Indicators Ahead of European Central Bank and Fed: Overstock (OSTK), Galaxy Digital (GLXY), ICE, Dollar Index (UUP)

December 12, 2018 / by Bill Noble

Crypto may be subject to some forces in the macroeconomic world in the coming days. On Dec. 13, the European Central Bank (ECB) will meet to discuss interest rates. Given the riots in France, the ECB will likely say something at the press conference hinting it will help. It may hint that it will flood the European banking system with money in the event France goes into a state of economic shock.

The U.S. Federal Reserve will meet on Dec. 19. This meeting will be very tricky for the Fed. On the one hand, interest rates have been so low for so long that an increase is long overdue. On the other hand, the U.S. stock market and housing markets are both in precarious positions because of the impact of higher rates, the trade war, and U.S. budget uncertainty.

The S&P 500 (SPY) has been mired in a miserable rectangular range since the end of October (Figure 1). The visual would hint that nobody knows what to do next in U.S. equities. That level of uncertainty could be toxic if the Fed continues to raise rates.

Figure 1

Crypto related equities are also worth a look.

Overstock (OSTK), a company that recently went “all in,” developing platforms and exchanges for cryptocurrencies and Securities Token Offerings (STOs), is trading in a triangular formation (Figure 2). If OSTK breaks out of that triangle, that could be an important signal one way or the other.

Figure 2

After the Bloomberg interview with crypto fund manager Mike Novogratz from Galaxy Digital, the stock of that company (GLXY) could be an important indicator of future moves in crypto. Right now, GLXY is trading at $1.00 per share. If GLXY falls below $1.00 and stays below, that could be a negative for crypto (Figure 3). We would expect this stock’s movements to be very telling, particularly if the central banks cause gyrations in stocks and bonds.

The International Continental Exchange (ICE) is also trading near a key technical point. This stock could be an important crypto leading indicator because ICE is developing the Bakkt exchange. Bakkt will help bring institutional money into crypto — in January.  So watching ICE will be a great way of gauging how the stock market views the future of crypto. Currently, ICE is on top of support near 78 (Figure 4). Whether or not that level holds will be a key indicator going forward.

And of course, there is the Dollar Index (UUP). If central banks say or do something that makes the Dollar go up, crypto may go lower. If the Fed says it is either going to pause or stop raising rates, that would crypto positive. Looking at the UUP chart, RSI divergences point to the possibility of a sharp top in the dollar given the catalyst (Figure 5).

Bottom Line: Central banks are taking center stage from Dec. 13 to 19.  The central banks’ press conferences after the meetings will likely move all markets, including crypto. If you’re a crypto bull, you’re praying for a dollar top and for crypto-related equities to hold up.