US stocks remain near record highs; Is Bitcoin breaking out?

Summary:

• US indices trade close to all-time highs 

• DE30: Covestro shares struggle near resistance

• GBP set for 3rd consecutive weekly gain; Too far, too fast?

• CAD dips as retail sales miss

• Crypto newsletter: Bitcoin breaks out of trading range 

It’s been a fairly steady week so far for US stock benchmarks with lower levels of volatility than those seen previously, but as it draws towards its conclusion its looking like another good one for the bulls. The S&P500 is on track for a 4th consecutive weekly gain and continues to trade not far from all-time highs. A broad megaphone pattern can be seen from a weekly timeframe which shows an expanding range. Price is once more drifting towards the top of this pattern. 

On the German stock market Covestro (COV.DE) is worth a mention after shares launched a major downward move after painting a double top pattern near €95 handle in Q1 2018. Shares are trading over 50% lower after 18 months but the stock has been on the rise over the past month gaining around 20%. Price is currently pulling back after failing to breach above the €45 handle, where a mix of 200-session moving average (purple line) and key resistance zone can be found. 

It’s shaping up to be another good week for sterling bulls with the pound chalking up a 3rd consecutive weekly gain. Some cold water was poured on the markets this morning however with Michel Barnier claiming talks have gone backwards. In the space of three weeks the sentiment in the pound seems to have swung pretty wildly with the excessive pessimism when the GBP/USD rate fell below $1.20 giving way to optimism that is bordering on over the top given the Brexit issues that remain. While a softening of stance from both sides has been warmly welcomed in the markets, it is worth noting that there’s been no tangible progress and Boris Johnson’s proposed alternatives to the backstop could be described as vague, sketchy and hopeful at best.

There has been a clear market reaction to some Canadian data with the Loonie falling lower as the latest consumer spending figures missed forecasts. Retail sales M/M came in at 0.4% as expected, although the prior was revised down by 10 basis points to now stand at -0.1% but the bigger disappointment came from the core figure. Retail sales ex autos M/M contracted with a print of -0.1% and given that a 0.2% increase was expected this marks the 3rd time in 4 months that this indicator has missed forecasts. The Canadian dollar dipped on the news but has since recovered a little to trade little changed on the day against the greenback. 

Bitcoin has been falling since the beginning of August being stuck within the bearish channel. This range trading became even tighter at the beginning of this month as evidenced by 50 and 100DMAs. Subsequently, the price fell below $10k toward the strong support of $9700. However, Bitcoin got a boost yesterday following the EA’s tweet saying “Invest in cryptocurrencies”, without elaborating on the topic. As a result, the price came back above $10k. If bulls keep prevailing, they may want to test $10800, otherwise bears could be able to push the price back toward $9300. Read our full Crypto newsletter here.