Federal Reserve Chairman Jerome Powell said in a question and answer session hosted by the Cato Institute on Sept. 8 that the central bank will contin
Federal Reserve Chairman Jerome Powell said in a question and answer session hosted by the Cato Institute on Sept. 8 that the central bank will continue to hike rates until inflation is under control. However, these comments did not rattle the markets as much as most would have anticipated, indicating that traders might have already factored in a 75 basis point rate hike in the Fed’s next meeting on Sept. 20-21.
Bitcoin has been strongly correlated with the S&P 500 and inversely correlated with the United States dollar index (DXY) for the past several weeks. With the DXY cooling off after hitting a two-decade high, risky assets have been attempting a recovery.
U.S. equities markets are attempting to snap a three-week losing streak while Bitcoin (BTC) has soared above the psychological level at $21,000.
Does the rally in the equities and crypto markets indicate that the risk-on sentiment is back? Let’s analyze five asset classes to review their trends and determine where they might go in the next few days.
BTC/USDT
Bitcoin rebounded off the strong support at $18,626 on Sept. 7 and broke back above the breakdown level of $19,520 on Sept. 9. This may have triggered short-covering by the aggressive bears which propelled the price above the 20-day exponential moving average ($20,434).
The relative strength index (RSI) has risen into the positive territory and the 20-day EMA is flattening out, indicating that the bears may be losing their grip.
The 50-day simple moving average ($21,981) may act as a minor hurdle, but if bulls overcome it, the BTC/USDT pair could rally to the overhead resistance at $25,211. A break and close above this level could complete a double bottom pattern. Such a move may signal the start of a new up-move. The pattern target of this reversal setup is $31.796.
Contrary to this assumption, if the price turns down from the 50-day SMA or $25,211, the pair could enter a consolidation for a few days.
The 4-hour chart shows that the pair picked up momentum after breaking above $19,520. The moving averages have completed a bullish crossover, indicating advantage to buyers but the RSI in the overbought zone suggests a minor consolidation or correction in the short term.
If the price turns down from the current level or the overhead resistance at $21,900 but does not break below $20,576, it will suggest that the sentiment has changed from selling on rallies to buying on dips. That could increase the likelihood of a break above $21,900.
The first sign of weakness will be a break and close below the moving averages. If that happens, it will suggest that the current rise may have been a sucker’s rally.
DXY
The U.S. dollar index (DXY) is correcting in a strong uptrend. After hitting a multi-year high at 110.78, the index has witnessed profit-booking which has pulled the price to the 20-day EMA ($108.64).
Although the rising moving averages indicate advantage to buyers, the RSI has formed a negative divergence, indicating that the bullish momentum could be weakening. If the price sustains below the 20-day EMA, the next stop could be the uptrend line.
This is an important level to keep an eye on because a break and close below it could indicate a potential trend change. The index could then decline to 104.63. A break below this level could suggest that the index may have topped out.
Conversely, if the price rebounds off the moving averages with strength, it will indicate that the sentiment remains bullish and traders are viewing the dips as a buying opportunity. If bulls push the price above 110.78 the rally could extend to 113.95.
The 20-EMA has turned down on the 4-hour chart and the RSI is in the negative territory, indicating that bears have the upper hand in the near term. The index could drop to the immediate support at 108.
If the price rebounds off 108 but fails to break above the 20-EMA, it will suggest that the sentiment has shifted from buying on dips to selling on rallies. That could increase the likelihood of a break below 108. If that happens, the index could start a deeper correction.
Contrary to this assumption, if the price turns up from the current level and breaks above the 20-EMA, the index could rise to 110.24 and then to 110.78. Buyers will have to overcome this barrier to indicate the resumption of the uptrend.
SPX
The S&P 500 is in a bottoming formation and is attempting to form a higher floor near 3,900. The price rebounded off the uptrend line, indicating that lower levels are attracting buyers.
The 20-day EMA (4,050) is an important level to watch out for in the near term. If bulls drive the price above this resistance, it will suggest that the latest leg of the correction may have ended.
The index could thereafter attempt a rally to 4,200. This level…
cointelegraph.com