During the holidays we didn’t get much on the fundamentals side except the news about full China reopening. This may have both positive and negative i
During the holidays we didn’t get
much on the fundamentals side except the news about full
China reopening. This may have both positive and negative
implications.
On one hand, it may help in the
short-term with global growth, but on the other hand, it may also increase
inflationary pressures and force the Fed to hike more than expected.
We will see how the market will
take it, but the risks are more skewed to the downside because in either
case, the Fed will make sure to hammer economic activity and avoid another
inflationary wave. So, in the end this should be taken as either a neutral or
negative development.
On the technical side as you can
see in the daily chart above, the price has been on a steady fall as the Fed
made clear that they will continue with their tightening “until the job is
done”.
The price broke out to the
downside through the strong support area in the 10950 region and continued the sell off
during the holidays with some pullbacks along the way.
The price almost reached the
October low at 10096. That is the next level to break on a continuation of
the bear market.
On the 1-hour chart above, we can
see that the price has been losing selling momentum forming a falling
wedge pattern, which is a reversal signal. You can also notice the divergence between the RSI and the falling wedge.
This chart
pattern is divergent in nature and the first target on a pullback is
generally the top of the pattern, which in this case is at the 10750 level.
This should be just a corrective move and the price should resume the
downtrend after testing that level.
Drilling down to the 15-minutes
chart above, we can see how the price broke out of the wedge and run to the
first swing level resistance at 10503. Once the price
breaks that level to the upside, we can expect the ultimate run to the 10750
target.
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