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November 6 REX Wire Market Outlook
Stocks have seen their best week of the year as the dollar's relative weakness provides a tailwind to risk assets.
It's a very promising point in the market cycle for stocks and crypto. Despite global gloom and uncertainty, risk assets are putting in some impressive gains, hinting at the possibility of a new stage to the bull market.
Dollar Tops Out
As we explored in more detail at the end of last week, the dollar may have hit a top. As things stand, the DXY seems to have rolled over at 107, the 50% mark from the September 2022 top to the bottom in July 2023, so this was a natural resistance level. After a significant drop on Friday, the dollar has now breached 105, an important confluence of support, opening the way to further downside. All of this is positive for risk.
One of the reasons for this is that Friday's jobs data came in weaker than forecast. Nonfarm payroll data for October came in at 150,000, against the expected 180,000. September's data was also revised down somewhat.
The recent dollar weakness has been a tailwind for stocks. The S&P 500 has posted a strong recovery, making up 50% of its recent losses within a single week: Its biggest weekly gain this year.
The NASDAQ has put in even stronger gains, confounding bears with their forecasts of another market crash on dire economic performance. We'll now be looking for indications that this is the start of a longer-term trend, as the dollar weakens and major indices potentially work their way towards new highs. We'll be watching gold for the same reason—and, of course, crypto.
Bitcoin Poised For Explosive Movement?
Since the middle of October, bitcoin has displayed impressive strength, rising from $27,000 on October 16 to $35,000 at the close of last week: A 30% run-up in three weeks. Bitcoin has broken through several key resistance levels and, while now in overbought territory on longer-term timeframes, is in a good position for the weeks ahead.
ETH and other altcoins are now recovering too, as profits from BTC rotate into underpriced cryptos. The total crypto market cap is very close to breaking out from its long-term consolidation zone, pushing above $1.3 trillion. As of this post, it's right on the line.
In terms of immediate targets for BTC, the 50% line from the bull market top ($69,000) to the bear market bottom ($15,500) sits around $42,000. $42k also saw some intermediate tops/bottoms in the last market cycle, so this is a very natural place for BTC to gravitate towards. That's only another 20% increase from here, which is easily achievable on the right catalyst (such as a promising ETF update). Invalidation of the bull thesis will occur if BTC breaks below the consolidation zone at $32,000, at which point, we'll have to reassess.
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