Weekly Stock Market Update – Bitcoin ready for new highs? Fed is confused.
The SP500 broad market found its way to all time highs this week in three consecutive days on Monday, Tuesday and Wednesday.
In the middle of the week we got more information about the Federal Reserve and their willingness to continue their tightening cycle (more on this in the next section).
Here is a daily view of the SP500:
Looking at the stock market sectors, the weekly scorecard is as follows:
- Energy is up 2.14%, the weekly winner
- Financials are close behind and up 2.13%
- Technology sector dropped 0.53% – a clear divergence
- Retail sector dropped 1.07%
- Utilities were the weakest, as expected in a bull market, down 2.62%
Looking at cross markets, oil was the strongest while silver was the weakest.
Here is the weekly scorecard:
- Oil market is up 1.52%
- US dollar traded higher by 0.43%
- SP500 managed to finish up just 0.08%
- Gold prices are down 1.89%
- Silver was down the most, totaling 3.71%
Federal Reserve Minutes Show Commitment to Tightening in October
The Federal Reserve announced on Wednesday at 2PM that they will not be hiking the interest rate this quarter, which was widely expected.
Looking at the dot plot projections, voting members lowered their long term outlook on interest rates.
This occurrence was a divergence from their higher interest rate outlook in the long term.
However, what really spooked the market a little on Wednesday was the fact that the Fed will continue with their 4.5 trillion balance sheet unwind starting October.
This week in our live market analysis webinar we will cover this event in details, and discuss how to trade it and what impact it will have on markets.
One aspect that stood out for me was that Janet Yellen clearly admitted they had no clue about inflation and were outright lost when it came time to answering why it was so low.
Despite this low inflation, they continued with their short term higher interest rate outlook (hawkish).
The market is now pricing in one more rate hike in December.
Balance sheet unwind will begin in October, with a small amount of $10BN monthly of bonds to be run-off the balance sheet.
Read here for more Federal Reserve analysis >
We will cover these details in our webinar this Sunday, join any of our packages and be there for this important update.
Bitcoin prices took a tumble this week after a brief retracement above 4,000 on extremely weak volume. This was a signal last week that more selling was to come.
During the week, JP Morgan’s CEO Jamie Dimon doubled down on last week’s comments, saying Bitcoin is a fraud and even said “it’s making stupid people, like my daughter, feel like geniuses.”
This has been a tough few weeks for the cryptocurrency, with the news that China banned trading in the market. The Chinese market was once as much as 60% of the total, now representing approximately 40%.
On this news Bitcoin dropped down to 61.8% retracement level at $3,036.94d and rallied sharply on high volume. This has now been established as firm support.
This same level was also supported by the 100 day moving average, while at the same time the momentum seems like it has bottomed out.
We see some upside in the next few weeks.
Economic Events for the Week
Last week was all about the Federal Reserve and the Bank of Japan.
This week we will see a plethora of central bank speakers starting on Monday with Kuroda in Japan and Mario Draghi of the European Central Bank (ECB).
By Tuesday we will see Janet Yellen at 12:45PM making a speech. Traders are looking for clues of interest rate forecast and balance sheet details.
Thursday we will see the final GDP numbers, which are not as widely followed as the preliminary data.
We wish you a great week and invite you to come out and trade with us in our live trading room.
You can also learn about our institutional grade day trading package here, or learn to trade a more passive options strategy in our package here.
The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.