Market Outlook

Markets saw a sharp reversal today as falling US Treasury yields fueled a recovery in equities and a significant pullback in the US dollar. The mood shifted from last week's caution to cautious optimism, with investors reacting to new signals on the future of US fiscal policy.

The S&P 500 (SPX) staged a strong comeback, fighting to reclaim the 6,700 level after dipping to 6,520 last week. The rally was driven by a sharp drop in government bond yields, which eased concerns about borrowing costs. This dynamic also played out dramatically in the currency market, where USDJPY tumbled from near 157.00 to below 156.00. The catalyst for the move was President-elect Trump’s nomination of Scott Bessent for Treasury Secretary, a pick viewed by markets as a fiscally conservative choice that could temper inflation fears.

Elsewhere, Gold benefited from the lower-yield environment, pushing through resistance to new highs around $4,160 in a technically-driven breakout. Digital assets had a far more volatile session. BTC experienced a violent flush-out, with a "capitulation wick" plunging the price to $81,000 amid over $1B in liquidations. However, buyers stepped in aggressively, sparking a V-shaped recovery. For now, BTC is consolidating, with traders watching the $85,000 level as a key pivot for stability.

Looking ahead, US Treasury yields remain the central driver for cross-asset moves. With equity markets heading into a holiday week, thinner trading volumes could exaggerate price action, while headlines related to a potential government shutdown remain a key variable for near-term sentiment.

The Defense of Key Levels

Markets ended the week on a note of stabilization, as buyers stepped in to defend key technical levels across several asset classes. After days of selling pressure, Friday’s session brought a relief rally to equities, while crypto and commodities found a floor after their own sharp pullbacks. The mood shifted from directional selling to a more cautious, range-bound feel heading into the weekend.

The SPX provided the clearest example of this shift, closing with a solid +1.00% gain. After drifting lower all week, the index found firm support around the 650 level, turning a potential breakdown into a strong bounce. While the move stopped the immediate slide, the index remains in a short-term pullback structure, with the 665 area acting as the next point of interest. Elsewhere in risk assets, BTC also quieted down, consolidating around $84,300. The crypto market is still digesting a recent leverage flush that sent prices from $93,000 down to a low of $80,500, a level that has so far held as critical support.

In commodities and FX, the U.S. dollar's recent momentum appeared to pause. Gold recovered from a mid-week scare, bouncing aggressively off the $4,020 support zone to stabilize around $4,079. The precious metal is now caught between that floor and resistance near $4,100. Meanwhile, USD/JPY cooled off significantly, pulling back from its highs near 157.80 to trade around 156.30. The move suggests profit-taking after a strong run, with traders showing caution at elevated levels.

Looking ahead, the primary question is whether these bounces have conviction. While sellers have been temporarily exhausted, buyers have yet to reclaim the key resistance levels needed to signal a full trend reversal. The market will be watching for follow-through next week to see if this was just a temporary reprieve or the start of a more sustained recovery.