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Analysis

3 Commodity ETFs Pose Caution In July

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Three commodity exchange traded funds (ETFs) have a tendency to rise or fall in July, indicating both opportunity and risk for investors, according to Investopedia. Two of the ETFs have a strong bearish bias while one has a long-term historical tendency to rally, although in recent years it has been slammed lower.

Investors are advised to use seasonality in conjunction with other fundamental or technical criteria, as it only shows what happened in the past and not necessarily what will happen this July. It is important to consider factors like targets, stop-losses and entries before trading the ETFs based on seasonality.

United Natural Gas Fund (UNG)

Source: Investopedia

The United States Natural Gas (UNG) fund, an ETF designed to track in percentage terms the movements of natural gas prices, has struggled in July over the last four years. UNG’s price has lost 5.8% on average and never closed the month higher than it opened. Even in 2016, when the price rallied, natural gas prices struggled through July and August.

UNG’s investment objective is for the daily changes in percentage terms of its shares’ net asset value to reflect the daily changes in percentage terms of the natural gas price delivered at the Henry Hub, La., as measured by the daily changes in the benchmark futures contract minus expenses.

The fund offers commodity exposure without using a commodity futures account. It offers equity-like features such as intra-day pricing and market, limit and stop orders.

Over the last 19 years, natural gas futures have dropped in July 68% of the time and lost 2.9% on average. The fund has been struggling in 2017, but recently, it bounced off support near $6.50. The seasonality factor, however, points to a re-test of the support area.

In April, natural gas futures rose 2% when a report indicated natural gas supply growth already peaked. Inventories rose by 2 billion cubic feet following an April draw of 43 billion cubic feet, which fell far short of expectations that supply would increase by 7 billion cubic feet.

Natural gas futures increased 0.7% following the news.

Natural gas reached its 52-week low in April 2016 of $2.64, followed by increased volatility due to unseasonably warm weather that crimped its bull run in early 2017. From mid-February to April 2017, natural gas reversed course and stayed 8.8% up from the year’s start.

UNG did not follow suit, however, rising only 0.9% and was down 16% on the year. UNG has witnessed a decline in its net asset value due to transaction and borrowing costs despite its underlying asset gaining in value.

iPath Bloomberg Sugar ETN (SGG)

Source: Investopedia

The iPath Bloomberg Sugar ETN (SGG), designed to provide exposure to the Bloomberg Sugar Subindex Total Return, has lost value every July for the last three years, dropping an average of 9.7%. While this strikes of bearishness, it is actually a recent phenomenon. The outlook for July improves in reviewing the results over four additional years.

The price over the last nine years has increased in July 67% of the time, gaining 2.9% on average. There have been some big loss years of late, but there were bigger positive years previously.

Sugar futures contracts have increased 68% of the time over the last 19 years, rising 4.8% on average.

The Sugar ETN suffers a downtrend at the present time, having dropped steadily since March. $25 to $24 to is a plausible support area, since that is where SGG bottomed in 2015.

ETNs are riskier than ordinary unsecured debt securities and offer no principal protection. The ETNs are unsecured debt obligations of Barclays Bank PLC, the issuer, and are not, directly or indirectly, guaranteed by any third party, according to Barclays Bank PLC.

Any payment made on the ETNs, including at maturity or upon redemption, relies on Barclays Bank PLC’s ability to satisfy obligations as they come due.

The index reflects the returns potentially available through an unleveraged investment in the futures contracts on sugar. It currently consists of one futures contract on sugar that is included in the Bloomberg Commodity Index Total Return.

Owning ETNs is not the same as owning interests in the commodities futures contracts comprising the index or a security directly tied to the index performance.

Most of the world’s supply of sugar is not traded on the open market. It is also highly subsidized in its countries of origin, which can make it impossible to determine its true supply and demand. All governments, to some extent, intervene with the growth and production of sugar in their country.

Teucrium Corn ETF (CORN)

Source: Investopedia

The Teucrium Corn ETF (CORN), which provides investors unleveraged, direct exposure to corn without the need for a futures account, has also had rough Julys as of late. It has fallen every July in the past four years, posting average declines of 8.9%.

CORN was created to minimize the effects of rolling contracts by not investing in front-month (spot) futures contracts, thereby limiting the number of contract rolls every year.

The futures contract offers a longer historical precedent as the ETF has existed for only eight years. Over the last 19 years, corn futures have increased only 32% of the time in July, shedding 3.4% on average.

The ETF has ranged since mid-2016. At the beginning of June, the price tumbled from the top of the range.

The ETF currently trades around $18.50, which could represent a support area according to the range.

If selling continues as history indicates, the next fall could take the price beneath $17.68, the August 2016 low.

Corn futures, which are traded on the Chicago Board of Trade, trade according to loose seasonal patterns. This is mainly on account of the seasonal availability of corn in the cash market. While these trends may not always work alone, they often work in conjunction with other fundamental and technical indicators.

Most farmers and professional grain traders know these trends. Farmers use them to initiate hedge positions and as a guide as to when cash corn should be sold. Traders use the knowledge to back up an existing indicator.

Most seasonal charts indicate the corn market is at its weakest prior to and during the harvest, which is generally between September and November, when North American farmers harvest corn and deliver it to local elevators. The lows occur because of the supply of cash corn that gets thrown into the market. High supplies, as with any market, equate to low prices.

Most traders use these indicators to confirm another signal, be it technical or fundamental. They should not trade using seasonal trends alone, since outside market forces can have a major impact.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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Analysis

Italy Spooks markets Again as Stocks Remain Under Pressure

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European stocks Led the way lower today despite a bullish start in Asia, as equities gave back their gains when Daimler published a surprising profit warning, which was deeply affected by the recent trade war developments, reigniting fears of a tariff-driven downturn in global trade.

DAX, 4-Hour Chart Analysis

The Old Continent got into more trouble later on, when two anti-EU officials were named in Italy, resurrecting fears of a clash between the systematically crucial country and the core of the Eurozone. Italian yields rose in European trading, and although they are still shy of the levels hit during the May scare, the periphery could be in trouble as the ECB pledged to exit the market by the end of the year.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The main European indices were smashed lower during the session, with the DAX hitting a two month low, still being very weak relatively speaking compared to its US peers. US stocks sold off heavily following the opening bell and they failed to recover, unlike two days ago, and the major benchmarks traded well below yesterday’s levels just before the close.

The Nasdaq and the Russell 2000 lost some of their recent mojo, pulling back heavily of the all-time highs during the day. All in all, the risk off shift continues to dominate across the board, as we expected and we remain negative on risk assets here, especially regarding emerging markets, even as the Dollar’s rally could be over for a while.

Dollar Pulls back as Pound Surges

USD/CAD, 4-Hour Chart Analysis

The Dollar took a beating as the Philly Fed Index came in much worse than expected, and as the Bank of England sent hawkish signals, pushing the Pound and the Euro higher. The central bank left its benchmark rate unchanged at 0.5%, but a rate hike this year got much closer, with a key member of the bank voicing inflationary concerns.

The Greenback fell more than what the events would imply, so a larger scale consolidation could have already started in the currency following the recent gains and the marginal new high yesterday. With the EUR/USD pair nearing the 1.1450-1.15 support zone, the USD/CAD hitting 1.33 and the AUD/USD touching 0.7350, a meaningful counter-trend move would be timely in the surging reserve currency.

WTI Crude Oil, 4-Hour Chart Analysis

Gold continued to drift lower before the Dollar’s reversal and it hit $1262 for the first time since lat December before bouncing back above the $1270 level in late trading. Crude oil also fell sharply in early trading, and the WTI contract traded with a $64 handle before rallying back to $66 per barrel.

The OPEC meeting, which is expected to result in a supply increase by the cartel made the crucial commodity very volatile in recent days, but we expect the bearish trend to continue, with a likely dip to the $60 level in the coming weeks.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 279 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Crypto Update: Coins Drift Sideways as Trading Activity Plunges

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Liquidity dried up in the cryptocurrency segment in recent days, as trading volumes have been declining progressively, while the major coins got stuck in tight ranges. Only a few coins show signs of activity, and the bearish short-term patterns continue to dominate the market. With a group of currencies, namely Litecoin, Monero, Dash, and Bitcoin itself clearly dragging the segment down, the short-term trend will likely continue, as the previous leaders are now showing strength either.

While all of the top digital currencies are showing some gains today, and the total value of the market edged close to $290 billion, major resistance levels are still towering above. The fact that the effect of the Bithumb hack faded away quickly is a positive here, but until signs of bullish momentum and a clear leadership forming, the short-term outlook remains bearish.

BTC/USD, 4-Hour Chart Analysis

Bitcoin continues to trade near the $6750 level, edging ever closer to the declining short-term trendline, in a bearish consolidation pattern. Bulls would need a sustained move above $7000 to negate the declining trend, but for now at least a test of last week’s lows is likely with a possible move towards the key long-term zone between $5850 and $6000.  The short-term zone around $6350 level provides support, while further resistance is ahead near $7350.

Ethereum Nears Trendline as ETC Attempts Breakout

ETH/USD, 4-Hour Chart Analysis

Ethereum has been among the strongest coins in the last few days again, and coupled with its long-term relative strength, the second largest coin is still the best candidate to lead a recovery. That said, the coin still faces strong resistance between $555 and $575, and bullish momentum is suspiciously weak. Primary support is found at $500 with further zones near $450 and $400.

ETC/USD, 4-Hour Chart Analysis

Ethereum Classic has been positively diverging compared to the rest of the market, together with Binance Coin, and to a lesser extent Tron ever since its inclusion to Coinbase, and the coin moved above the key $16 resistance yesterday in late trading.

While ETC is slightly overbought from a short-term perspective, a consolidation above $16 and a subsequent move higher could confirm a trend change. For now, the short-term trend signal is only neutral, and traders should remain cautious given the broad downtrend in the segment

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 279 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

Treading the Floods: Cryptocurrency Prices Stable Following Bithumb Attack 

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Cryptocurrencies emerged unscathed Wednesday following yet another security breach of a South Korean exchange, as the market continued to favor a corrective rally for bitcoin and the major altcoins.

Crypto Prices Hold Steady

Bitcoin fell by as much as $200 Wednesday on news of a cyber attack targeting South Korea’s Bithumb exchange. However, the coin quickly recovered and now sits just shy of $6,800, according to data provider CoinMarketCap. Prices peaked at $6,821.56 at 12:34 UTC.

Compared with 24 hours ago, bitcoin’s per-coin value was virtually unchanged.

The ten biggest altcoins by market cap exhibited the same pattern, with prices treading water compared with Tuesday afternoon. The total cryptocurrency market was valued above $290 billion, up from an earlier low of around $282 billion.

Bitcoin and the major altcoins have more or less retained their bullish bias, which suggests that a continuation of the upward trend is likely. Since bottoming last week, coins have rebounded $26 billion.

Bithumb Attack: What We Know

Hackers made off with roughly $31 million in stolen cryptocurrency on Wednesday as Bithumb suffered its third cyber breach in 12 months. The attackers reportedly targeted users’ holdings of XRP, the third-largest cryptocurrency by market cap, by running a series of unauthorized access attempts.

Bithumb was unable to prevent the attack despite spending upwards of 10 billion won ($9 million) on security enhancements. This includes complying with new guidelines for financial institutions requiring 5% of company staff be made up of IT specialists. Bithumb has reportedly exceeded that quota by a wide margin.

The Seoul-based exchange confirmed that it had migrated outstanding crypto balances to cold storage and said it will fully refund affected users. Transactions on the exchange remain suspended for now.

Although news of the attack hit the airwaves on Wednesday, some analysts believe the theft occurred several days earlier as part of Bithumb’s data upgrade. However, the exact cause of the breach remains unclear.

Goldman Sachs Weighs Crypto Trading as an Option

U.S. multinational investment bank Goldman Sachs is considering taking a bigger dive into cryptocurrency by launching a full-scale trading operation, according to COO David Solomon.

“We are clearing some futures around bitcoin, talking about doing some other activities there, but it’s going very cautiously,” Solomon said during an interview in China, as reported by CCN. “We’re listening to our clients and trying to help our clients as they’re exploring those things too.”

Currently, the Wall Street investment giant is clearing bitcoin futures contracts. It has also announced plans to introduce a new bitcoin trading operation, which includes using its own money to trade with clients in a variety of contracts linked to bitcoin.

Institutional traders are awaiting the arrival of custodial services dedicated to cryptocurrency before taking the full plunge into digital assets. To that effect, the San Francisco-based  Coinbase exchange is leading the charge by announcing a new line of crypto custodial services to unlock up to $10 billion in institutional capital.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 462 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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