Monday morning trading in New York was a sea of red as liquidations took place across a broad range of technology stocks. Futures on the Nasdaq 100 were down 400 points from the closing print on Friday before an almighty reversal as yields slowed their recent advance. The index finished the day essentially unchanged. The classic hammer candle could portain more gains to come. Traders will be eagerly watching for early signs of follow through on turnaround Tuesday.
Crypto currencies have sold off significantly from their November highs and the most popular narrative in financial media at the moment is the influence of rapidly rising yields on the price of risk assets. The 10y US treasury yield has moved up from 1.5% at the start of the year to an intraday high of 1.8%, before reversing slightly to finish at 1.75%. This move gathered pace as market participants interpreted the US Fed’s position as more hawkish following the release of the FOMC minutes from December.
Nasdaq and crypto currencies, which are seen to benefit from low bond yields induced by loose monetary conditions, have sold off viciously to multi-month lows.
Given today’s intraday recovery in the US tech index, will traders dare to buy the tip in BTC and ETH? The conditions are starting to favour a relief rally. Sentiment is extremely negative, assets are oversold, liquidations have been brutal, major crypto’s are down 40% from highs and as soon as the market perceives that large sellers are done then we can expect a significant bounce. On balance of probabilities, people that have been patiently waiting to put money to work, may dip their toes in the water here.
