9 Monster Market Predictions For The Week Of August 9 – The Risk-Off Trade

Friday marked what could be the start of a significant shift in the market following the jobs report. The dollar index rallied sharply and appeared to have put in a double bottom. The index has found a significant level of support around 92.50, and should it rally beyond 94; it would likely confirm that double bottom pattern and set up a run to around 96. The RSI also hit very sold levels around 17.50 and is now beginning to show signs of a reversal of the trend.

If this is the case, it could market the unwind of the risk-on trade. (Premium RTM Content – The Unwind Of Risk-On Has Started)

Copper was smashed on Friday, falling by over 4% and breaking some crucial support around the $2.86 level. Additionally, the RSI suggests the metal still has further to fall, perhaps to around $2.70 from its current price of approximately $2.79.

Copper prices and the Nasdaq 100 have been highly correlated since the March lows, and either the two will now diverge, or copper is sending a horrible warnings sign for the Nasdaq 100.

One can also see how closely related the Nasdaq 100 and the dollar index have been over the past few months. Remember, a weak dollar acts as a tailwind to equity prices because it will help to boost revenue and corporate profits of multi-nationals, a strong dollar –well does the opposite.

A strong dollar will also be a killer for the gold and silver trade as well, with the potential for gold to fall back to $1,925.

And the potential for Silver to fall back to $22.50.

Don’t think it stops there because the S&P 500 has also seen a little boost from the short-dollar trade too.

Two bearish patterns have formed in the S&P 500, one at the gap from February 24, and the second is a rising wedge. As I said on Friday to members if I had to pick a place and time for a pullback in the market it would be here and now. A drop below 3,260 on the S&P 500 could trigger a sell-off and gap fill in the index down to 2,860. (Premium RTM content – Big Levels To Watch – Midday)

It isn’t just a rebounding dollar that could derail the risk-on trade, but Tencent in Hong Kong could be a weight too, as discussed in Friday’s morning call. The stock has now failed three times at 564HKD, and a break of 512 could send the shares sharply lower to around 434. (Premium RTM content – Forget The Jobs Data, Focus On Tencent)

Why do we care so much about Tencent? Well, look at the overlay of the chart with Amazon, and you will see why. A breakdown in Tencent could trigger a decline in the entire global technology stock trade. (RTM Premium Content- Don’t Blink – Morning Commentary Transcript)

Amazon has struggled to advance despite strong quarterly results, and a break of that uptrend at $3,066 sends the stocks even lower to $2,685.

Netflix came very close to testing its uptrend on Friday, and a break of support at $495 gets that trend line broken, and the potential for a move back to $450.