Markets corrected as US employment data reflected a stubbornly strong labor market, adding further confirmation to investors’ belief that the Federal Reserve will continue its aggressive interest rate hikes.
US non-farm payrolls rose by 263,000 in September, marginally below the Dow Jones estimate of 275,000, but the unemployment rate fell to 3.5% compared to the 3.7% forecast.

Some analysts believe the report shows the labor market remains strong despite the Federal Reserve’s efforts to slow the economy and that could encourage the Fed to move forward with another aggressive rate hike at its next meeting in November. This led to a sharp drop in US stock markets on October 7.

Cryptocurrency market daily performance. Source: Coin360
Although Bitcoin

to mark

has traded in close correlation with US stock markets for most of 2022, that could change in the second half of the year and Bitcoin could “change to become a risk-free asset, like gold and US Treasuries,” Bloomberg Intelligence Senior Commodities strategist Mike McGlone said in the Oct. 5 Bloomberg Crypto Outlook report.

Let’s study the charts of the S&P 500 Index, the US Dollar Index (DXY) and major cryptocurrencies to determine the short-term price outlook.

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The S&P 500 Index (SPX) fell and closed below the June low of $3,636 on September 30, but the bears could not sustain the lower levels. Buyers aggressively bought the dip and pushed the price above the breakout level of $3,636 on Oct. 3. This may end the aggressive bears, resulting in a short pullback, the price to the 20-day exponential moving average (EMA) ($3,779) on Oct. 4.

SPX daily chart. Source: TradingView
In a bear market, experienced traders continue to sell on rallies and that’s what happened to the index. The bears stopped the recovery at the 20-day EMA and the price dropped sharply on October 7.

The area between $3,636 and $3,584 is vital for the bulls to defend, as a break below it could signal a resumption of the downtrend. The index could then fall to $3,500 and then to $3,325.

Conversely, if the price breaks out of the support zone, it will suggest an accumulation of the bulls at lower levels. The buyers are once again trying to push the price above the 20-day EMA. If they are successful, the index could rally to the downtrend line.

The bulls need to break through this barrier to signal that the short-term correction phase is over. So the index could start a rally to $4,100.

The US dollar index remains in a strong uptrend. Sellers pushed the price below the 20-day EMA (111) on October 4, but failed to sustain the lower levels. Aggressive buying on the dips pushed the price back above the 20-day EMA on October 5.

DXY daily chart. Source: TradingView
The bears are trying to stop the up move in the zone between the 50% Fib retracement level of $112.41 and the 61.8% Fib retracement level of $112.96. If the price falls sharply out of this zone, it will suggest that traders are selling on rallies. That could take the price back to the 20-day EMA and then to $110.05.

If the support at $110.05 is abandoned, it will suggest that the short-term bullish momentum has weakened. The price could then fall to the uptrend line. A close below this support could indicate that the index is rising.

Instead, if the bulls push the price above $112.96, the index may retest the multi-year high at $114.77. A break above this resistance could suggest a resumption of the uptrend. The next target on the upside is $117.14.

Bitcoin’s relief rally is facing stiff resistance in the zone between the 50-day simple moving average (SMA) ($20,019) and the downtrend line. This shows that the bears are selling on the rallies and trying to push the price to $18,626.

BTC/USDT daily chart. Source: TradingView
Repeated testing of a support level tends to weaken it. If the bears sink the price below the strong support at $18,626

Source: CoinTelegraph