Cryptocurrencies have been in demand again of late, with prices making higher highs and higher lows. It is not clear what exactly is behind the rally but with the stock markets falling in the US, they may have found some safe haven flows.
Today’s sell-off on Wall Street has been vicious, but the warning signs were there. Above all, it was the market’s response – or lack thereof – to so many solid company earnings which made us cautious on US equities.
Despite the release of mostly better-than-expected results, the major indices could not push higher. When the markets don’t respond to news in the way one would normally expect them to, then it may be a sign of change. This may well have been indicative of a market stuck in distribution phase: smart money selling stocks to street money. Today’s sell-off was exacerbated because of technical reasons, as the break of the 200-day average on the S&P 500 and Dow Jones probably triggered a cluster of stop sell orders. But it remains to be seen whether the indices will be able to bounce back, or this time the correction will be more severe. If stocks remain under pressure then cryptocurrencies could extend their gains further.
Among the major digital currencies, Ethereum continues to show relative strength. We last looked at ETHUSD back on 9 April. Then, Ethereum was trading near that $400 support level where we highlighted the possibility of a rally. Here, several technical factors came together, including the long-term bullish trend line and previous support and resistance level.
As it turned out, we were correct on this occasion over the direction of the trend. The crypto has rallied sharply away from that level and it has almost doubled in price. Today in another bullish development, it took out short-term resistance at $700. This level is now going to be the key support level going forward. For as long as price remains above it, the path of least resistance would be to the upside. If and when it goes back below this level then this may be a bearish development, particularly if the last low prior to the breakout at $627 also gives way. Meanwhile the next area of resistance, which could also be a bullish objective, is between $800 and $835. This range was formerly support and so could turn into resistance. Above here, the 61.8% Fibonacci retracement level at $891 is the next objective bullish target.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.