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Cryptocurrency investors have been on a rollercoaster ride since the start of the year. Bitcoin has rallied and fallen just as quickly. This is not surprising, as such price movements are characteristic of fast-growing assets. Given recent market developments, bitcoin may continue its bullish momentum from current positions and make new highs by the end of this year.

BTC/USD

Why might this happen? One factor is inflationary pressures. Almost all central banks in developed countries are printing hard to support their economies. Even if the biggest one in the US starts to phase out the stimulus programme little by little, the US government will still approve a big trillion dollar spending package. Big money will still come into the market. Rising prices and assets always have a positive effect on cryptocurrencies and push up their price.
In the near future confidence in fiat currencies may weaken, because in the current situation the holders of fiat money are totally dependent on the states that printed the money. Such currencies are only backed by the promise of those countries that nothing bad will happen. In a situation where inflation is rising, the owners of money are losing assets on a daily basis. They will try to keep their money in an instrument which is decentralised and not much affected. Bitcoin is not bad for this.
Another factor in the rise in cryptocurrency value could be what happened in Afghanistan. It is difficult to predict what will happen to that country and what geopolitical transformations will happen in the future. People will try to save their money, and the easiest way to do that is with cryptocurrencies. A flash drive with a wallet takes up almost no space in your pocket.
It’s safe to say now that the trajectory of bitcoin over time has been very similar for the past few years. If a bull run happens in the fall, bitcoin could very well renew its highs and head towards the $100,000 per BTC mark. Technically, a bullish trend pattern is almost in place.

03.30 Australia’s trade balance for July
14.30 US initial jobless claims
16.00 US Factory orders for July

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The summer has come to an end, which is usually a rather sluggish period for trading. Volumes are down and traders are resting. There are usually no sudden movements at this time. But come September, investors somewhere are starting to get a little nervous about what lies ahead.

OIL.WTI

Where is this tension coming from? After all, everything has been going reasonably well up to this point. The tension comes from the forthcoming report on newly created jobs as well as unemployment, which is likely to be decisive for the Fed in deciding whether to cut QE. If the data comes out strong, it is very likely that the next meeting of the Open Market Committee will make important decisions on the current quantitative easing programme. Perhaps it will be the announcement of a timetable for when and how things will happen. Of course, they will start the stimulus rollback very smoothly so as not to worry the markets too much.
How might this affect the commodities market? Due to financial stimulus and the COVID-19 pandemic, the TRCCRB index, which includes 19 different commodities, has risen 31% since the beginning of the year. This is almost 10% more than the rise in the S&P500 index. It’s an interesting situation when US inflation is only 4.6% and the world’s major commodities have jumped to such magnitudes. The thing is that the Fed is very flexible in its calculation of inflation and tries to change the formula from time to time. For example, it is possible to ignore the cost of housing, which would immediately reduce the figure. These calculations always give an opportunity to maneuver. It is already evident that the commodities market is overheated and that in the near future we can observe a strong volatility, similar to what happened to the timber market.
What is in store for the oil market? First of all, it is the peak of the hurricane season. Hurricane Ida has already made adjustments to the production rigs and caused quite a bit of damage in the state of Louisiana. Power cuts and production curtailments will definitely have an impact on oil volatility in the near future.
Also in focus is the upcoming OPEC+ meeting where they want to once again revise oil production quotas downwards.
A very difficult month and the end of the year lies ahead. There could well be increased volatility in almost all sectors of the economy.

09.55 Markit Manufacturing Business Activity Index for Germany for August
14.15 ADP US private sector employment report for August
16.00 US ISM Manufacturing Index for August

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

One of the most anticipated events of August has happened. Jerome Powell spoke at a symposium in Jackson Hole. The market was waiting for the Fed chief to shed light on the Fed’s further actions on the timing and conditions of the reduction of the quantitative easing programme.

S&P500

What we can take for ourselves from Powell’s speech. Firstly, Powell de-escalated the markets by saying that by the end of this year there will be a concrete consideration of reducing the quantitative easing programme.
Secondly, Powell said that the end of the QE programme does not mean that interest rates will automatically start to rise. This is important because a sharp rate hike is not at all good for investors, who are now investing in risky assets rather than the US dollar.
Jerome Powell commented that the main objectives for winding down the quantitative easing programme were to increase inflation and reduce unemployment. The inflation target has been met. On unemployment, there is “significant progress” in getting closer to maximum employment. Powell reiterated the conclusions of the minutes of the last Fed meeting, which stated that QE rollback could begin by the end of 2021, but no specific timeline was given in his speech. The markets had high hopes for it, therefore the heads of the federal banks urged to start a rollback as soon as possible, almost in October.
As for the interest rate, Powell explained that cutting QE would not instantly affect the interest rate. Rates will remain at their minimum values as long as employment reaches its maximum values, which are still a long way off.
The markets reacted positively to Powell’s speech, probably because there were no harsh statements in it. Back in June we forecasted that most likely in summer the Fed would not make any serious decisions on the quantitative stimulus programme and we were right. Summer and the holiday season is coming to an end. Most likely, the Fed will announce at its next meeting, which will be on 21-22 September, when the program will start to be wound up. Although much depends on the economic data that will be released during this month.

01.50 Japan’s retail sales YTD
14.00 Germany’s harmonised consumer price index YTD
16.00 Unfinished US Home Sales for July

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

In developed countries, life expectancy has increased in recent decades. That means that the investment horizon has also changed dramatically. This could fundamentally change the logic of the US stock market.

S&P 500

How did it work before? Back when Warren Buffett was making his first money in the market?
A young man would go to university, gain knowledge, start a job and grow in his career. By the time he was 30, he had the opportunity to start investing. And the investment horizon was 30 years to retire by 60 and enjoy the fruits of investment. The problem is that not many investors even lived to be 60.
Today, things are different. Thanks to technology, the cost of entry into the market has come down drastically + commissions have come down + buying stocks or CFDs on them, has become a simple matter.
Virtually any university or college student can start long-term investing at the age of 20. That said, such a person will work till about 70-80 years. And live until 90. In other words, their investment horizon grows from 30 to at least 50 years.
And this is a critical difference from what it was in the last century.
The cost of a mistake is no longer as high as it used to be. If the stock market goes down, the long-term investor has a lot more time to spare. One can buy more on dips and wait for the market to make new highs.
And this leads to a new paradigm. Any dips in the equity market will be redeemed faster and faster. After all, any entry price, with decades of investing still ahead of us, is good. If it’s a couple of per cent lower than it was a week ago, that’s already a great entry point.
The new paradigm could mean that in a few years we won’t see a correction in the US stock market at all. And it will only be possible to move it down for a very short time. And by something out of the ordinary (the example of the coronavirus epidemic).

03.30 Australian retail sales for July
16.00 US University of Michigan Consumer Confidence Index for August

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Interesting developments are taking place in the oil market. A month and a half ago, black gold hit a year high of $76.5 a barrel. Then they started to fall rapidly. It was based on profit taking and increased risks to the world economy due to the rapid spread of the delta strain of the coronavirus.

OIL.WTI

This week, however, the situation has changed dramatically. On Monday and Tuesday we saw 2 long green candles. They allowed oil to bounce back from the lows shown immediately by 9%. On Wednesday the bulls took a pause. And the bears breathed a sigh of relief. Everyone is trying to figure out what exactly is going on? Is this another profit taking or a continuation of the rising trend?
Yes, on the one hand there is a specific reason for this rally. The price of black gold rose strongly after the news from Mexico. A fire at an oil platform led to a fall in production of more than 400.000 barrels per day. However, Mexico’s state-owned oil company is calling for the situation not to be exacerbated. According to its estimates, production will recover by the end of the month.
It seems to us that the main driver for this growth lies elsewhere. There is the start of the bankers’ symposium in Jackson Hole. And everyone is expecting the Fed Chairman’s speech as well. Many believe that Jerome Powell will announce a reduction in bond purchases of USD 120 billion every month at this event. Or generally about a complete scrapping of this programme in the 1st quarter of 2022.
But the rally in commodities on Monday and Tuesday (we are not just talking about the oil rally), suggests otherwise. Either rumours have leaked into the market. Or the “smart money” already knows for sure that no monetary policy tightening is planned. Which means they are ahead of the curve.
If this is indeed the case, we could see new highs for oil as early as Q4 this year.

14.30 US annual Q2 GDP data

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The S&P 500 made a new all-time high. And the traders who follow our newsletters have once again learned from a simple pattern, which we have looked at many times before. Now back to it and technical analysis, which supposedly does not work.

S&P 500

A few days ago the following was written in the newsletter. Quote:
“Today will be the important day. One, even a long red candle does not indicate anything. However, if today also ends in a decline, then we should probably expect the price to be at the SMA 50 (red line) again.”
From here on, everything went strictly according to the scenario (pattern) that has been implemented on this chart 5 times already. The second red candle led to an increase in panic, and the third led to the closing of traders’ positions on stops.
The price reached the SMA 50 level. It was expected that once again we would see 3 red candles followed by a move in the opposite direction to new highs.
However, this time the pattern scenario has also accelerated. It brings in too much easy money. Traders did not wait for the formation of 3 red candles in a row. And started buying back the S&P 500 intraday, exactly from the touch point with the moving average.
Additionally, the bears were taken out who continued to short inside the day on this rise. They hoped that the day would end with a red candle after all. And when it didn’t happen, in a panic, they closed their positions closer to the closing of the American trading session.
From here it is simple. The price went up and yesterday we saw a new historical high in the S&P 500 index.

What conclusions should we draw?

There is a very strong long-term trend in the market. And the longer it continues, the stronger it gets. The smart money only stands with the longs. And stupid money, located in weak hands, starts shorting this trend every time it corrects. And each time they lose money on a new rise.

10.00 IFO Economic Expectations Index for Germany for August
14.30 US Durable Goods Orders for July

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The first cryptocurrency resembles a phoenix that is reborn from the ashes every time. The sceptics buried it once again, after falling to the $29,000 level. And it has risen again and is punishing the sceptical bears.

BTC

What are the drivers of growth this time around? There are many of them. The main ones are as follows:
– The cryptocurrency market is completely bogged down by regulators from the US and China. This, by the way, was the basis of the previous decline. As we noted, at some point in time, investors and traders “don’t care” about this negativity. Since everyone who wanted bitcoins has already sold on this negative

– Growth of the network hash rate. It continues to increase after several months of decline. This means that miners have less and less desire to sell mined coins. Thus the market supply is decreasing. And in the slightly longer term, it also means a rapid rise in the cost of mining

– The ongoing quantitative easing programme in the US. Every month 120 billion unsecured dollars are poured into the market. However, not only the U.S., but also the EU, Japan, Britain and dozens of other central banks around the world are doing this.

– Against this background, bitcoin’s capitalisation of $900 billion looks kind of silly. There are only 3-4 billion coins on the market in free supply, which can theoretically be bought. The value of 1 million BTC is $49 billion. That is times less than what central banks print every month. But if someone wants to buy that 1 million BTC, the price will really fly into space

We still stick to our forecast of 1 BTC at around 58-87 thousand dollars by the end of 2021.

09.30 German Manufacturing Activity Index for August
10.00 EU Manufacturing Activity Index for August
10.30 UK Services Business Activity Index for August

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Lately the Australian currency has been looking noticeably worse than its commodity rivals the Canadian and New Zealand dollars. Is there a reason for that?

AUD/USD

Australia’s main export commodity is iron ore, not gold as some people think. Iron ore prices have fallen by 30% in the last month and a half. The main buyer is China. And it is the culprit for this situation.
In the spring of 2021, a number of Chinese steel producers have been ordered to cut production. To reduce their carbon footprint.
The Chinese state also raised export duties on certain types of steel materials. Plus it cancelled discounts on cold-rolled steel. It turns out that the fall in iron ore prices is being driven by the government itself. Less production means less demand for ore.
How long can this situation last? The profitability of producers, due to falling ore prices and rising prices for finished products, is at record levels. Naturally, it is in the interest of these companies not to reduce but to expand production.
As soon as the Chinese government eases the pressure on the industry, the demand for iron ore will immediately increase. This will lead to a new upward trend.
For now, from a technical point of view, things are very sad. And the nearest support is in the range of 0.7-0.705. If it is broken, especially on the background of the tightening of the monetary policy in the USA, an abyss awaits the Australian dollar below.

03.30 People’s Bank of China interest rate decision
08.00 UK retail sales for July
14.30 Canadian retail sales for June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Today we are not talking about the euro/dollar pair or the pound/dollar pair. It is about the outlook for the US dollar against a basket of currencies. The dollar index (DXY) will help us with this.

DXY

Why the dollar index and not the familiar euro/dollar pair that almost all of our traders trade in? The fact is that sometimes both the US dollar and the EURO rise or fall against a basket of currencies. It is clear that in this case the quotation of the pair does not change much. At the same time, the dollar can rise or fall heavily against other world currencies. This is not a problem with the dollar index. It is clear whether the USD is rising, falling or flat. Also we decided to pay attention to the USD index today, because of a nice technical pattern. Let’s look at the daily chart above. At least the “cup and handle” pattern is visible. We have analysed it in one of our previous newsletters.
And at the most, the bears of the American dollar should not just be uneasy but scared when looking at the chart. The price came again to the strong resistance line at 92.9-93.5, which it has repeatedly pushed up and down from. The level is very strong. That means that there are a lot of stops behind it. Plus visually above it is not visible any resistance levels at all. Thus, a sharp upward movement of the USD index, with the first target of 95, is possible in case of a breakdown of this level.
An additional impulse to the movement may be given by the removal of stops already in the pair EUR/USD below 1.17.
In addition to the technical picture, the situation is also under pressure from the fundamentals. Many investors and traders are playing ahead. They expect that FRS in the near future will announce about the beginning of minimization of the program for economy stimulation. There is a potential date of this event. In a fortnight time at the conference of central bank governors in Jackson Hole.

03.30 Australian unemployment rate for July
14.30 US initial jobless claims

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Tuesday’s US trading session was marked by a sell-off in all sectors of equities. It started as a profit taking at new highs and turned into a correction which offset last week’s gains..

S&P 500

Why are we talking about profit taking? The S&P 500 index has risen exactly twice from the lows of last spring’s coronavirus. It only took it 354 trading days to do so. Such a fast rebound has not been seen since World War 2. According to statistics, it takes an average of about 1000 trading days to rise 2-fold after a price collapse.
Are there more reasons for a correction? There are many, analysts can tell us about the slowing Chinese economy, geopolitical instability (the Taliban taking power in Afghanistan), an increase in the number of people falling ill with the delta strain of coronavirus. And, of course, investors are spooked by talk of the US Federal Reserve scaling back its bond-buying programme.
From a technical point of view everything looks very nice. Note the last three retracements of the S&P 500 Index to the 50-day moving average (shown in red on the chart). Visually the exact same time frame has passed, which means it is time for a correction.
Today will be the important day. One, even a long red candlestick does not indicate anything. However, if today also ends in a decline, it is very likely to be worth waiting for the price at the SMA 50 level again.

04.00 Reserve Bank of New Zealand interest rate decision
08.00 UK Consumer Price Index for July
11.00 EU Consumer Price Index for July
20.00 US Federal Open Market Committee Meeting Minutes

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.