First, let’s talk about why the big rebound?
Let's look at the issue of interest rate hikes. In fact, before this, the market only expected a 46% chance of a rate hike. However, after the latest data was released, although the market's expectations for a rate hike increased, the final result did not change. The market has digested this bad news, and the pie immediately fell 600 points, and people's concerns about future rate hikes have also eased. When the market began to rebound, most people had already assumed that there would be a rate hike in the future, so market sentiment is unlikely to be greatly affected by the panic of a rate hike unless the possibility of a rate hike increases further.
After the release of the big non-farm data, the price of US bonds fell and the US dollar index also began to fall, partly due to changes in capital flows. Previously, part of the funds flowed into the US dollar and US bond markets, mainly for risk aversion. People were worried that the US economy might weaken or even collapse under the continuous interest rate hikes of the Federal Reserve, so they chose US bonds and the US dollar as relatively stable investments to protect profits. However, last night's data was significantly positive for the US economy, triggering a gradual withdrawal of risk-averse funds from the market. At the same time, funds previously invested in US bonds were also more willing to invest in US stocks due to the improvement of the US economy, resulting in a drop in US bond prices and a decline in the US dollar index.
There is also a reasonable explanation for the rebound of US stocks. Although the data is bearish for the investment market, it also shows the solid performance and profitability of US companies, which greatly stimulates the growth potential of the stock market. The funds that previously flowed into safe-haven assets are now actively flowing back to the stock market, and some of them may also flow back to the cryptocurrency market.
Especially when a lot of negative data appeared, the crypto market only fell 600 points and stopped falling, which accelerated the return of funds. However, this does not mean that the market has completely turned into a bull market. At least for now, I cannot be sure that the market has completely turned to the bulls.
Several reasons played a role in the crypto market’s gains during the holiday. The activity during Asian trading hours played a big role, while the European and American markets saw more selling during the holiday.
The increase in trading volume in the Asian market can be attributed to several factors. First, the stock market was closed during the holidays, and some investors chose to invest their funds in the crypto market to seek safe havens. Second, the continuous interest rate hikes in the United States have severely suppressed the exchange rates of some currencies, so some investors may use their funds in the crypto market, especially to buy digital assets such as Bitcoin, to avoid currency risks.
Although the holiday is over, I am not sure whether these funds will continue to flow into the crypto market after the stock market opens next Monday. If funds continue to flow into the crypto market after the stock market opens on Monday, just like during the holiday, this may become one of the factors that turn the market in a short-term bullish direction.
On the other hand, let's look at the macroeconomic situation. Judging from the data, the US economy seems to be performing very well, which is undoubtedly a positive sign. However, this sharp rebound in data has also raised some doubts. Some investors, and even people in the United States, have questioned the accuracy of the data statistics of the US Bureau of Labor Statistics. In short, people's trust has declined. If there is data tampering, then the optimism of economic data has become a joke. Under the impact of long-term high interest rates, whether the US economy will suffer irreparable damage has become a difficult question to predict. Once there is a big problem in the economy, the sustainability of capital flowing back to the investment market is also difficult to determine. After all, although the current data shows that the US economy is in good condition, on the other hand, strikes in the United States have not stopped. If companies show good performance, why are there still large-scale strikes? This question deserves in-depth thinking.
From another perspective, recent data from the global stablecoin market shows that the size of the stablecoin market is gradually decreasing, which means that funds in the stablecoin market are flowing out and the corresponding purchasing power is also declining. I have always emphasized that if a bull market or the early stage of a bull market is really coming, the market needs more traders and trading funds to solve the problem. The launch of the market requires real funds and activity, and cannot rely solely on enthusiasm and imagination, because imagination cannot create market demand.
Of course, according to recent observations, there was incremental trading in the Asian market during the short holiday, and after the release of yesterday's non-agricultural data, the European and American markets also began to increase buying. If the market remains in this situation after next Monday and there is no major potential crisis, then long trading can indeed be considered in the short term to follow the short-term trend. However, based on all the current data, I still cannot confirm whether the general trend has turned to long or whether the bull market has started. We need more data to support this view.
As for trading strategies, considering the usual low liquidity on Saturdays and the need to wait for the market performance on next Monday to judge the short-term trend, my personal advice is not to consider opening new orders for the time being, but to remain short and wait and see market trends.