By J.C. Parets & All Star Charts
1/ Dow Slides Back in the Box
2/ Tracking the 5-Year for Confirmation
3/ Cautiously Bullish
4/ Bitcoin Retests Key Level
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1/ Dow Slides Back in the Box
Growth stocks aren’t the only market area contending with sellers.
Even the more value-oriented Dow Jones Industrial Average (DJIA) is pulling back.
Check out the Dow e-mini futures contract undercutting a critical shelf of former highs as it nears an upward-sloping 200-day moving average:
A tight bearish momentum divergence in the 14-day relative strength index (RSI) clearly warned of waning strength.
The stock market correction deepens as participation deteriorates beneath the surface.
We’re monitoring the major stock market indexes and individual names for signs of near-term reversals.
If more stocks fall back into their prior ranges, like the Dow, a far more severe correction may lie ahead for U.S. equities.
2/ Tracking the 5-Year for Confirmation
The rising rate regime defines the market environment.
We’ve highlighted the structural uptrend for long-duration U.S. yields. That trend remains intact as the tactical bias flips from neutral to bullish for interest rates.
Here’s a triple-pane chart of the U.S. 5-year, 10-year, and 30-year yields, highlighting the breakouts further out on the curve:
With the 10-year and 30-year rates breaking above their former 2022 highs, will the 5-year yield follow?
The breakouts in the longer-duration rates are likely holding if and when the 5-year reaches fresh highs. So we’re monitoring the middle of the curve for confirming evidence in the coming weeks.
3/ Cautiously Bullish
Energy stocks are resolving higher, holding their breakouts—something few market areas can claim this quarter.
It makes sense. Interest rates are rising across the curve as the U.S. 10-year and 30-year yields eclipse last year’s high.
But while rates continue to rise and energy names are ripping, crude oil has not been able to break out.
Notice the multiple contact points along the $83.25 level. That’s the line in the sand.
Market participants have proven the importance of this level as sellers defend this critical shelf of former highs.
But the more times price tests a level, the higher the likelihood it will break.
Meanwhile, we are monitoring black gold for further weakness toward $74. Continued selling pressure in crude would not bode well for energy.
4/ Bitcoin Retests Key Level
Price action expands and contracts, oscillating between low- and high-volatility periods.
Unsurprisingly, Bitcoin (BTC/USD) experienced extreme volatility yesterday after a historic collapse in activity. (Some even joked that Bitcoin was trading as if it had been delisted.)
Check out the Bitcoin chart below with the one-day rate of change (ROC) in the upper pane and the 14-day RSI in the lower pane:
Bitcoin hasn’t experienced such an extreme one-day ROC since it bottomed last fall. Yesterday also marked its lowest momentum reading in over a year.
While the key takeaway is that periods of low volatility breed explosive price moves, ignoring Bitcoin’s tendency to bottom after downside flushes in price is difficult.
Perhaps we’ve witnessed a significant low in Bitcoin, given the critical polarity zone holds.
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Originally posted 18th August 2023
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