Stocks Hit Key Resistance, Crypto Facing Breakdown Risk

Good morning everyone. As you know, the stock market turned lower yesterday, which was not really a surprise, since the Fed sounded somewhat hawkish with yesterday's remarks. Hopes for potential rate hikes are rising for next year, and that's something that keeps the dollar supported alongside US yields, as the Fed may still need to take action to fight inflation. As a result, we have seen a turn lower in stocks, with the US indexes coming perfectly back to those weekend gaps that we discussed in our previous updates and also mentioned in our Monday webinar. Now the question is whether stocks will stay under pressure. For now, we can still see that the correlation with crypto remains quite tight over the last few weeks. So if stocks see more sideways price action or even more weakness, then I would not be surprised to see cryptocurrencies also breaking lower.

In fact, when looking at the crypto total market cap, the 2.16 trillion level is something to watch. If we close below that level, then we would also have a break below the corrective channel. In that case, the bounce from 2.05 trillion would be confirmed as a counter trend movement, and a fifth wave down could show up, possibly with room towards 2 trillion for a final leg lower within the larger decline from the May highs.