Has The US Stock Market Bottomed?

By | Market Analysis

On the 20th of May 2022, the S&P500 briefly fell into the official bear market territory, dropping over 20% from its all-time high. The S&P500 didn’t remain in the bear market territory for long and has continued to recover ever since. The jury is now out as to whether the US stock market has bottomed and will continue its bullish trend.

Today, we are digging deeper into the underlying mechanics of the US stock market and will analyse the recent price action of the NASDAQ and the DXY (US dollar Index).

Firstly, what is driving the market?

2022 has been all about interest rates, surging inflation and geo-politics. Since the FED pivoted from the “transitory” story, global stock markets have sold off heavily. This year, the interest on the US 10 year has risen sharply from roughly 1.5% to highs of 3.21%. As the market has re-adjusted to the year-end US interest rate projections, equity has rotated out of high tech, high growth stocks – which tend to perform well during periods of low-interest rates, and into safe-haven assets.

Notably, the USD or DXY has benefited majorly from that. The US Dollar index (DXY) has rallied over 10% from the start of 2022. As expected, the FED has taken an aggressive monetary policy tightening stance in an attempt to combat inflation. The FED hiked rates by 0.5%, its largest rate hike in 22 years. The market is expecting a series of interest rate hikes from the FED from June through to the end of the year, which is why the DXY has been a top-performing asset this year.

Currently the market consensus is a 100% chance of an interest rate hike in the next two FED meetings and roughly a 70% chance of an interest rate hike in September. Recently, there has been a series of concerning economic data points around the world which is raising the question as to whether the FED will stick to their guns, or take their foot off of the aggressive rate hike stance in September.

China has faced a prolonged period of Covid-19 lockdowns due to their no covid policy. This has resulted in China abandoning this year’s GDP growth rate target of 5.5%. Premier Li Keqiang has conceded that China’s economy is stalling at a dangerous rate and faces critical risks, as he instructed an army of officials from across the country to exhaust all measures to stabilise the economy. Manufacturing data is down indicating a slow down in the global demand for goods and services. As the saying goes, when China contracts the whole world feels it.

Secondly, the US reported a negative GDP growth rate of -1.5% for the last quarter, another quarter of negative GDP growth would signal an official recession. We are in a macro-economic environment of high inflation and a slowdown in productivity. With this in mind, and concerns of an economic slowdown, bets are growing that the FED may need to take a break from raising interest rates by September.

If this is the case, the equity market may have overextended to the downside as investors and traders would have priced in a more aggressive rate hike path into the year end. Whilst a slow down in the global economy could hurt individuals, the stock market appears to want and need negative data.


DXY Weekly Chart

The US dollar index is generally classed as a safe haven currency or asset, and tends to perform well during times of economic uncertainty, political tensions or war/conflict. The start of 2022 has been no different with the DXY surging to the upside reaching a 5 year high. Investors have rotated out of assets that performed well during the “easy money policy” from the Central Banks during the recovery from the Covid-19 pandemic and into the safe havens.

Since the negative economic data in May, the DXY has taken a sharp turn to the downside. A number of technical indicators are suggesting a major market cycle top is in place, and the next move on the US Dollar Index is to the downside. The weekly MACD is close to crossing over which has been a strong indicator of a major reversal previously. If investors are rotating out of the DXY due to the possibility of a lower year-end interest rate, the move to the downside in the stock market may also be over extended.

NASDAQ Weekly Chart

The start of 2022 has been very concerning, whilst the Covid-19 market crash felt more severe, the recent price action has continued to grind to the downside and has exceeded the Covid-19 market crash. Investors are now watching for signs of a possible bottom in the market. If the DXY has topped, and investors rotate out of the global currency reserve, there is a chance for investors to pick up stocks and equities at a 30% discount. The MACD and RSI readings on the weekly time frame are indicating a slow down in selling pressure. There has been a number of reversals on the NASDAQ when there were similar readings previously.

As an investor or trader, dips of this magnitude provide huge opportunities from an investment and trading standpoint. Whilst it is far too early to call a bottom, there are signs of selling exhaustion in the short term. It is no coincidence the DXY has reversed at the same time as risk assets like the NASDAQ. This is indicating a potential change in psychology and momentum in the market.

The recent market low at 11,500 will provide a key invalidation level for any bulls stepping back into the market. And on the DXY, a break above the most recent swing high at roughly 105.00 will provide a bearish invalidation level.

From a technical perspective, there needs to be a higher low on the NASDAQ and a lower high on the DXY to confirm a short term reversal.

Be fearful when others are greedy, and greedy when others are fearful – Warren Buffet 

By all means, the market is very fearful at the moment with recession headlines showing up all over the media. We are not suggesting to load up on all equities and stocks, but what we are suggesting is get yourself ready to take advantage of the huge discount in the market. The Trading Floor is ready to capitalise on any move higher on the NASDAQ, and are also watching the currency market closely for indications of a move lower on the DXY.

If you would like to discuss trading the financial markets in more detail, we have opened up FREE consultations where we are discussing potential opportunities across the US market.


If you have any questions please reach out to the support inbox: [email protected]



GOLD – Why you need to own this asset

By | Uncategorized

Why you need to own this asset

Over the past couple of weeks, the Trading Floor has secured a number of wins in the metals market and I am going to explain why we are bullish on the metal and why you need to do something about it!

Real Rates V Nominal Interest Rates

A nominal interest rate is a rate you will receive from the bank, at the moment, the US has a nominal rate of 0.25%. Meaning if you leave $10,000 USD in the bank you will receive a measly $25 USD return. This does not take inflation into account.

It gets worse…

Real rates are an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower and the real yield to the lender or to an investor. For example, if the current interest rate is 0.25% and inflation is at +5% the real interest rate would be -4.75% (0.25 – 5 = -4.75). This is something the Central Bank does not report, but this is the KEY driver of gold prices. The further real rates move into the negative the higher gold prices will rise.

The real rate gives a more accurate measure of yield when factoring in the cost of inflation. Currently, the real rate in the US is -5.3%, not 0.25% which is what the FED wants you to believe.


US Real Interest Rates

The blue line in the chart above is REAL rates, the red line is inflation and the black line is nominal rates.


As you all know, inflation is currently running hot across the financial markets due to supply chain issues and the impacts of the covid-19 pandemic, currently sitting at a 14 year high at 5.4%, whilst the nominal interest rate is at record lows at 0.25%.


This is expected to get worse leading into a busy Christmas period as the demand for retail, travel, technology and energy is forecast to rise. Europe the UK and China are already facing energy supply issues.

To put it simply, changes in real interest rates are crucial to understanding movements in the price of gold. The inverse relationship between real interest rates and the gold price is quite well-established in research. The biggest booms in the gold market occurred in negative real rates environments, first during the 1970s, when both nominal interest rates and inflation rates were high, and later in the 2000s, when both nominal interest rates and inflation rates were low.

This week, FED Governor Christopher Waller jawboned the possibility of interest rates rising next year in the US. He stated the FED should begin tapering bonds next month, though interest rate hikes are probably some way off. The FED’s most recent dot plot showed half of the policymakers see rates rising by the end of 2022 and the other half expecting a rise by the end of 2023. If the FED delays raising interest rates the USD could see a decline across the board which plays into a long bias across metals.

Real rates are negative and based on the current market climate and what is yet to come, they could fall further which supports higher gold prices.

GOLD Technical Analysis


Gold has faced a year of consolidation whilst other assets have taken off to the upside including the crypto market. However, gold is now facing a potential breakout from the pennant formation over the coming weeks which has the Trading Floor team very excited!


We can also see a possible inverted head and shoulders structure in play which indicates a bullish change in trend. An inverted head and shoulders structure is generally found at the bottom of a trend and we have used this technical setup on multiple occasions. The 1840 resistance is a KEY level that needs to be taken out as it is the neckline of the inverted head and shoulders and also the negative trend line resistance. Once this level is taken out we can confirm the bulls are back and can expect a rapid move to the upside!

If you are looking to take advantage of this opportunity in the metals market but are not sure where to start, book a call to speak with one of our experts!



Don't Miss the FOMC & FED This Week

By | Market Analysis

FOMC and the FED – Make or break scenario for financial markets


Market Update – 17th March 2021

Over the past couple of weeks we have highlighted on a number of occasions the rise in bond yields, and the threat they pose to financial markets. 

Everyone knew at some point this year that bond yields would rise, so what has all the fuss been about? 

The move higher has not necessarily been the issue, it is the speed at which the interest on the yields has risen. The sharp rise in interest rates on the 10 year has resulted in volatility spilling over into risk assets. Especially tech growth stocks. Stocks like Tesla, Apple and Amazon have been hit the hardest, as they were the corporations that benefited the most during the economic downturn. 

The rise in interest rates on bond yields signals a strengthening of the US economy. Markets are beginning to price in an interest rate rise or a bond tapering (central bank tightening) from the FED a lot sooner rather than later. Growth stocks surged throughout 2020 and early 2021 anticipating further stimulus and record low-interest rates for the foreseeable future. However, this could be coming to an end…

“The steepening yield curve reflects that returns on long-term bonds are growing faster than the return on short-term bonds, signalling economic optimism. This indicates the spread between short-term and long-term interest rates has widened. When a yield curve is steep, the market is pricing in central bank tightening. This means that the market believes the central bank will increase short-term rates, eventually creating a normal yield curve at higher short term rates.” 


Will rates continue rising?


Back in 2016, the FED announced they were reducing the pace of its purchases of treasury bonds (bond tapering), to reduce the amount of money it was feeding into the economy. The market did NOT like this, resulting in equties sinking lower. This is now known as the 2016 taper tantrum.  A similar scenario is potentially on the cards at some point in the near future. The question is will it occur during the next meeting. 

FOMC DOT PLOT & Interest Rate decision

The FED will release their new economic and interest rate forecast, which could show FED officials expectations to raise interest rates by 2023 which is sooner than the market expected, 2024. If so, expect a bearish move across risk assets and a bullish move on the USD.

Potential Outcomes

Scenario 1: Potential Dovish Outcome (weaker USD)

FED members signal yield curve control intervention. This is where the FED will purchase bonds on the longer end of the yield curve to drive interest rates lower. 

DOT Plot remains unchanged. This is where FED members signal their opinion on interest rates over the next two/three years. If this remains unchanged expect a weaker USD. Currently, the DOT plot median is a possible rate hike by 2024.

Scenario 2: Potential Hawkish Outcome (stronger USD)

If FED Chair Jerome Powell has no verbal intervention on the bond yields. 

If the DOT PLOT median interest rate change moves closer, from 2024 to 2023. 

No announcement of yield curve control.

USD INDEX – Daily Charts

There are two key levels to keep a close eye on. A close beneath the 91.36 support will indicate a continuation to the downside. This may occur if the FED cools inflation and interest rate fears. However, a breakout above the new resistance at 92.70 will indicate a continuation to the upside. This will occur if the FED signals an interest rate hike sooner than market consensus.


As always we will be looking to capitalise on the volatility in the trading floor later this evening! If you have any questions let us know in the trading floor live chat.

Bull Trap on the US Stock Market...

By | Market Analysis

Are we looking at a BULL TRAP on the US stock market?

Isn’t it bizarre how the US stock market is trading at record highs yet there are over 12 million US citizens unemployed? More major retailers have filed for bankruptcy in the first nine months of this year compared to the whole of 2019.

Furthermore, US mortgage delinquencies have jumped by nearly 4% which is the largest jump since the MBA’s (Mortgage Bankers Association) survey began. An estimated 4.2 million homeowners were on forbearance plans, as of June 28th.

You may have heard the saying, there is a disconnect between the economy and the stock market, and you would be correct in agreeing with the statement.

Markets are trading at record highs based on hopes of a second stimulus package. The mass stimulus from the FED and US government is resulting in a devaluation of the USD. The US printed more money in one month than in two centuries.

We are now questioning the strength of the recent recovery in the US stock market. 

Are we in a counter-rally/bull trap?

SP500 – Daily Charts

The SP500 is showing a rising channel formation/bear flag, keep in mind these ALWAYS break at some point. The new high is also setting up a potential bearish divergence on the RSI. The bearish divergence is generally what we look for when trading reversal opportunities.

DOW JONES – Daily Charts

There is a similar story being painted on the Dow Jones. A possible bearish divergence setting up along with a bear flag structure. Retail traders are being brought into the market on hopes of more stimulus. Technical patterns are always broken at some point, what we tend to find initially is a move higher beyond what the market is expecting. Which results in capitulation and a breakdown. Classic bull trap scenario.

The question we have to ask is how high will this go before the opportunity presents itself.

Next week there is a blockbuster week!

VIX Options/ Futures expiration on the 21st October

US Government vote on the next stimulus bill.

Presidential debate on the 22nd October


Firstly, the VIX is a measure of volatility. Leading into the expiration date traders will be looking to sell their positions or face cash delivery. This can increase volatility on the day. The market, which is hanging on stimulus hopes, will find out on Thursday if they receive any stimulus prior to the US elections and to top it all off, President Trump and Joe Biden face off again for another comical viewing.

The stimulus will have a direct impact on the USD and US indices.

DXY Index

We have been tracking the USD reversal pattern for some time, as you all have seen previous analysis.

There has been an inverted head and shoulders formation at the bottom of a 5 wave structure. The DXY is now setting up a potential bull flag structure. There is a clear inverse correlation between the US stock market and the DXY.

If the stimulus talks breakdown, we could see an explosion on the VIX, consequently pushing traders into the USD and sell US indices.

The technicals are there for everyone to see.

We just need the catalyst to start the movement. Technicals are ALWAYS broken, it is just a question of when.

Our sole focus in the trading floor is to take advantage of these setups over the coming week!

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We have created all of the essential education a beginner trader needs and are giving it to you for FREE. 

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GOLD Bear Flag Pending

By | Uncategorized
Market Update – 14th October

The US equity market is holding the FED/ US Government hostage, craving more and more stimulus to support the US economy. Whether the money being printed is supporting the US economy in a positive matter is an interesting question. For US citizens and USD holders, their cash is becoming worthless. Gold is currently up roughly 25%-30% as investors piled in buying protection against the oncoming inflationary pressure.

There are a number of events taking place that will likely impact the next move on gold.

With the Democrats taking the lead in the US Presidential Election Polls the devaluation of the USD may continue. According to CNN, Joe Bidden is in a better position at this point in the campaigns compared to any challenger since 1936. Biden is reportedly ahead in the polls, 55% to 43% among likely voters. If the Democrats do take office, we should expect even more stimulus than what has already been provided by the US Government. With the polls at the current levels, the market is beginning to price in an even weaker USD, which may support higher gold prices. However, this all rests on the second stimulus check clearing, and soon.

Any sign of the US Government putting a stop to the stimulus and free money, they US stock market crumbles. Last week we all witnessed this first hand during Trump’s twitter antics. The US government is set to vote on the next stimulus bill on October the 19th. McConnel, the Senate majority leader, said the first order of business is to vote on a smaller stimulus bill worth roughly $500 billion. Therefore it puts the questions forward on whether a bill will be past prior to the US elections. It all hangs in the balance.


GOLD – Daily Charts

The past month trading gold has been difficult with the choppy movements. Taking a look at the longer term picture we can see a pennant breakdown and a move back into an inclining channel formation. Gold has been teasing a potential breakout to the upside of the channel formation.

GOLD 4 Hour Charts

The 4 hour charts are showing a rising channel formation or a bear flag. The question is what news event will result in weaker gold prices. A resurgence into the USD is the most likely scenario.

Yesterday news coming from Johnson and Johnson reported they had stoped clinical trials on their covid-19 vaccine. This resulted in a run higher on the USD, and gold consequently fell over night. Additionally, news broke about the stimulus package not coming into effect until 2021.

Goldman Sachs strategists have suggested to sell the USD on positive Biden news and vaccine hopes. On the other hand, buy USD and SELL gold on negative stimulus and vaccine news.

Traders will be watching for a break below the bear flag formation to confirm a move lower, or a rally above the negative pennant trend line to enter long positions.

As always we will keep you posted in the trading floor on any set ups we take.


Let’s see how this plays out.