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Market Overview

To the Moon!!

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The Cryptocurrency world is full of clashes and rivalries but none is quite as prominent as the fight between Ripple Labs and Stellar Lumens.

Both were founded in the city of San Francisco by the same man who founded the infamous Mt. Gox exchange, Mr. Jed McCaleb.

After several ideological disputes with Ripple, Jed left to start Stellar. There’s a great in-depth article on observer.com that tells the entire tale.

Steller has been praised by the crypto-community for being less corporate and more decentralized than her older sister. The economics also work a bit different. Ripple has a fixed supply of 100 Billion tokens, most of which are held by the owners of Ripple, including Jed.

Stellar has a slightly more complex system that includes a built-in inflation metric and has regular auctions and giveaways

When it comes down to it, the success of both projects will depend largely on their adoption by bigger financial firms. Stellar is gaining momentum in this regard and as of October is involved in a deal with IBM to improve the global payments system.

As an investor, we can’t really know exactly how the future will play out, which is why it pays to diversify your portfolio, not only with different cryptocurrencies but with all types of assets for long-term growth.

eToro is very proud to add Stellar Lumens as the 8th cryptocurrency on the world’s number one social trading network.

To the moon!!

@MatiGreenspan

eToro, Senior Market Analyst

Today’s Highlights

Some Stocks Perspective

Inflation Print Today

Bitcoin’s Integration

Please note: All data, figures & graphs are valid as of February 14th. All trading carries risk. Only risk capital you can afford to lose.

The Big Number

Stock markets are looking rather flat this morning as we await some big news this afternoon.

Precisely one hour before the opening bell on Wall Street the US government will announce the inflation figures for the month of January. This specific print represents an excellent opportunity for those who like to trade the news and here’s why…

Over the last two weeks, the global stock markets have been selling off big time. Many analysts claim that we should have expected this as a “technical correction” because over the entire course of 2017 the markets have been going in a single direction.

These three charts show the Dow Jones, the China 50, and the Dax 30 over the last year and a half.

Indeed, things have been a bit one-sided for a lot longer than that. Over the past decade, the central banks of the world have been overcompensating for the 2008 financial crisis by injecting more and more money into the economy and further supporting it by artificially keeping the interest rates at record low levels.

The poor stock markets have been eating this cheap money without question like veal being prepared for slaughter.

Here’s a chart of the Dow Jones showing the dip through the financial crisis. Notice the large leap up in price and volumes over the last year.

What does this have to do with inflation?

Oh right, excuse my rambling.

Many analysts believe that the pullback over the last two weeks is being caused by expectations that the Federal Reserve is about to tighten up their monetary policy.

Since low interest rates are a key driver of the upward momentum, many feel that if the rates start to go up, the markets will need to come down.

…and the key thing that the Fed is watching when deciding on those rates is the inflation data.

If inflation starts to go up faster than expected the main tool that the Fed has to slow it down is to raise the interest rates.

Analysts are forecasting January’s CPI inflation number to be 0.3% and the Core CPI to be 0.2%.

Of course, if we see any numbers bigger than that it could startle investors and might drive up the US Dollar, which would benefit from larger interest rates.

What about Crypto?

During the announcement, I will personally be watching the crypto-markets for any potential reaction.

In this chart, we can see that there has been a rather tight correlation between Bitcoin and the Dow Jones over the last month.

Of course, we know that both have been rising uncontrollably over the entire course of 2017. However, Bitcoin has already seen a very serious pullback of 71% while the Dow’s recent low was only 13% from the peak.

In my view, the crypto pullback has already shaken out a large part of the speculation money and what we have now are more of the hard core holders, most of whom probably wouldn’t sell even if we see $1000 again.

Whereas the stock market is still chalk full of speculation money, most of which has been focused on short term gains for far too long.

Any reaction to the CPI print in the crypto markets would be a clear sign that liquidity in this new market is rising and that old-school investors are starting to get onboard.

In any case, it will be interesting to see what happens. Let’s have a great day ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

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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Analysis

Volatile and Flat US Session Ends a Hectic Week for Stocks

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The major US indices finished virtually unchanged today, despite the positive open, while short-dated Treasuries closed the week near their multi-year lows. The session had several ups and downs, but the uptick in yields and the weakness in Europe proved too much for a sustained move higher to develop, despite the string of better-than-expected quarterly earnings reports.

S&P 500 Index Futures, 4-Hour Chart Analysis

From a broader perspective we can say that another bounce faded in stocks, with small-caps underperforming yet again, so the risk-off trend got one more confirmation.

Russell 2000, 4-Hour Chart Analysis

We have been tracking the main US small-cap benchmark all week long, as it has been precisely leading the broader market in recent weeks, and today the index got very close hitting a new 6-month low. The next week will be crucial for global risk assets, as given the long-term breakdowns in the main European benchmarks, the new bear market lows in Chinese stocks, and the ugly market internals on Wall Street, this might be the last opportunity to avoid protracted bearish period, or even a global bear market.

While Italian assets are under severe pressure, with government bond yields charging higher, decoupling from the “core” of the Eurozone, credit markets in general are not showing signs of broad distress. With that in mind, we don’t expect 2008-like dislocations in financial markets, for now, but investors should watch high-yield corporate bonds, where large excesses built up in recent years.

Forex Markets Turn Choppy as Dollar Pulls Back Again

EUR/USD, 4-Hour Chart Analysis

The China-led rebound in equities, which faded in late trading, and the Dollar’s retreat were the two main drivers in forex markets today. The EUR/USD recovered above the key 1.15 level after reaching as low as 1.1430 in early trading, while the Dollar index also failed to rise above its recent swing high, so the reserve currency could continue to consolidate before re-testing the August lows.

The bounce in the Euro was helped by the rumors regarding a possible new budget proposal from Italy, and as Moody’s downgraded Italy after the US market close, we will likely see further choppy, hard-to-trade action in currencies, especially given the large moves in US Treasury yields.

Gold Futures, 4-Hour Chart Analysis

Commodities had a mostly bullish day thanks to the Dollar’s dip, with copper and crude oil both recovering after yesterday’s selloff. The WTI crude contract bounced back all the way to the $70 per barrel level, while copper avoided a key breakdown out of its lengthy consolidation pattern.

Gold is also consolidating, albeit in a much different technical position, as the precious metal is trying to form a swing low that would confirm a short-term uptrend after last week’s breakout. A move above short-term resistance would likely lead to a test of the $1245-$1250 zone, with a likely rally up to the next major resistance level near $1260.

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 380 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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Market Overview

Market Update: U.S. Stocks Settle Mixed in Choppy Trade; Cryptocurrencies Endure Modest Pullback

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U.S. stocks traded mixed on Friday, as only one of three major bourses managed to bounce back from the heavy losses incurred in the previous session. Cryptocurrencies showed signs of wobbling early on before a modest recovery kept the market near break-even.

Stocks Lose Steam

The large-cap S&P 500 Index held higher up until the final moments of trade before running out of gas. It settled flat at 2,767.78 following a back-and-forth session. Among the 11 major sectors tracked by the index, five reported gains. Consumer staples were the strongest contributors, surging more than 2% as a whole. Utilities companies and financials stocks also reported firm gains.

The Dow Jones Industrial Average also finished in positive territory, adding 64.89 points, or 0.3%, to close at 25,444.34.

Meanwhile, the technology-driven Nasdaq Composite Index fell further into the red, shedding 0.4% to 7,449.03.

A measure of implied volatility known as the CBOE VIX held near the historic average on Friday, as the recent string of tumultuous sessions eroded risk sentiment on Wall Street. The so-called fear gauge closed just below 20 on a scale of 1-100.

U.S. equity markets pulled back sharply on Thursday as China-induced volatility weighed on investors’ sentiment. Chinese stocks led a global recovery on Friday as policymakers offered soothing remarks on the health of the economy. Still, the benchmark Shanghai Composite Index is down double-digits this month.

Earnings Show Promise

Another batch of upbeat corporate earnings have helped smooth out the recent bout of volatility in U.S. markets. On Friday, Dow blue-chip Procter & Gamble (PG) reported better than expected revenue growth as well as the sharpest rise in quarterly sales in five years. The company posted adjusted per-share earnings of $1.12 on revenues of $16.69 billion.

Other companies to report higher than expected results include Honeywell International Inc. (HON) and Schlumberger Limited (SLB).

As of last Friday, 86% of S&P 500 companies had reported earnings surprises for Q3, according to FactSet. The current blended earnings growth rate for S&P 500 companies is 19.1%.

Crypto Volumes Plunge

Cryptocurrency prices saw limited upside on Friday, as a sharp decline in trading volumes kept investors on the sidelines. The combined market capitalization of all coins bottomed near $206 billion overnight Thursday before recovering near $208 billion. Overall, the market is little changed compared with previous sessions.

Trade volumes are down some 6% over the previous day and nearly 20% compared with a week ago. As CCN recently reported, daily turnover in bitcoin is approaching yearly lows – a clear indication that bullish upside is limited.

Bitcoin posted a quick and dramatic upsurge on Monday as Tether’s USDT token lost its peg to the U.S. dollar. According to Galaxy Digital’s Mike Novogratz, the selloff of USDT is due to a lack of transparency at the parent company.

“I think Tether didn’t do a great job in terms of creating transparency,” he said at a recent conference in Frankfurt, as quoted by Bloomberg. Until now, Tether has refused to provide an audit of its dollar-backed reserves, igniting concerns that it was artificially inflating its stablecoin circulation.

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 648 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Analysis

Pre-Market Analysis And Chartbook: Risk Assets Higher Thanks to Chinese Bounce

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Friday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,797 0.81
DAX 30 11,568 -0.18%
WTI Crude Oil 69.61 1.35%
GOLD 1,230 0.16%
Bitcoin 6,379 -0.24%
EUR/USD 1.1480 0.24%

Risk assets are having an active and already very busy day after yesterday’s tumultuous session, as volatility continues to be high, especially in equities. All eyes were on Chinese stocks and the Yuan today in early trading, as several key economic numbers were published in the country. Chinese officials lived up to the occasion, doing everything in their power to prop up the market verbally and most likely more directly too.

USD/CNH, 4-Hour Chart Analysis

Chinese stocks started the day lower due to yesterday’s broad global selloff, and although they surged higher towards the end of the session, erasing their early losses, the main benchmarks remain in steep downtrends on all time-frames, and the Yuan is also very close to its cycle lows.

Shanghai Composite Index CFD, 4-Hour Chart Analysis

The quarterly GDP and industrial production came in slightly below expected, continuing the deterioration of the recent quarters, while retail sales beat the consensus estimate, as the consumer segment is still outperforming.

 While the official numbers are far from disastrous, it’s hard to trust the government statistics, given the history of “controlled” releases, and looking at the unofficial indicators, the country’s economy and financial system are under larger stress than reported.

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Global stock futures celebrated the Chinese rally for a few hours, but a large chunk of the gains is already gone near the end of the European session, and the focus is back on the Italian budget crisis and the looming Brexit deadline.

The Italian banking sector is under heavy pressure on rumors suggesting increased capital flight from the country and although the Euro is stable, the risk-off trade is well and alive on the Old Continent.

The EuroStoxx 50, which has been performing relatively well form a long-term standpoint failed to leave the vicinity of the spring lows, and the mega-cap index is now threatening to join the long-term breakdown of the DAX after the decline of the past couple of sessions.

US Stocks Rebound as Dollar Rally Pauses

Dow 30 Futures, 4-Hour Chart Analysis

The major US indices opened modestly above yesterday’s closing levels, as Treasury yields settled down following the volatile post-Fed-minutes period. The Dow, the S&P 500, and Nasdaq are all stuck in declining short-term trends, and despite the recent strong bounce, last week’s panic lows are still close.

The Volatility Index (VIX) fell back below 20 today, small caps are performing in line with the broader market, so while we remain bearish form a broader perspective, the immediate outlook for equities is mixed, with no strong divergences before the last session of the week.

Today’s bounce is helped by the better-than-expected earnings report of Procter & Gamble (PG), which opened 6% higher, and the slight pullback Dollar, which got close to its 2-month highs today in European trading. Forex markets, in general, are showing a risk-on bias today, with the Australian Dollar and the Kiwi being helped by the Chinese bounce, and with Pound being stable after yesterday’s selloff.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

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 380 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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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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