Why analysts expect persistent selling pressure in financial markets

Monday’s market turmoil felt like a fever dream. Assets bounced back from a massive sell-off, but QCP Capital analysts warn this is just the beginning. 

Traditional finance got a bitter taste of a typical crypto day with the VIX (Volatility Index) skyrocketing over 65%. This chaos isn’t over. 

Expect more selling pressure in the coming days as systematic funds continue to adjust their exposure to high volatility.

The analysts recommend keeping a close watch on Nasdaq, Nikkei, and USDJPY. Cross-asset correlations remain high, and we’re in for a wild ride. 

The Federal Reserve is unlikely to cut rates in September or make an emergency cut in October because it would only stir up more panic. 

This means the pressure isn’t easing anytime soon.

High volatility continues to drive selling

With the worst of the market volatility seemingly behind us, analysts favor establishing longer-term bullish positions in anticipation of a rate-cutting cycle. 

The idea is to look at trades with a 3-6 month horizon to avoid getting chopped up in the volatile market. However, the current environment demands caution. 

Take Bitcoin as an example. Despite its recent minor gain of 0.18%, Bitcoin is facing significant resistance and selling pressure. Bitcoin’s price sits at approximately $55,318.33, but the broader picture shows it grappling with major problems. 

The Simple Moving Averages (SMAs) for 50, 100, and 200 periods are acting as barriers. The 50-period SMA is at $56,161.03, the 100-period SMA is at $56,851.86, and the 200-period SMA is at $60,575.68. 

Indicators suggest further decline

Bitcoin’s price is below all the moving averages right now, so we’re in a bearish trend. The MACD adds to the bearish outlook. Its line is below the signal line, with a histogram showing negative values. 

Specifically, the MACD line stands at -318.12, the signal line at -250.06, and the histogram at -68.06.

The On-Balance Volume (OBV) value is at 23.329K. A downward trend in OBV typically means that volume is higher on down days, supporting the bears.

Despite price fluctuations, OBV’s recent stability means that selling pressure has not yet subsided. Adding to the complexity, the Federal Reserve’s movements further influences market dynamics. 

Jay Powell, Chairman of the Federal Reserve of the United States

Jay Powell’s decision to hold off on rate cuts, despite market volatility, means we won’t see relief in the form of lower interest rates soon.

But traders see opportunities in this volatility. QCP Capital recommends establishing long-term bullish positions but advises caution. The goal is to capitalize on the expected rate-cutting cycle without getting caught in short-term market fluctuations.