarding the Bank of England. Apparently they are going to raiser interest rates for the Second Month in a row. The last time they did this was 2004. This is a big deal because of the cost of money has increased. This can be attributed to the Federal Reserve for adding more Poker Chips to the Table. Inflation. We have moved bullish nearly 100
pips since this rumor came out. Looks like people are buying the rumor. I believe this news may be a catalyst for a more bullish next few weeks. It may encourage bullish sentiment in the markets, continurbting to a rebound in other risk on assets. possibly the dollar cools down. anyways, cheers everyone. Like and Follow for more content like this
How Will Increased Interest Rates in the USD Affect Crypto? Now that the Federal Reserve seems committed to raising interest rates in response to inflation (something that they denied was a problem during 2021) we're going to see a shift in the way money is talked about in the near future. What does this mean for crypto, and the greater economy, overall?
- The US growth and assets markets have been driven strongly by the availability of cheap loans since 2008, an era that is now coming to a close because the only way to avoid a hyper-inflationary economy in the USD right now is to raise interest rates.
- The historic rate at which the US Treasury printed money -- largely justified through COVID woes -- is extreme and it's TBD whether or not the proposed rates will be enough to offset its after-effects. (Was initially 2%, now proposed to ~3%.) The government is broke and has no other choice.
- Higher interest rates are generally bad for "risk-takers" in the market, but good for people who like to save. The idea of the government and financial sectors actively encouraging people to save, however, has been missing from the mainstream narratives for a while. Whether or not the institutions can adapt fast enough to form a holistic plan in the midst of the turmoil is yet to be seen. The condition has been around long enough that this scenario will be new to even "experienced" financial experts out there.
- This presents a new economic landscape/opportunity for entrepreneurs and investors looking to capitalize on the change. But in this environment, the "slow growth" approach is likely to be more successful than the marketing-driven hype markets that has dominated the scene for the last 10-15 years. (Yes, even in crypto. ex. SHIB, NFT-hype.)
- Generally speaking, countries with higher inflation rates tend to have higher crypto adoption rates as well. Will the same happen to crypto, NFTs, and metaverse -based assets? Time will tell -- but now crypto at least has the title of an "alternative asset" with the potential for high growth, especially since it's not affected by supply chain issues that traditional assets are tied into right now.
- Since 2021 there have been a lot of crypto-based projects that have tied itself into the USD markets through traditional legal arrangements and contracts (as opposed to "pure" crypto investments that aren't concerned with what the traditional markets are doing right now) -- this money is more likely to run in parallel to the outcomes that fiat money will face as the interest rates start to ramp up in 2022.