One of the more interesting charts this week is Bitcoin, mainly because despite the fact that there is so much in the way of hesitation and concern around the world when it comes to taking on risk, Bitcoin has refused to fall apart throughout the bulk of this. Furthermore, it is worth noting that the ETFs that are based on Wall Street are seeing inflows despite the fact that most people are nervous.
With this being said, I think it shows a certain amount of resiliency in the Bitcoin market that should not be ignored. This market will eventually have to make a longer-term decision and from everything that I am seeing here, it looks like we are trying to make a positive one.
It does make a certain amount of sense because Bitcoin has essentially lost 50% of its value and anybody who is a longer-term holder of Bitcoin can tell you that generally means it is time to start buying the dip. I personally am not a huge believer in Bitcoin, but the charts are telling me anything above $76,000 gets interesting quickly.
The Nasdaq 100 rallied during the week, mainly led by the announcement of a ceasefire and that of course is a big event for risk appetite. We find ourselves right around the 25,000 level at the end of the week, but with the meeting in Pakistan over the weekend, the attitude of this market could change quite rapidly on Monday. It is because of this that I am cautiously optimistic, but I would use the phrase cautiously to quantify any optimism that I see in equities.
The US dollar has fallen significantly against the Mexican peso during the course of the week with risk appetite returning and of course it is worth noting that the interest rate differential between the two economies is huge, so traders prefer to be short of this pair. They get paid at the end of every day to hold Mexican pesos.
It now looks like we are threatening a breakdown to the 17 pesos level, but quite frankly I do not know that it matters at this point because of that meeting in Pakistan over the weekend. If things go poorly at that meeting, the US dollar probably rallies. If they do not, then we continue the downward trajectory.
The DAX in Germany has found itself positive for the week, but it did finish quite poorly on Friday. Again, I think this comes down to that meeting over the weekend because Germany has to worry about its industrial base getting energy out of Qatar. If it does not have the ability to get that LNG out of Qatar or crude oil through the Strait of Hormuz, that causes major problems. I think a lot of traders are just simply taking in some of their profits and taking risk off ahead of such an important statement in Pakistan coming.
The US dollar has fallen against the Canadian dollar. It finds itself basically the 50-week EMA as well as the 200-day EMA so it does make a certain amount of sense that we pause here. Again, the open on Monday will probably be dictated by what is going on in Islamabad, but ultimately this looks like a market that is trying to find support underneath to get things going. The 1.3750 level would be a particularly interesting place to play the bounce if we do in fact sell off. To the upside I see the 1.40 level as a major barrier.
The Euro has rallied quite nicely during the course of the week and again this comes down to risk appetite as the Euro now finds itself above the 1.17 level for the first time in about 5 weeks. So, if that ends up being the case, I think we go looking to the 1.18 level.
The 1.18 level is a massive barrier but ultimately if we get good results out of that conversation between the Iranians and the Americans, that probably sets off a pretty significant relief rally here like it would everywhere else.
Silver has been noisy but decidedly positive for the week as we continue to try to find our bottom. The market will continue to be one that is noisy and I think ultimately, we have to make a bigger decision, but I do not necessarily believe this is a market that you should get big in at the moment.
Interest rates will continue to play a major part here so pay attention to the US 10-year yield. If it is above 4.30% generally that is bad although it is not cut and dry, it is just one of the factors. And of course, that noise out there that is coming from Islamabad and the meeting will have a major influence on what happens in the interest rate markets and then by extension here.
The gold market has rallied a bit as well but again, I think this has caught people on the wrong foot as interest rates have been the driver not fear of war. I get a lot of emails almost daily not understanding why gold is falling during a time of war. Well, it is because there is so much more yield in the bond market now than there once was and portfolio managers tend to rebalance in that direction.
I do like gold longer term, but I recognize that if yields spike again, maybe due to poor discussions in Islamabad, this market is likely to test the $4,600 level. To the upside your first serious barrier is probably 5,000.
