Chop Incomming?
StatsEdgeTrading
Welcome to the Weekend Market Wrap-Up, where we take a systematic approach to dissecting the week's market movements and prepare for the week ahead. This week was another wild ride, filled with significant moves in Forex, Bitcoin, and the broader stock market. For those of you who are StatsEdge Pro members, it was another great week of pullback plays, proving once again the power of a systematic trading approach. If you haven’t joined us yet, make sure to sign up at the link in the description or visit StatsEdgeTrading.com to get started.
Bitcoin: A Risk Asset in a Risk-On Market?
Starting as always with Bitcoin, we saw more of the same on the weekly chart. On a shorter time frame, I’m currently holding a small Bitcoin position, leaning against a lower trend line on the hourly chart. But on the weekly chart, we’re still seeing Bitcoin hover around that crucial prior high zone. Last week’s massive bottoming tail and this week’s inside bar suggest that the market is digesting recent information. However, what concerns me is the lack of strength in Bitcoin despite the strong performance in other risk assets. Typically, Bitcoin moves in tandem with risk-on markets, so this divergence is something to keep an eye on.
Ethereum and the Dollar Index: Relative Weakness and Correlation Breaks
Ethereum continues to show relative weakness, remaining under key resistance zones, indicating that Bitcoin remains the dominant player in the crypto space. Meanwhile, the Dollar Index (DXY) continues to slide, potentially breaking key support levels. Interestingly, the usual correlation between a weaker dollar and stronger stocks seems to be breaking down, adding another layer of complexity to the current market environment.
Gold and Silver: New Highs and Relative Weakness
Gold made new all-time highs this week, breaking out of a range that I thought might hold for longer. I’m still holding a long position in gold, but the lack of follow-through in silver is concerning. Silver remains stuck below key resistance, failing to catch up with gold’s strength, which could be an important signal for precious metals traders.
Forex Focus: Yen and Euro in the Spotlight
In the Forex world, I’m keeping a close eye on the Euro and Yen. The Euro is showing signs of rolling over after bouncing back to a key resistance zone. Meanwhile, the Yen, which spiked dramatically during the recent market turmoil, is now pulling back. I’m watching closely to see if the Yen finds support around key levels, which could provide a trading opportunity
Stock Market: Navigating a Choppy Election Year
Shifting to the stock market, the S&P 500 had a rollercoaster week but ultimately closed the gap after a strong rally. We’re nearing prior highs, but with the election year typically bringing choppy markets, I’m expecting more volatility ahead. Despite this, the RSP, an equal-weighted version of the S&P 500, is showing relative strength, indicating that this isn’t just a big tech rally. However, mid-caps and small-caps continue to underperform, so the focus remains on large-cap names
Commodities and Natural Gas: Diverging Trends
Commodities, as measured by DBC, continue to trend lower, while large-cap technology stocks push higher. Natural gas is another area of interest, as it’s showing signs of life after a significant bounce off support. I’m closely watching how this plays out in the coming weeks.
China: A Bright Spot in Global Markets
China continues to shine, particularly with FXI showing strong relative strength compared to KWEB. Large-cap Chinese stocks are leading the charge, much like their U.S. counterparts, making this an interesting area to watch.
Final Thoughts
As we head into the new week, my focus remains on pullback plays and trading the range. The market is showing signs of FOMO, but with the broader context of an election year, I’m expecting more choppiness. As always, thank you for tuning in. If you haven’t already, make sure to check out StatsEdge Pro to start trading with a proven edge. I’ll see you all next week!