Ethereum leads crypto upsurge as stocks slump

Crypto currencies have been in demand again of late, with prices making higher highs and higher lows. It is not clear what exactly is behind the rally but with the stock markets falling in the US, they may have found some safe haven flows. Today’s sell-off on Wall Street has been vicious, but the warning signs were there. Above all, it was the market’s response – or lack thereof – to so many solid company earnings which made us cautious on US equities. Despite the release of mostly better-than-expected results, the major indices could not push higher. When the markets don’t respond to news in the way one would normally expect them to, then it may be a sign of change. This may well have been indicative of a market stuck in distribution phase: smart money selling stocks to street money. Today’s sell-off was exacerbated because of technical reasons, as the break of the 200-day average on the S&P 500 and Dow Jones probably triggered a cluster of stop sell orders. But it remains to be seen whether the indices will be able to bounce back, or this time the correction will be more severe. If stocks remain under pressure then cryptocurrencies could extend their gains further.

Among the major digital currencies, Ethereum continues to show relative strength. We last looked at ETHUSD back on April 9. Then, Ethereum was trading near that $400 support level where we highlighted the possibility of a rally. Here, several technical factors came together, including the long-term bullish trend line and previous support and resistance level. As it turned out, we were correct on this occasion over the direction of the trend. The crypto has rallied sharply away from that level and it has almost doubled in price. Today in another bullish development, it took out short-term resistance at $700. This level is now going to be the key support level going forward. For as long as price remains above it, the path of least resistance would be to the upside. If and when it goes back below this level then this may be a bearish development, particularly if the last low prior to the breakout at $627 also gives way. Meanwhile the next area of resistance, which could also be a bullish objective, is between $800 and $835. This range was formerly support and so could turn into resistance. Above here, the 61.8% Fibonacci retracement level at $891 is the next objective bullish target.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.