US and European stock futures are going to see some serious tests this week as the economic calendar is full of fireworks, and some of them could send a significant trimer for the current rally. This is the week when we are going to see the US inflation data and the Fed meeting. The expectations are that we will see some further slowdown in the inflation reading, but unfortunately, only this element will not be enough, as traders are inclined to see some ease in the stickiness nature of inflation. If we see the economic readings showing some signs of relief in terms of higher inflation, we could see some additional strength for the US stock market, while traders could still be waiting for the Fed meeting’s event. We believe that no matter what the reading is going to be, the Fed is going to increase interest rates and is more than likely to follow in the footsteps of the RBA and BOC.
US Stock Market
Overall, there is no shortage of optimism among traders as the S&P 500 came off another positive week of gains and the US stock market marked its highest point since August last year. It is the NASDAQ index, which is very much the leading index among the Dow Jones and S&P 500 indices, that has the most momentum. One thing that does need some attention, and we believe that it is a valid reason for traders not to be overly enthusiastic, is that the current rally is widely led by megacaps; in order to have full confidence, we should see Russell 2000 performing well too.
Wild Weekend for Cryptos
Crypto prices had a rough weekend as the SEC tightened its leash on crypto assets and finally began the process of cracking them down. Cardano, Polygon, and Solana are just some of the names that kept many traders on their toes over the weekend as the price action displayed an enormous amount of weakness. These companies were highly popular during the peak of the crypto rally, and they were dubbed the next ETH killers. Professional investors sell some of their assets, like Ethereum, in order to get exposure to them, while retail traders see them as their lottery ticket to buy a Lamborghini. But in reality, they did nothing more than advertise and make false promises, and little to no work was done on the legal side of things. But obviously, this isn’t the first time that a large number of traders were sidetracked by their evil marketing ways, which helped companies like Cardano and Polygon accumulate piles of cash.
Now that the reality is more clear for many traders, they want to stay away from anything that can be classified as a security, and the reality is that it is unlikely that crypto investors will go after any regulation arbitrage that these companies have been playing. Now that the SEC wants companies like Cardano to pay by the book, they are more than likely to focus their energy on two less friendly countries to base their operations. And secondly, start spinning the wheel of their marketing by putting more shine on their scaling element.
On the other hand, bitcoin prices are trying to stabilise; investors know that this asset class is not going anywhere. Bitcoin certainly has the ability to weather all kinds of storms. The SEC made its position very clear about Bitcoin a long time ago, and what we need to see is exchanges respecting the SEC’s framework. We continue to believe that any weakness in Bitcoin represents an opportunity, while traders hope that the price will continue to hold on to gains as no one wants to see the price dropping towards the 20K as that could trigger another rout in prices.
Oil Prices Struggle
Oil traders continue to worry about demand and hope that the revival in Chinese oil demand comes back into play. So far, Chinese economic data has been lacklustre, which is creating a dent in oil demand while OPEC is trying its best to maintain oil supply. Crude oil prices have once again dropped below the level of 70, which has created a feeling of uneasiness among the OPEC cartel, which only recently announced a major oil cut, and the whole weight of this cut was shouldered by Saudi Arabia.
