Opening Bell: Recession Worries Overshadow U.S. Futures; Bitcoin Slides

Key Events

After the July 4 holiday, US futures on the Dow, S&P, NASDAQ, and Russell 2000 as well as European stocks retreated. Optimism that the possible end of some trade tariffs between the US and China might help temper inflation and hence the need for aggressive interest rate hikes faded.

Global Financial Affairs

Initially, US contracts traded higher on the hope that if the world's two largest economies set aside some differences and removed some trade barriers, it might stabilize the global supply crisis. However, that optimism isn't sticking. In the last few hours, S&P 500 contracts wiped out previous gains and have fallen back below the neckline of an hourly double-bottom.

S&P Hourly

Both the MACD and the RSI have provided sell signals after overbought conditions. If the price drops below 3,790, the previous low, the contract will likely retest the 3,740 lows.

We can see the same reaction in the bond market.

After jumping, yields on the 10-year declined, we think, for technical reasons.

10-year Treasuries Hourly

Yields turned around just as they reached the downtrend line since the June 28 high. The rising black uptrend line illustrates yields moving higher since the March 2020 crash. However, if yields get through the 2.95% level today, they will have completed an hourly H&S bottom and will likely retest the channel top.

The dollar has surged since December 2021 which shows investors remain more focused on the Fed's rapid rate of tightening rather than the  inflation. 

The greenback confirmed a bullish pennant, helping the currency extend the uptrend line, as highlighted previously.

Dollar Index Daily

This confirmation increases the likelihood of a continued rally in the medium and long term. 

Dollar Monthly

The dollar broke free of a range in March 2015, suggesting a repeat of its heights, which would retest the 2001 highs.

Gold fell on dollar strength, which keeps the yellow metal in a technical bind. It is failing to retest the uptrend line since March 2021, in the service of the downtrend line since the March 2022 all-time high. From a technical perspective, the price fell below its rising channel, which is working against the yellow metal. Recently, its 50 DMA crossed below its 200 DMA, triggering a Death Cross. In the short term, I am bearish.

Gold Hourly

The precious metal completed an hourly top, sending it toward the daily uptrend line.

The recent rally in Bitcoin ended and it is back below $20,000.

Bitcoin Hourly

The cryptocurrency topped out on the hourly chart, increasing the chance of a further selloff in the short term.

Tight oil supply helped offset concerns that a recession will hit demand so the price only fell slightly but further volatility is likely.

Oil Daily

A rally turned into a decline, forming an intraday Shooting Star on the edge of a bearish flag, whose potency is magnified by being on the uptrend line.

This week currency traders will be closely watching Eurozone PMI data. Positive news would help the euro climb back after an H&S Continuation pattern (complete upon a close).

EUR/USD Daily

The euro extended losses, tumbling to its lowest level since 2002 against the dollar as well as its weakest since January 2015 against the Swiss franc.

Up Ahead

• UK construction PMI figures are released on Wednesday.
• US JOLTS job openings are published on Wednesday.
• On Wednesday, the US FOMC meeting minutes are published.