Daily Analysis: Stocks Build Rally but Divergences Persist

Monday Market Recap

Asset	Current Value	Daily Change
S&P 500	2652	1.29%
DAX	12,282	1.45%
WTI Crude Oil	59.37	0.29%
GOLD	1325.00	0.71%
Bitcoin	8580	3.48%
EUR/USD	1.2290	0.31%

US stocks extended the gains of the late-Friday buying frenzy today, but a closer look reveals that most of the advance came from the overnight session, and the major indices are not out of the woods yet. The volatility crisis might have ended, but the technical damage could result in longer correction.

For now, until a break above last week’s bounce high, the short-term picture remains bearish in US equities, even if one doesn’t look at other markets.

S&P 500 Futures, 4-Hour Chart Analysis

The previously weak European and Asian exchanges continue to lag their US peers, and that points to further selling pressure in the coming weeks. With valuations still being hostile, the only speculative merit in stocks remains the ongoing long-term uptrend that very rarely ends with a bang, as market tops are usually grueling, lengthy affairs.

With that in mind, more all-time highs are possible, with a “feel good” recovery being very likely after the correction runs its course, even in the face of the monetary tightening cycle

DAX, 4-Hour Chart Analysis

Currency markets were in bounce-mode together with stocks, as the Dollar gave back some of its recent gains, partly helped by the reveal of a less-than-modest US budget plan, while risk-on currencies recovered losses across the board.

It’s no surprise that the safe-haven Yen also drifted lower, but the Dollar managed to underperform the Japanese currency despite the improving sentiment, and that could set up further losses in the USD/JPY that is already trading near its 16-month low.

USD/JPY, Daily Chart Analysis

Commodities joined the risk rally, but industrial metals and crude oil didn’t manage more than a minor bounce, and gold is also still stuck in its overbought correction. Oil’s weakness is especially significant as it comes after a strong rally that was fueled by the more and more troublesome Middle East situation, and it could signal a larger-scale change in risk appetite.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment had a mixed but generally positive day, as the most valuable coins ended higher with a few negative outliers, most notably Ripple, Cardano, and Stellar, and one major outperformer, Ethereum Classic. With no major changes in the technical setup, traders are still waiting for a rally to confirm that last Monday marked the end of the latest severe correction in the volatile sector.

BTC/USD, Daily Chart Analysis

Bitcoin saw a bullish cross in the long-term MACD in oversold territory recently and that is a very reliable technical signal, which adds to the already present encouraging signs.

As the last leg lower in BTC and most of the majors coincided with the sudden crash in stocks, today’s calm day on Wall Street helped cryptocurrencies, even as usually the correlation with traditional assets is tiny. The next few days could be crucial for the segment, as a push to new rally highs would confirm a short-term uptrend, while a less likely failure and a re-surge in volatility would warn of a possible test of the lows.

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