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We were spot on with our analysis from yesterday in stocks. Recall that we noted the head and shoulders pattern, and the completion of the impulse in the Elliott Wave. Also we noted the vacuum zone from the move on June 5th, which it completely retraced.
Stocks are currently finding good support at 3132 or so. The next level of support is 3100. This is both a technical and psychological level. After that, there is support at 3069. A healthy retracement in stocks is a good thing, because this unbridled exuberance would otherwise lead to a worse correction later on.
The Kovach Momentum indicators are accounting for the dip. At this point it could go either way, as Ghost Squawk AI is has a neutral reading at the moment. But the Fed won’t let stocks go down forever and will likely intervene if it gets worse. Watch those levels of support, but otherwise, your bias should be to the long-side. After all, Powell signaled that the Fed is not even thinking about raising rates until 2022.
Bonds have almost completely retraced June’s decline. They have faced resistance, however at almost all of the Fibonacci levels we have spelled out earlier. The Kovach Momentum Indicators have turned positive, validating this uptrend. There is one more vacuum zone to cross, which will likely provide great resistance, as this is the anchor of our Fibonacci levels and the relative high of the range. If risk on sentiment picks up, watch for ZN to bounce here, or even at current levels.
Oil appears to have completed an impulse wave, and is currently in a sideways corrective phase. This is reasonable considering how much it has rallied so far. The Kovach Momentum indicators suggest that we have reason to still be bullish. Watch for more ranging, before another breakout. Keep your eye on $36.92. If we are wrong, it could break this lower bound and test the next Fibonacci level (50% which is significant!) at $35.82.
The US Dollar Index
There does not appear to be any end in sight for the dollar’s decline. We are gradually unwinding its need as a safe haven as Coronavirus worries ease. Furthermore, the Fed was exceptionally dovish which will add to weakness in USD. We have had to apply inverse Fibonacci Extension levels to get an idea for levels of support. Currently, the DXY is finding support at one of these.
Even in light of all this bearish news, it is still likely to retrace at some point, even if it is just a short squeeze. Watch for ranging about current levels as the dollar recovers from the storm.
Bitcoin appears to be forming a bull wedge pattern. However this is one of the hardest products to trade on account of low liquidity and the price action being dominated by large wallets. When the technical setup appears so succinct, watch for a counter move. You must avoid FOMO with this product, unless you are buying for the long term. Watch those Fibonacci levels in the $9000 and $8000 handle. Eventually, Bitcoin should break $10K again.